India Inc could feel the heat: RBI

A combination reversal of portfolio equity flows, reduced availability of international capital and pressure on the exchange rate could affect India’s corporate sector, says the RBI.

A combination reversal of portfolio equity flows, reduced availability of international capital and pressure on the exchange rate could affect India’s corporate sector, the Reserve Bank of India (RBI) has said.

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“About 15 per cent to 18 per cent of the business coming to Indian outsourcers includes projects from banking, insurance, and the financial services sector, which is now uncertain,” RBI Deputy governor Rakesh Mohan said on Thursday.

He was speaking at IMF-FSF High-Level Meeting on the financial turmoil.

Mohan, however, said sustained high domestic savings rate would ensure that the impact is limited.

“With external savings utilisation having been low traditionally, between one to two percent of GDP, and the sustained high domestic savings rate, this impact can be expected to be at the margin,” Mohan said.

Besides, the continued buoyancy of foreign direct investment suggests that confidence in Indian growth prospects remained healthy.

A detailed study undertaken by the RBI in September 2007 on the impact of the sub-prime episode on the Indian banks has shown that no Indian bank had any direct exposure to the sub-prime markets in the USA or other markets.