India is well prepared if the Eurozone crisis that threatens to snowball in to a global situation similar to that of financial crisis in 2008, said finance minister Pranab Mukherjee on Sunday.
“I am concerned that the situation emerging in the small part of Europe is affecting the economy to Europe and if this situation spreads to other countries there will be another crisis and there may be another downward trend,” said Mukherjee at a gathering in Mumbai.
“With the recovery still very fragile I would not like to have a repetition of that situation in India and we have taken the necessary measures,” he said.
Mukherjee said that India’s fiscal deficit is a big concern, but if another global crisis hits, India is prepared. The government managed to raise Rs 1 lakh crore as against an estimated Rs 35,000 crore through the auction of 3G spectrum.
“I am conservative about my estimates,” said Mukherjee.
The finance minister also stressed that the strong banking sector was one of the reasons why India was not much affected by the 2008 crisis.
At a time when the government and industry are looking to enhance steps on financial inclusion, Mukherjee expressed concern over the high cost and limited reach of the banking sector. “The cost of banking intermediaries in India is high and bank penetration is limited to only a few customer segments and geographies,” he said.
Mukherjee said that the government was trying to address this situation in collaboration with the Reserve Bank of India and with the active participation of banking and non-banking financial entities.
Greece, Ireland, Spain and Portugal are among the biggest concerns for the Eurozone. Recent news that the investors were dumping Portuguese bonds pushed the yield of the 10-year debt over 8%, which is the highest-ever.
Meanwhile, Ireland too is resisting increasing taxes that could lead to lower foreign direct investment (FDI).