Preparing for Europe's Lehman moment

One of the reasons the rupee has remained under pressure has been the reduced role of European banks in India and the emerging Asia region as a whole. This has affected the flow of both long-term commercial borrowings as well as short-term trade credit, and has taken a toll on the overall balance of external payments. The International Monetary Fund’s (IMF’s) regional economic outlook released in April 2012 focuses on this aspect, and considers the possible effect of a sharp escalation in Europe’s problems on financial flows to emerging Asia.

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