India may see flight of capital in next six months: FICCI.

India is likely to see flight of capital from its equity and debt markets in the next six months as global investors hesitate to pour money outside the US because of the European debt crisis, a FICCI survey said on Sunday.

"With deleveraging (belt-tightening) expected to continue in the global markets, there is likely to be flight of capital from equity markets in emerging economies, including India," the chamber said, quoting the views of economists. It said debt flows could also be impacted.

The unfolding events on the global economic landscape, particularly in Europe, would also result in a tight liquidity position in the coming months, it said.

Finance minister Pranab Mukherjee, who is attending the G-20 ministerial meeting in South Korea, had said that if the recovery in Europe and the eurozone is retarded, it may have an adverse impact on India.

"(There will be an impact) on our recovery because Europe still continues to be an important export destination of India," Mukherjee had said.

Europe accounts for about 23 per cent of India's exports of around USD 176 billion.

However, FICCI expressed hope that the RBI would ensure that adequate liquidity was maintained in the system to keep the growth momentum of the Indian economy.

This is because inflation (around 10 per cent) is likely to dip in the second half of the current fiscal.

As the markets are likely to see outflows, the majority of the economists who participated in the survey felt that the rupee may remain under pressure in the near term.

The rupee has already seen a decline of about 4 per cent against the dollar last month.


Source :- timesofindia.indiatimes.com