Euro break-up to hit us in face: Basu

'It Will Be A Lie To Say That We Have The Strength To Weather Crisis'   Mumbai/Delhi: Chief economic adviser Kaushik Basu has cautioned that if the Eurozone breaks up finally, it will impact India in the face as the country is unlikely to have the strength to overcome a crisis of that magnitude.      Basu's warning comes at a time when the Indian economy has slowed and business confidence is down. The government has blamed the Eurozone debt crisis as one of the reasons behind the slowdown in the domestic economy, while exports to Europe too have moderated. Growth has slowed to a 9-year low of 5.3% in the January-March quarter, prompting calls for urgent action to revive growth.      The chief economic adviser, who does not mince words, had earlier said that the government has a contingency plan to deal with any problems arising out of the Eurozone meltdown. Basu, however, said by 2015 the emerging economies, will be better off and post robust growth. "The emerging economies are in a position to build strength (during this interval) so when we come out of this tunnel, we will be at the top of it. We will come out on top of growth drivers by 2015," he said. "If Europe does slip into a crisis, it is going to be a very difficult time. There is no escaping from that. Though we (government and the Reserve Bank) have a team that is working on different scenarios, to see how we will react, it will be a lie to say that we have the strength to weather that," he said at a function in Mumbai over the weekend.      Initially Indian policymakers had shrugged off any adverse impact of the Eurozone crisis when it emerged but there is now a recognition in the government that the impact on India could be huge given the trade and financial linkages of the domestic economy with the global economy. Policymakers now say that one obvious and consequence of the global downturn is bound to be a fall in export revenues. The European Union accounts for 20.2% of India's merchandise exports and the US for another 10.9%. India is now diversifying its exports to other regions to overcome some of the pain from slowdown in the two key markets.      On the impact of a possible Greek exit from the Eurozone on the domestic economy, Basu said, "We are not out of the woods. There is indeed some risk that this is going to last a while. It will affect us." He said a deeper European crisis would be a jolt and it could spin Europe into a big crisis. "It is going to be a difficult one or two years for the world for sure. Thankfully, Europe is no longer our biggest export destination, to the Middle-East we probably export more today." But, he said the impact on India will be indirect. "Europe being a major driver of growth and if it slows down, even if we don't get a direct hit, the US is going to get hit immediately, China is going to get hit immediately. So, the impact on us will come to us through our trading partners."      The chief economic adviser said the problem will arise in 2014, when the LTRO (longterm refinancing operations of the European Central Bank or ECB) payback comes in December 2014 and February 2015, when nearly $1.3 trillion needs to be paid by 800 banks to the ECB. This will sap the entire banking system, he warned.      Speaking in the 'War and Peace programme' of Doordarshan, Basu said if there is a full-fledged global crisis, the economic tsunami's waves can come up to the Indian shores in a big way after two years. "But if the crisis is there, we will take cover, we have plans of doing that but these waves will be waves that will come up on our shore in a big way," he said, adding that certain protective measures can be taken to cover the country "as much as possible". When asked whether by any account it was possible to rule out such an economic tsunami, he said, "It will be very foolish to feel that we are impervious to this or if we bury our head in the sand and say that it is not coming now."  IMPACTING INDIA  tEU accounts for over 20% of India's merchandise exports and the US nearly 11%  tThe impact on India will come through trading partners as, if the Europe crisis worsens, it would hit the US & China immediatelytProblem will arise in Dec 2014 and Feb 2015, when long-term refinancing operations of European Central Bank paybacks come up. Then, nearly $1.3 trillion will need to be paid by 800 banks to the ECB. This will sap the banking system