A fine balance

Indian businesses grapple with the risks, uncertainties and opportunities presented by the euro crisis

Nandini Lakshman reports

Late last year, India’s finance minister, Pranab Mukherjee, admitted that the eurozone crisis was impacting growth and would hurt Indian exports. Data released by the government last month show India’s economic growth slipped to a three-year low of 6.1% in the third quarter of the fiscal year that ends on 31 March. Mukherjee said although the GDP figure was “disappointing, it was not unexpected” due to the poor performance in manufacturing, mining and agriculture.

The slowing growth at home coupled with the euro crisis, particularly the prospect of a financial default in Greece, is giving many Indian businesses and investors cause for concern. Indian companies have been doing business in Europe for decades and this continues today, even as India’s growth hinges on domestic consumption, unlike the export-led Chinese economy.

The euro crisis is hurting all constituencies. For Indian exporters, it means dwindling orders, payment delays or simply contracts being dishonoured. There is also the prospect of European banks being reluctant to issue new loans, or even reneging on earlier loans, which might force companies to rewrite contractual agreements.