With Greeks’ rejection of rescue package from creditors spooking markets, the government today asserted that India is well insulated from the crisis but rupee may be affected due to the outward flight of investment.

“This is a drama which is going to play out for sometime.

We are well protected in at least three ways. Our macro-economic situation is much more stable. We have (forex) reserves. We are an economy which is still a very attractive investment destination. So I think we are relatively well insulated,” Chief Economic Advisor Arvind Subramanian told reporters here today.

Flight to dollars

Greeks had yesterday rejected a rescue package from its international creditors, throwing the future of the country’s Eurozone membership in doubt.

“As for the crisis itself, it is going to going to be long and prolonged. Tomorrow is a big meeting of the German and the French head of the states. Let’s see, it is up to Europe to respond,” he said.

On the likely impact of the crisis on Indian economy, he said, “In these situations what mostly happens is there is flight to dollars, to a safe haven. Rupee might also be affected by that. But nothing gets unusual at all so far.”

He said as the crisis plays out “financial markets are going to be volatile. Both the ECB and Fed will take this into account.”

Govt monitoring

Finance Secretary Rajiv Mehrishi said government is closely monitoring the situation as India may be indirectly impacted.

“We will have to see how the euro moves now. We are closely monitoring the Greece situation. There could be some reaction on the Fed rate hike likely,” he said here.

“Greece crisis might impact India indirectly,” he added without elaborating.