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Greek debt crisis: India well prepared to handle the short term volatilities, says PHD Chamber
The deepening of the Greek debt crisis is unfortunate for the global economy which may impact the economic and business sentiments across the countries. "However we believe that India is well prepared to handle the short term volatilities," said Alok B. Shriram, President, PHD Chamber of Commerce and Industry.

Many European economies including Portugal, Ireland, Italy, Greece and Spain (PIIGS) are suffering from fiscal sustainability concerns about large fiscal deficits and stagnated growth scenario. The increasing unemployment rate and sluggish output growth have escalated debt levels in these economies, said Shriram.

Real GDP and unemployment scenario in PIIGS economies in 2015

 EconomiesReal GDP(%)Unemployment (%)Debt/GDP (%)
 Portugal  1.5% 13%  130.20%
 Ireland  4.1%  9.8%  109.7%
 Italy  0.1%  12.4%  132.1%
 Greece  0.4%  25.4%  177.1%
 Spain  2.7%  21.3%  97.7%

Source: PHD Research Bureau, compiled from various sources

He further elaborated that Greece's debt-to-GDP ratio has already reached an EU-high of 177% while unemployment is hovering at around 25% in Greece. The massive amount of government spending designed to stimulate the economies vis-a-vis to tackle unemployment is only leading to rising debt.

India has emerged as global economic power-house as a result of its relatively strong macro-economic indicators. The Indian economy is expected to surpass China this year in growth meanwhile the government and central bank has been able to intelligently manage the macro-economic fundamentals in times of dynamic global scenario, said Alok B. Shriram in a release.

Our macroeconomic fundamentals are very strong and almost all lead indicators are in positive trajectory, added Shriram.

The real GDP growth in 2014-15 has been recorded at 7.3% and is expected to enter into double digit trajectory in the medium term. The WPI inflation is in negative trajectory while the CPI inflation has also declined from 8.3% in May 2014 to 5% in May 2015. The Current Account Deficit has declined to 1.3% of GDP in 2014-15 as against 1.7% of GDP in 2014-15.

Further, the fiscal position of the government looks impressive with the fiscal deficit for the 2014-15 registered at 4.0% as against the target of 4.1%, while revenue deficit for 2014-15 at 2.8% as against target of 2.9%, he said.

However in an event of deepening of the Greek debt crisis, the domestic vulnerabilities arising from trade and financial channels will need to be dealt proficiently and swiftly said Shriram.

India may have some challenges to growth including impact of fluctuating monsoons, rising levels of non-performing assets and its consequent impact on highly leveraged sectors including infrastructure, mining, iron & steel, textiles, infrastructure and aviation, said Shriram.

Further, he acknowledged that these structural weaknesses are in process of being resolved and commended the practical measures being taken by regulatory authorities to curb external spillovers in an effective manner in the recent past.

PHD Chamber's president stated that in view of the current global economic developments, there will not be any sharp decline in rupee from the current level. While there will not be any significant upward movement from the current level, it will also not decelerate like August 2013. During the last one year, the rupee depreciated from around 59/USD in May 2014 (average) to about 64/USD (average) in May 2015.

He said that in times of dynamic movement of capital flows, India should not be solely dependent on its large reserves of US$355bn. It is necessary that reforms are implemented from the grass-root level to strengthen the structural aspects of the economy. These measures will go a long way in strengthening the economic and business sentiments.

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