Taking a jibe at some economic commentators, finance minister Arun Jaitley on Monday said that though they had forecast that Greek referendum against the bailout offer could create turmoil in the markets, it had not happened.
“I was watching television last night when the results of the Greece referendum were just coming in and I heard one very authoritative commentator on the Indian screen mention that Mondays are known to be very bloody as far as the markets are concerned… Till about noon this prediction continued and then more sober realty started sinking in and then watching the situation move the other way, the views immediately changed and so did the analysis,” he said at the launch of professor emeritus London School of Economics Meghnad Desai’s book on economic recession titled “Hubris- Why Economists Failed to Predict the Crisis and How to avoid the Next One”.
The finance minister also expressed puzzlement over why economists have failed to predict crisis. “But there are not many who have been able to do that. I find amongst the very transient details in the last one year particularly as to which way the oil prices are going,” he said.
Meanwhile, the finance ministry said that India is well insulated from the Greek 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,” said chief economic adviser to the finance ministry Arvind Subramanian.
Greeks had on Sunday rejected a rescue package from its international creditors, throwing the future of the country’s Eurozone membership in doubt.
Noting that the crisis is going to be long drawn out, he said that the Indian rupee may get affected but that would not be unusual.
“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 said adding that financial markets are going to be volatile. “Both the ECB and Fed will take this into account,” he said.
Finance secretary Rajiv Mehrishi said government is closely monitoring the situation as India may be indirectly impacted.
“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,” he said, adding that the Greece crisis might impact India indirectly.
Meanwhile, speaking at the launch of his book, Desai said that the global economy is in a downswing since 2008. “We are now in the middle of another secular stagnation and low output growth and low inflation.”
While noting that India is out of this, he however said that the downswing would continue for another 15 to 20 years.
Expressing optimism over India’s growth potential, former deputy chairperson of the erstwhile Planning Commission Montek Singh Ahluwalia too said that the long term growth potential of the economy is of 8 per cent to 10 per cent over the next 20 years.