|Demand of the question Introduction. Contextual introduction. Body. Discuss various post-Brexit opportunities and challenges for India. Conclusion. Way forward.|
Brexit is a term being used for Britain’s exit from the European Union. Both Britain and India share an age-old history of common interests and values and with India growing fast, the relations between the two countries can reach new heights post Brexit. The UK is India’s 5th largest trading partner and provides great opportunities for India to develop stronger relations with Britain, post-Brexit.
- Stronger Trade ties: Brexit provides a fresh opportunity to India to strengthen its economic relationship with the UK through an India-UK free trade agreement (FTA). A study carried out by the Commonwealth Secretariat after the Brexit vote has identified 13 new products which India can export to the UK. It has estimated market access of around $2 billion for these products. A well negotiated bilateral trade arrangement between the UK and India has the potential to increase bilateral trade by 26%.
- Foreign Direct Investments (FDI): Indian government has considerably liberalised the FDI regime in the country and there has been an increase in FDI inflows over the last two years. India is expected to get continued attention from the investors including investments from the UK. The UK is the third largest investor in India and accounts for about 8.0% of the total FDI inflows in the country. Several British companies have exhibited interests in India post launch of the Make in India campaign.
- Boost Immigration from India: The UK is experiencing a great shortfall in skilled manpower. Brexit would provide a new opportunity for the Indian professionals to look for the work options in the UK.
- Cheaper Pound Sterling: The British pound is among the most expensive currencies in the world. The cheaper UK currency would likely boost exports from India as an alternative to the overpriced Eurozone. Indian students could pay less for the rupee conversion and for the Indian tourists UK travel could become much more affordable.
- Education Sector: Britain’s exit from the EU is expected to open up significant business and economic opportunities for the Indian Education Sector. Education in the UK will likely become more affordable. For Indian students studying in the UK, Brexit might result in a more level playing field compared with other EU students who hitherto had an informal edge over the rest of the world in the job market. India being one of the largest skilled labour markets, with a population well versed in the English Language could have a distinct advantage.
- Agricultural opportunities: Key opportunities for Indian companies, post-Brexit could arise in the food and agro products sector, since the UK is a net importer of food and food products from the EU. Indian exporters would need to comply with the regulatory framework and accompanying phytosanitary requirements, depending naturally on what framework the UK adopts.
- Depreciation of Pound: India businesses have presence in a wide array of sectors in the UK which include automobiles, auto components, pharmaceuticals, gems and jewellery, education and IT enabled services. Most of these sectors will be vulnerable to changes in demand and currency values. The depreciating Pound will impact the revenue stream of companies over the near term.
- Potential loss of market access in EU: Many of the largest Indian employers operate in the services sector, which will be seriously impacted. Businesses in the UK might be treated as third country service providers by the EU, with potential loss of market access and increase in non-tariff barriers.
- Impact on garment industry: Readymade garments are one of the key export items to the UK from India. It accounts for about 20% of India’s total exports to the UK. The sector is expected to feel the pinch on account of moderation in demand.
- Loss of jobs: India is one of the largest exporters of IT-enabled services and the sector has significant exposure to the European market especially the UK. The UK accounts for about 17% of India’s total IT exports. IT companies thus are expected to face the heat in light of Brexit. Given the risk of further moderation in growth in the UK and EU, there is an increased probability that the companies lower their IT budgets and many may lose their jobs.
Brexit does provide an opportunity to expand India’s trade and economic relations with the UK. Much will depend on the fine print of Brexit and the ensuing negotiations. The challenges that Brexit throws up have to be addressed before an India-UK FTA becomes a reality. Even though the Indian economy may be in better shape than a post-Brexit UK, we will need to leverage our strengths so that the complementarities in our economies are harnessed. We need to work towards a win-win situation so that we are able to translate adversity into an opportunity for mutual prosperity.