Europe maybe helpful to India.

Contrary to what people are saying a financial crisis in Europe may be of great help to India. Provided our fellows take the right decisions, of course. If Greece exits the Euro and there are runs on banks in Spain and Italy foreign funds will immediately withdraw money from emerging markets for the safety of the US and Germany. That will result in a precipitous fall in property prices and the Sensex, which are the main avenues for investing black money. Once most of the black money is out of the system inflation, which has not been controlled by 13 rises in interest rates, will fall. The outflow of FIIs will tend to deplete foreign exchange reserves and put downward pressure on the rupee but this will be more than offset by the fall in commodity prices, especially oil which is the largest import cost for India. Non resident Indians will seize this opportunity to buy assets here increasing remittances in dollars. The fall in inflation will allow the RBI to reduce interest rates but this must be done with extreme caution so as to keep inflation down at 3% and prevent a property price bubble from forming again. On no account must the RBI allow property prices to get ahead of inflation thereby keeping a lid on black money which it cannot control or tax. A relatively high interest rate will encourage savings which is falling and is the reason why banks were unable to pass on the recent 50 basis points cut in interest rate to borrowers. Preventing an asset price bubble will prevent reckless borrowing and protect banks. At least 10% of loans to the real estate sector are stressed but banks are saying it is 3-4%. ET, June 20. Indian banks have sought to restructure $12 billion of corporate debt through the Corporate Debt Restructuring Cell, an increase of 156% over the previous year. Analysts reckon that banks are hiding bad debts by advancing new loans to cover the old ones so that they are not shown a Non Performing Assets on their books. This is called " evergreening " and makes the situation worse by increasing the debt load. At SBI 43% of restructured loans were declared non performing within 2 years. Low inflation will allow the government to increase the price of diesel and reduce the price of petrol, thus reducing the difference in price and the incentive for people to buy diesel cars. The government must reduce expenditure and push foreign investment in retail and in infrastructure and reduce taxes on infrastructure industries like airports, roads and power. As the economy grows the rupee will tend to strengthen. The RBI must buy dollars to keep the rupee from gaining too much. This will increase dollar reserves and help local industries by preventing excessive imports. This is not a Nobel Prize winning theory in macroeconomics but simple common sense. We could see the present crisis in 2008 because of what the Congress did to win elections in 2009. Let us hope that they have minimum patriotism not to destroy the country to win in 2014.