India has firepower to withstand Britain's exit, will accelerate growth programmes to offset impact: Finmin
India has firepower to withstand Britain's exit, will accelerate growth programmes to offset impact: Finmin
The ‘Brexit’ vote by UK to leave the European Union would be unlikely to have much impact on India's economy, experts feel.
A sharp depreciation in pound value can unnerve markets significantly in the short term and can cause a correction in the local markets. However, this is unlikely to have a lasting impact on the Indian economy and markets.
Read: Britain votes to leave EU in historic divorce unleasing global turmoil
Indian exports to the UK are equivalent to less than 0.5% of the GDP, so even a sharp slowdown in demand from the UK, which observers think is unlikely in any case, would have a very small impact on Indian growth.
Indian markets are outperforming global markets mainly because relative growth is much stronger, earnings have rebounded, etc.
Read: Opened up Pandora's box: Kiran Mazumdar-Shaw on Brexit
However, the impact of UK leaving the Eurozone will be felt through the currency markets. The GBP could depreciate between 8 percent and 10 percent to the dollar. This could cause a risk-off sentiment in the markets. This could dominate local markets until the sentiment improves.
Read: Brexit may change Britain’s financial industry forever India has firepower to withstand British exit from EU: Finmin India has the firepower to withstand Britain's likely exit from the European Union, will accelerate growth programmes to offset its impact, and does not expect its foreign trade to suffer, a senior finance ministry official said.
Read: UK pound suffers biggest fall as UK referendum results come in
-"India is prepared for all eventualities,-" Economic Affairs Secretary Shaktikanta Das said on Friday on the steps of the finance ministry after UK broadcasters called the outcome of Britain's EU referendum in favour of quitting the bloc.
India gold prices jump 6 percent to highest in nearly 3 years:
Gold prices in India jumped 6 percent on Friday to their highest level in nearly three years following gains in overseas markets and on a weaker rupee.
Read: Enough -"firepower-" to deal with Brexit fallout: Shaktikanta Das
At 0457 GMT, the key gold contract for August delivery on the Multi Commodity Exchange was up 6 percent at 31,708 rupees per 10 grams, the highest level since Sept. 9, 2013.
Global gold prices jumped 6 percent on Friday after partial results in a UK referendum put Britain on the brink of leaving the European Union, boosting the appetite for safe-haven assets.
The Indian rupee was trading at 68.1350/68.1400 to the dollar at 0504 GMT after tumbling to as low 68.22 in early trade, its weakest since March 1.
RBI likely preventing rupee from falling past 68.20/dollar, traders say:
The Reserve Bank of India likely sold dollars around 68.20 rupee levels through state-owned banks to prevent the rupee from falling further, three traders said on Friday, adding that appeared to be the level the central bank was keen on defending.
Read: Sensex plunges 1,000 points, rupee cracks 68-mark on Brexit jitters
The Indian rupee was trading at 68.1225/68.1300 to the dollar at 9.24 a.m. after tumbling to as low as 68.22 to the dollar, its weakest since March 1.
The currency had closed at 67.25/67.26 per dollar on Thursday.
The currency was plunging in line with Asian currencies after a referendum in Britain appeared to be leaning towards leaving the European Union.
India focusing on market dislocations from Brexit, Jayant Sinha says:
India is focusing on the market dislocations arising from a likely British referendum vote to leave the European Union, junior finance minister Jayant Sinha said on Friday, saying it was too early to assess the trade impact.
-"There's going to be market dislocation and we are going to have to focus on that,-" Sinha told news channel ET Now in the first official comment on the UK plebiscite.
India's benchmark stock indexes opened down 3 percent. Listed companies with exposure to Britain suffered the heaviest losses with Tata Motors tanking nearly 10 percent.
But Brexit negative for Indian IT:
Brexit is -"negative-" for the Indian IT industry in the short, and medium-term, former CEO and Managing Director of software major Infosys S Gopalakrishnan said today.
Stating that uncertainty is not good for industry in general, and currency movements are going to be unpredictable at this point of time, he said one does not know now whether this is going to trigger a cascading set of reactions.
-"So, in the short term, this uncertainty is not good for industry and it will be negative for IT industry too because of the uncertainty,-" the former President of Confederation of Indian Industry told PTI.
-"Having said that, may be in the medium-term, a lot of this would trigger changes in IT systems. That means some additional business for IT. In the short-term and probably in the medium term, this uncertainty is not going to be good for the IT industry,-" the Chairman of Axilor Ventures said.
Asked if the vote is going to be negative in the short and medium term for the Indian IT industry, the co-founder of Bangalore-headquartered Infosys said: -"that is correct-".
Responding to what strategy Indian IT industry needs to adopt now, Gopalakrishnan said: -"Unfortunately, this is beyond the IT industry. This is the global economy. Since it’s the global economy, IT as a services industry has to wait for things to settle down-".
(This story originally appeared in the deccan Chronicle as may the case be)
