India announced a 10 bn USD contribution to the IMF's additional 430 bn USD financial firewall to help the debt-wracked 17-nation eurozone so that the faltering world economy is protected against the spread of any financial contagion.

The 'Eurozone' is the name given to the 17 European countries which use the Euro as their official currency, including Ireland, Spain, Germany, Portugal and Greece. The debt crisis basically came about because several Eurozone countries have lost control of their finances since the global recession - borrowing and spending more than they could realistically afford.

India's contribution along with pledges by other member countries of the five-nation BRICS bloc has helped increase IMF's resources and give a boost to the 430 billion USD fund being used as a firewall to support struggling eurozone economies.

The IMF fund will serve to help governments that are struggling to cope with debt repayments. However, in return for all these loans, the IMF insisted that nations should embark on a major austerity drive involving drastic spending cuts, tax rises, and labour market and pension reforms.

Europe accounts for about a third of India’s exports. The sovereign debt crisis in the EU is likely to affect exports from India and moderate the flow of capital into the country. Exporters are worried that the debt crisis will hit demand and lead to payments problem which in turn will affect the Indian economy drastically as already visible by decrement in the value of rupee in the world market.