Brexit and it’s effect on India

brexit and it's effect on India Assam Exam


The UK joined the European Communities on 1 January 1973, with membership confirmed by a referendum in 1975. In the 1970s and 1980s, withdrawal from the EC was advocated mainly by Labour Party and trade unions. From the 1990s, the main advocates of withdrawal were the newly founded UK Independence Party (UKIP) and an increasing number of Eurosceptic Conservatives.


European Union

European Union (EU) is an economic and political partnership involving 28 European countries. It began after World War Two to foster economic co-operation, with the idea that countries which trade together are more likely to avoid going to war with each other. Since then it has grown to become a “single market” allowing goods and people to move freely across the member states. It has its own currency, the euro, which is used by 19 of the member countries, its own parliament and it now set of laws in areas of environment, transport, consumer rights etc.


Why Britain leaving the European Union

The Leave Campaign argues that Britain is losing out a big deal by staying in the EU as it has to pay millions of pounds each week as a contribution to the European budget; the extremely bureaucratic nature of the European parliament is hurting British exporters; and finally, that unmitigated migration from the European Union into Britain is creating an imbalance in the welfare schemes of the UK government.
A referendum was held in Britain on 23rd June, 2016, to decide whether the UK should leave or remain in the European Union. 51.9% of the vote favoured to leave the union.

Brexit Process

For the UK to leave the EU it had to invoke Article 50 of the Lisbon Treaty which gives the two sides two years to agree the terms of the split. Prime Minister Theresa May triggered this process on 29 March 2017, meaning the UK is scheduled to leave on Friday, 29 March 2019.

Article 50 is a plan for any country that wishes to exit the EU. It was created as part of the Treaty of Lisbon – an agreement signed up to by all EU states which became law in 2009. Before that treaty, there was no formal mechanism for a country to leave the EU.

Article 50 says that any EU member state may decide to quit the EU, that it must notify the European Council and negotiate its withdrawal with the EU, that there are two years to reach an agreement – unless everyone agrees to extend it – and that the exiting state cannot take part in EU internal discussions about its departure.


Impacts of Brexit

Most of the countries across the world will be impacted to various degrees if the event of Brexit do materialise.

Here are some ways in which India will be affected

1. The uncertainty following Brexit: Britain have not mapped out the future course of action if Brexit indeed happens. There is no sound plan regarding Britain’s future relationship with the EU or any other specific country within the EU. As of now, questions about their extent of access to the European markets, trade barriers or any trade agreement, are left unanswered. And these uncertainties will hurt global financial markets. The pound will depreciate and markets across the world will fall and India is also no exception.

2. Investment: India is presently the second biggest source of FDI (Foreign Direct Investment) for Great Britain. For Indian business, UK proved to be a gateway into the rest of Europe and the event of Brexit, this will cause short-term distress to Indian firms. Further, if Britain is leaving the EU due to the latter’s complex bureaucratic regulatory structure, Indian companies can expect a deregulated and freer market in Britain, which is definitely good for Indian business. Britain may try extra hard to woo Indian companies by providing much bigger incentives in terms of tax breaks, lesser regulation and other financial incentives.

3. New Trade relation with the rest of EU partner: This will force India to forge strong trade ties with other countries within the EU to access it’s large market. Many Indian companies would need to relocate or create new set-up in other places of EU nations.

4. Opportunity for Indian Business: Due to Brexit, European goods will not be free flow the market of Britain as is the case now due to EU economic union. Indian business has a good opportunity to capture the market with own products.

5. Opportunity for Indian Workforce: With Britain cutting off ties with the EU, it will be desperate to find new trading partners and a source of capital and labour. Britain will need a steady inflow of talented labour, and India’s large English-speaking workforce may find it as a great opportunity.

6. Indian’s Foreign education Destination: Britain is one of the most important destinations for Indians who want to study abroad. With Brexit, Britain’s universities will be at will to accommodate more Indian students and provide scholarships for studying there. The depreciation of pound will also reduce travelling cost to the UK and will make it a economical travel destination.

7. As an important partner to European Union: Europe needs to counterbalance United States and China geopolitically and would also need to hedge against a slowing China for its economic interests. Europe would be looking at the fastest-growing major economy in the world and would need to quickly resolve the pending trade issues with India in order to develop a lasting relationship.

7. Automobile, Pharma and IT Sectors will be the most affected. Leading Indian IT firms have not commented on it as since there is a possibility of renegotiations for all the ongoing projects because of the devaluation in the value of pound. In the automobile industry, Brexit may lead to reduction in sales and companies that derive good revenues of profits from Britain could get hurt majorly.

India with the vast young workforce and it’s economy is growing fast, should use the current turmoil as an opportunity. At this point of time, it seems as if India will not loose much and may even gain more from the Brexit event.


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