The Centre reassured the citizens saying India is well insulated from the crisis but rupee may be affected due to the outward flight of investment.
“This is a drama which is going to play out for some time. We are well protected in at least three ways. Our macro- economic situation is much more stable. We have (forex) reserves. We are an economy which is still a very attractive investment destination. So I think we are relatively well insulated,” Chief Economic Advisor Arvind Subramanian told reporters in New Delhi.
“In these situations what mostly happens is there is flight to dollars, to a safe haven. Rupee might also be affected by that. But nothing gets unusual at all so far,” he added.
On Sunday, the Greeks strongly sided with the government’s stand in voting against a bailout package in exchange of austerity measures. The ‘No’ vote has left everyone speculating if Greece will exit the Eurozone, a 19-nation organisation.
As a result, the Euro fell against the dollar and the Asian markets too slipped. Markets in Hong Kong and South Korea posted their biggest one-day fall in three years. Japan’s Nikkei fell by 2.1 percent.
However, Sensex and Nifty recovered most of the losses, ending the day in green. Sensex closed almost 115 points up closing at 28,208 after opening about 300 points down. Nifty too ended above the 8,500 mark.
“As for the crisis itself, it is going to be long and prolonged. Tomorrow is a big meeting of the German and the French head of the states. Let’s see, it is up to Europe to respond,” Subramanian explained.
The government does not deny that the crisis in Greece may affect India indirectly.
“We will have to see how the euro moves now. We are closely monitoring the Greece situation. There could be some reaction on the Fed rate hike likely,” said Finance Secretary Rajiv Mehrishi.
He also added that the “financial markets are going to be volatile. Both the ECB and Fed will take this into account.”
(With inputs from PTI)