CHENNAI: Minister of State for Finance, Jayant Sinha on Saturday reiterated the Union government’s stance from a possible Greece fallout with the possibility of some volatility in the capital markets in India with marginal impact on the country’s economy as a whole.
Speaking to Express, Sinha however qualified his statement saying that sectors with high exposure to the European market “will see an impact”.
Tamil Nadu’s vital export industries - Leather and Textiles - fall into this category with the European Union being one of the largest export markets, and any decline in the strength of the Euro will likely see an already unfavourable situation worsen.
“If there is indeed an exit from the EU by Greece, as far as India is concerned, we will have to deal with some volatility in the capital market. And certain industries with exports that are quite significant to Europe will be affected,” Sinha said.
The Eurozone constitutes almost 48 per cent of the Indian textile export market and constitutes 60 per cent of the leather export market.
According to Rafique Ahmed, president of the Federation of Indian Export Organisations, the Greek crisis and the weakening Euro have already had a significant impact on the two.
“There has been an approximate 10-15 per cent decline in Indian exports from these sectors ever since the uncertainty over Greece surfaced - over the last five months,” he said. Any further decline in the value of the Euro, could see conditions worsen significantly. Textile exports alone in the last five months have seen a decline of around 5 percent, according to exporters.
It all depends on the Euro. It has weakened already and that has seen some decline in our exports. We are afraid it might weaken further if Europe decides to let go of that debt,” said A Sakthivel, president of the Tirupur Exporters Organisation. (Tirupur is a major textile hub - exporting Rs 20,730 crore out of a total Rs 2.62 lakh crore in total textile exports in 2014-15.) According to figures from the Directorate General of Commercial Intelligence and Statistics, textiles contributed 12.59 per cent of India’s overall export figures in 2013-14 which is a significant amount.
For leather products, with the Eurozone constituting a larger export market, the situation is potentially worse.
Experts are hoping that the European Central Bank will effect a swift correction if the Euro starts declining, which will help in stemming any decline in exports from India.
“We have to see how quickly any volatility in the Euro is contained. With the European economy already in a poor state, the Greek crisis has only increased the uncertainty and reduced the purchasing power. The recovery of (the textile and leather sectors in case of Euro volatility), will be slow and we (must brace for)some tough times ahead,” asserted Ahmed.