BREXIT AND ITs IMPACT ON THE INDIAN ECONOMY

Richard D. Daimary
- PGDM B 2106
1621134

Britain, a magnificent country indeed famous for its horrible weather, love for tea, cricket,
football and of course Her Majesty The Queen, Dr. Who and Beatles and Queen the
legendary bands. A country that was famous for being an empire where the sun could never
set. Great Britain without a doubt deserves the title Great before Britain because of her rich
history. Of course, over the years the greatness of Britain may pale in comparison to her old
glory days but her bold decision to step out of the European Union can be termed Great
nonetheless.
Britain always had a shaky relationship with the EU ever since its conception after the 2 nd
World War. Britain argued that she was losing out a big deal by staying in the EU. She paid
millions of pounds each week as contribution to the European budget, her exporters were
handicapped by the extremely bureaucratic of the European parliament and the unchecked
immigration from the EU was causing an imbalance in the welfare scheme of the UK
government. On the 23rd of June 2016 a referendum was held where 52% voted to leave the
EU to 48% who voted against the decision to leave and just like that Britain left the European
Union. But did Britain not remember? She gains much more than she pays as contribution,
companies in Britain have or had unrestricted access to the entire EU and regarding the
immigration problem she would still have to trade with the rest of the EU and to do that she
would need to accept some shares of outsiders within her shores. Being in the EU the UKs
diplomatic and military objectives were complimented. The UK is also in fact prospering as
the fifth largest economy in the world. Now with Britain outside the EU her weaknesses will
be more carefully scrutinized than when she was on the inside especially her continuing high
annual budget deficit and growing debit and also her high current account deficit.
The biggest concern from the exit of Britain is what impact will it have on the markets
worldwide? There is no proper plan regarding Britains future relationship with the EU and
all its member nations. Will she still have access to European markets? Will trade barriers
increase if they leave? Are there any agreements with the union regarding the movement of
capital, goods and labour? These unanswered questions are the main reason the markets

worldwide are currently spooked. Without a doubt one country Britain is going to make sure
she still has trade relations is India the country she has a deep connection with both
historically and economically. India is the world 2 nd fastest growing economy and is a hot
destination for investment. India is also presently the 2 nd biggest source of FDI (Foreign
Direct Investment). The UK proved to be a gateway for India into the EU market. Indian
companies that would set up factories in Britain could sell their products freely in the EU
under the European Free Market system. With Britains exit it will not be an attractive
destination for Indian FDI as before. Britain also would not want to lose out on capital
coming from India as now with their exit there will be hesitation by other countries to trade
with her. Thus Britain may try to woo Indian companies by providing much bigger incentives
like tax breaks, lesser regulation and other financial incentives. Plus, Britain leaving the EUs
rigid bureaucratic system means a much more free market in the UK.
With Britains exit India will most probably look for ties with another country within the EU
which may prove to be beneficial in the long run. India had already started building trade
negotiations with the Netherlands, France, Germany and others although in small ways.
Netherlands is as of now Indias top FDI destination. India will now most probably form
strong trading connections with other EU countries for access to the large European market.
With Britain now out of the EU she will be desperate to find new trading partners and a good
and stable source of capital and labour. Britain will need a steady inflow of talented labour
and India fits perfectly to Britains needs because of the majority of its people speaking
English. With flow of immigration from Europe most probably drying up Britain would be
able to accommodate migration from other countries from the commonwealth which would
work in Indias favour. In terms of education Britain is one of the most popular destinations
for Indians wishing to study abroad. Before BREXIT UK universities were forced to offer
subsidized rates to students of the UK and EU. Now, after the exit UK universities will no
longer be obliged to pay EU students scholarships. This will free up funds for students from
other countries. Many Indian students will now get the chance to study in the UK and get
scholarships. Whether BREXIT happened or didnt it would be in the European Unions best
interest to develop India as a strong trade, military and strategic power. Europe needs to
counterbalance the United States and China geopolitically. The EU would also need to hedge
against a slowing China for its economic interests. For this the EU would most probably look
at the worlds fastest growing economy and quickly resolve any trade issues it has with India
in order to develop a lasting relationship which benefits both parties.

Though the exit of Britain may make the country suffer in terms of reduced trade and a drop
in their GDP the overall effect could turn out to be positive for India. There is, of course no
concrete proof of such theories that are based on speculation and math. Only time will tell
whether Britains decision was a wise one and in the long run will it be truly beneficial to
India.