Global crisis may spread to India through equity, forex mkts: RBI

The Reserve Bank has warned that the global financial crisis can spread to India through equity and forex markets, while money, debt and credit markets could be impacted indirectly due to the continuing onslaught.     

However, the country may escape the worst consequences of the crisis, even as "the equity and the forex markets provide the channels through which the global crisis can spread to the Indian system," RBI Governor D Subbarao said here on Saturday.     
Speaking at the International Monetary and Financial Committee Meeting of the Fund, he said the other three segments of the financial markets which could get affected indirectly are money, debt and capital markets.     

He added that the cost of borrowings have increased for India Inc because of factors like risk aversions, deleveraging and frozen money markets, which is also affecting the availability of funds in the international markets.     

Subbarao, who took charge as RBI Governor last month when the financial crisis was unfolding, said that the unavailability of funds in the international markets will mean additional demand for domestic bank credit in the near term.     

Referring to capital flows, he said reduced interest of investors in emerging economies could impact capital flows "significantly" and the looming recession will impact Indian exports.     

India's exports during the first five months of the current fiscal registered a growth of 35.1 per cent to $81.2 billion as against $60.1 billion in the same period a year ago.     

In the capital market, FIIs have net pulled out $10.05 billion in 2008 so far, while they have net pumped in $2.15 billion in the debt market, according to Sebi figures.