Brexit – What next

Analysis of the Brexit implications for India

Analysis of the Brexit implications for India
Analysis of the Brexit implications for India

[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]I[/dropcap]t was a nail biting finish for Britain to decide by a referendum on staying with or leaving the European Union (EU). It should be noted that Britain was not part of Euro currency even though it was with the EU.

The primary issues were regarding sovereignty of Britain/ Refugee influx and increasing unemployment. It was felt that EU was deciding about fiscal policies and other regulations without considering local sensibilities. The fiscal deficit set by EU—at 3%-was not followed by many countries in practice but still was felt as a diktat from an unelected body to sovereign nations.

But the last straw on the camel’s back was the refugee issues wherein every EU country was to take refugees pouring in from Syria/ Yemen and even Pakistan.

In the context of local unemployment hovering above20 % and youth unemployment as high as 40% — many countries were unhappy about this.

So the Poorer / Rural/ Less educated British decided to opt out of EU while London voted for staying with the EU.

Also to be noted that younger generation voted for EU compared to oldies. Youngsters were looking at long term benefits if any in remaining in the EU while oldies were voting out of experience.

[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]I[/dropcap]nterestingly Scotland voted for EU. This can have implications in terms of Scotland renewing its desire for independence. Even London may feel that it’s voice is not heard and demand separate status within EU. Already protests are happening. A large number of people in London are angry and demonstrating. It should be noted that London is known as Londonistan due to its composition of population.

So in a sense UK is unraveling with Scotland, Ireland and London wanting to have a say on staying with EU. Very soon, one can expect Scotland to re-try seceding from UK. Scotland wants to be in the EU, which might embolden EU to sweeten the pot for the Scots.

In other countries like France and Netherland too there is a clamour to leave the EU. We can safely say that the “Project Europe” is coming to an end. EU as we know may not exist.

In the short run the pound will be pounded with a fall. Already it had a massive intra day fall since 1985– to the extent of nearly 10%. It will help exports by UK.

[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]I[/dropcap]ndia currently enjoys a positive trade surplus of around US$ 3.64 billion with the UK. The depreciation of the British Pound will differently affect exporters and importers. Our importers will be happy in the short term and exporters will fret.

India will need to negotiate agreements with EU and Britain separately. At present, India’s trade with Britain stands at around US $14 billion, which is more than the rest of Europe put together. Britain’s exit could also mean Britain and EU could compete for trading with India and enter into long term relationships, by resolving pending issues. It is expected that the EU will take a more favourable look to complete its negotiations with India to conclude the EU-India Bilateral Trade and Investment Agreement. However, India would like to first initiate and conclude a trade and investment agreement with the UK and then will consider concluding its BTIA with the EU, according to an analysis from CUTS-E group forum.

Indian Foreign Minister Sushma Swaraj noted that UK was India’s gateway to the EU as around 800 Indian firms operate from Britain, for easy access to the EU. EU leaders have already suggested that with Brexit, India will be treated as a third party and will need to engage with EU to gain access. This could adversely affect Indian companies as  a local office in London might no more mean being present in/ having access to EU. Consequently, they will have to revisit their business strategies and consider relocation. On the other hand, with Brexit and expected depreciation of the British Pound, in future, Indian investors in the UK may get a more favourable treatment. Similarly, British investors may like to divert their investment to India and other such countries where they expect to get better returns. The UK may look at India’s investment regime more favourably than the EU. Overall, there will be investment creation for India and strengthening of the capital markets between India and the UK.( says the same CUTS analysis)

[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]I[/dropcap]nterestingly with Brexit, the UK will no longer be obliged to offer quota-based jobs to the citizens of the EU countries. This will open up the market for skilled and semi-skilled labour. Overall, there will be employment creation for Indian and Commonwealth country migrants, including temporary workers, in the UK.

Now the issues are much larger. It is perceived as a slap on the face of globalisation by the unwashed masses in rural England and Wales. At one level this argument is valid since they do not want impersonal bureaucrats from Belgium -where EU is head quartered -to rule them under the guise of European  Union.

#Brexit  will be a trigger point similar to the assassination of Archduke of Austria Hungary which many suggest as the beginning of 1st world war.

Europe is on a time bomb which may implode in a few years.

The decline of G-7 is a great opportunity for re-emerging markets and civilisations like India.

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Prof R. Vaidyanathan

Cho S Ramaswamy Visiting Chair Professor of Public policy[CRVCPPP]

Sastra University

An expert in Finance and a two times Fulbright Scholar, Prof. R Vaidyanathan is a much sought after author, speaker and TV commentator on all items related to Money and Finance.
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  1. EU economic cartel will break and it helps easyern countries.emaciated europe is good. Enoough infiltrated by islamists due to corrupt EU leaders that will keep the european countries ever in flux, fear ,faltering , and failing. Good for test of the world.

  2. EU came into being during cold war. Such ill defined entity won’t last. Islamist Saudi +easily penetrated unelectetd corrupt politicos of EU admin to infiltrate massively. EU will go USSR way. EU will be in flux and present government heads will lose . Good augury to eastern countries as EU economic cartel will break.


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