India export was worth US$363 million in 2014 to Greece while it imported US$131 million worth of goods from the crisis ridden European country. In textiles, exports were worth US$45 million and imports at a negligible US$3.3 million. Overall export fell dramatically to less than US$400 in 2012 when the crisis first erupted in Greece. Exports were worth US$800 in earlier years. All these numbers are apparently insignificant compared with overall trade numbers and thus will have negligible impact on direct trade between the two countries. Textile trade will remain almost immune.
The fear that emerged is on What will happen to Euro then? While the impact of the financial crisis in Greece will definitely create upheavals in the currency markets, the Indian government and the Reserve Bank of India are closely monitoring the developments. Nirmala Sitharaman, Indiaâ€™s Minister for Commerce and Industry reportedly stated that the government is â€œvery closelyâ€ monitoring the developments in Greece as that could have implications on the international currency market. She further added, â€œI think the Greece affair is going to play out for a few more days and we will certainly have to watch thatâ€¦Indiaâ€™s foreign exchange reserves are comfortable....I think we have to be alert and keep watching what is happening.â€
While it is too early to ascertain the impact on the Indian INR, the weakening of the Euro has already started against the US$. At the time of writing this report the INR was pegged at 69.85 against the Euro and 63.31 against the US$. However, the fear looms large if the problem spread into other eurozone countries then exports may face several issues. Even exporters body Federation of Indian Export Organisations fear that further depreciation in euro against the US$ and Indian currency will impact exports to eurozone.
The 19-member eurozone accounts for about 20 per cent of the Indiaâ€™s total exports. Greece mainly import textile, garments and marine products from India while exports auto components, petroleum products, leather goods and machine tools to India.
On the Greece side bank closures were in their second week holding tightly whatever cash they have, fearing banks may run dry. Cash machines are limited to dispensing Euros 60 per customer per day. Nobody has access to their safe deposit vaults either while small business operators cannot use credit cards or money from bank accounts to replenish their stock. These restrictions have created uneasiness which is undercutting the daily flow.
Greeks, historically, have heroically withstood severe crisis and certainly do not like pushed around. They have even faced overwhelming opposition. Their rhetoric rejection of the European Unionâ€™s terms for further bail-outs echo their past history of overthrowing followed by liberation. Will Greece repeat its history, letâ€™s watch.
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