With the world’s attention focussed on the unfolding Greek drama, India could remain relatively unscathed, with little direct exposure to the turmoil, though Indian software and engineering exports are expected to take a hit. The country may also face larger capital outflows due to a weaker euro, industry and government officials warned on Monday.
Greece headed closer to default and exit from the euro on Sunday with Prime Minister Alexis Tsipras announcing capital controls and shutdown of banks at least for a week.
The crisis sparked a sell-off in emerging markets, battering the Bombay Stock Exchange along with global stock exchanges. According to news agencies, companies with direct exposure to eurozone markets are being hit hardest.
The BSE Sensex dropped by more than 600 points in early trade on Monday, but managed to recoup some loses later on selective buying and settled the day lower by 167 points at 27,645.15.
The euro turned weak against the rupee to Rs 70.97, from Rs 71.25 in the last trading session, even as the US dollar and British Pound gained.
“If yields on euro bonds go up, then it might impact inflows and outflows from India,” Finance Secretary Rajiv Mehrishi told the media.
He said the government is consulting the RBI to deal with the situation.
"This a dynamic and evolving situation. There is no firm plan that we can access," Mehrishi said. "Nobody can predict what the exact situation would be."
Meanwhile, RBI Governor Raghuram Rajan said last week he expected India's economy would be able to withstand the impact thanks in part to its foreign exchange reserves, which reached a record high of $355.46 billion on June 19.
However, engineering exporters’ body EEPC India warned that engineering exports would be hit as the European Union is the largest destination.
Commerce Secretary Rajeev Kher also said exports from India would be impacted negatively if the European Union is hit from the Greece crisis, although he ruled out any major direct impact of the prevailing Greek situation.
“India does not have large exposure of Greece as far as trade is concerned,” he pointed out.