Using Indian Data to Measure the Impact of the Eurozone Debt Crisis Through the Financial Channel

Vighneswara Swamy

Published: December 2017

Economic data for the period 2000 to 2013 shows that the sovereign debt crisis in the Eurozone had a macroeconomic impact on India by transmission through financial channels. Capital flows into India slowed down significantly due to the crisis: net external loans availed by banks stood at US$2.7 billion in the third quarter (Q3) of 2012–13 as against outflows of US$87 billion in Q3 of 2011–12. The number and quantity of Euro issues by Indian firms declined from INR159.6 billion (with 18 issues) in 2009–10 to only INR10.3 billion (with 5 issues) in 2012–13 and portfolio investments into India fell significantly. One significant lesson from the Euro debt crises is that the Indian financial system is relatively more open than that of the Chinese.