The US is struggling to arrive at a consensus plan to raise a Congress-imposed debt ceiling of USD 13.2 trillion before August 2, failing which it risks losing its golden rating as well as defaulting on its sovereign debt.
"As far as possible, the US debt default and the impasse over its debt servicing, we have reviewed the position and I believe we have sufficient liquidity to manage the situation.
"We are prepared for any possible repercussions in the markets, but whether they would default or what implications that might have is uncertain at this point of time," Governor D Subbarao said at the customary post-policy press conference.
When asked if he was in touch with his US counterpart, Subbarao said, "the government has a scheduled bilateral consultation with the US on the debt situation, but the RBI is not a part of the talks. We had a scheduled bilateral consultation with the US at the end of June, but that had nothing to do with the current impasse."
Later during the day, deputy governor Subir Gokarn said the US was venturing in the unknown now. He said even as the resolution of sovereign debt crisis of Europe and the US was in progress, India has "enough liquidity to absorb the shocks that could arise from any of these two crisis zones."
"Our concern is to ensure if there is a significant flight of capital out of the country along the lines we saw in September-October 2008, we have adequate liquidity to cover that and that is an assessment which we have been making and we do believe that we can cover this shock," Gokarn told reporters in a post-policy press meet.
But Gokarn pointed out that despite the US being in the unknown now, he did not think, "there is any serious anticipation that they will not reach some solution."
He was quick to add that even a diluted solution can see some disruption in capital allocations.
Gokarn broadly termed the negatives from the US and Eurozone crises as "some sort of flight to safety".
He said though there might be many possible outcomes, some of which may be hostile and some benign,"the ones that we are immediately concerned with are the likely impact on commodity prices, the impact on capital movement, the likely impact on exports and on trade."
He said the European situation was no longer an immediate threat, at least its precipitation has been postponed. "There is solution on paper, its a question of how it is implemented," the deputy governor said.
Counting on the positive fallouts of a likely crisis in the US and Europe, Gokarn said there may be in fact reverse move -- money coming from these markets into the country-as happened in the past following the faster recovery of the emerging markets.
But if that happens, with an enormous pressure on the forex markets, we will have to evaluate how we deal with that. But, that is a less difficult problem than an outflow, Gokarn said.
PTI
