The referendum is bound to have initial shocks since this was largely unexpected. Even the British PM David Cameroon was unprepared for this. The result is, there is no well-defined future course of action. This uncertainty over Brexit is bound to reflect on the world markets. Currently, India is the second biggest source of FDI for the UK and this is primarily because of India’s historical and cultural convolution with Britain. Brexit, however, will herald substantial changes in the approach of the Indian investors as Britain would no longer continue to remain as the center of operations for Europe. Yet, Britain will not want to lose out on such heavy investments and this will give India a stronger footing to put forward the terms for trade.
On the other hand, Europe definitely wants to cut into the USA and China’s sphere of influence, and also needs to hedge against the declining Chinese growth rate. Hence, Europe will be turning to India and would want to resolve the pending trade issues quickly. With the loss of her “Gateway to Europe”, India would now want to have strong ties with some other country in the EU. Currently, among the EU nations, Netherlands is the biggest recipient of India’s FDI. Also, India is in the midst of developing better trading relationships with other EU countries including France and Germany.
India would also likely provide Britain with quality, English-speaking labour force, that it might require following the severing of economic ties with the continent. Britain is also the most attractive destination for higher studies for Indian students. Presently, British Universities provide subsidised courses to students from the EU nations, which may now be diverted to help students from countries having strategic trade relations with Britain.
Talks on India-European Union Bilateral Trade and Investment Agreement (BTIA) have stalled because of resistance from the industry lobbies in India, who have consistently insisted on continued protection for several sectors. The Chief negotiator for Indian-European BTIA visited India within a month after the referendum. Although this agreement will provide mutual benefits for both the parties involved, Brexit has tilted the equation slightly in India’s favour. India is also in talks with the UK to sign another Trade Agreement after Brexit. Both the countries are exploring the option of formation of an India-UK sub-fund under the National Investment and Infrastructure Fund (NIIF) umbrella. Brexit has provided consequences where EU and UK are, in a way, competing for better trade relations with India.
Although Brexit has had some negative effects on the Indian economy, the need is to patiently weather the storm. The prospects for the future are bright. Brexit brings with it the myriad opportunities of growth for Indian industries. It provides a high pedestal for Indian negotiators at FTAs with UK as well as the EU. India just needs to be watchful and capitalize on whatever opportunities comes her way.
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About the Author:
Bhaskar Poddar is a first-year student at IIM Rohtak. He is an Electronics and Communications engineer from Dehradun Institute of Technology, Dehradun. A member of the Cultural Committee at IIM Rohtak, he likes to dance and watch movies in his leisure time.
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