‘ECB bond buying will not impact India’

It will help in reduction of borrowing costs for struggling euro zone economies.

Written by ENS Economic Bureau | New Delhi | Published: September 8, 2012 1:26:31 am

The European Central Bank’s (ECB) unlimited bond-buying programme to help euro zone is not likely to have much impact on India,a senior government official said on Friday adding that the resultant inflation on account of the move has to be contained.

ECB president Mario Draghi said on Thursday that the new plan,aimed at the secondary market,would address bond market distortions and unfounded fears of investors about the survival of the euro. It will help in reduction of borrowing costs for struggling euro zone economies.

The move was well received by the global markets. In fact,joining a global market rally,the Sensex on Friday surged by 337 points,its biggest single day gain in two months,on heavy buying.

“There is not going to be much impact as of now on India but we will have to see…inflation has to be managed,it has to be contained,” Arvind Mayaram,secretary,department of economic affairs,told reporters here at the sidelines of a global skills summit organised by industry chamber Ficci.

All the same,the ECB has also indicated that the bond buying will be sterilised,i.e. the amount spent on buying short maturity bonds of troubled economies will be absorbed back by the ECB. This means that no additional liquidity is expected to flow through the global markets because of these proposals.

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