In 2016, the citizens of Britain voted for an exit from the EU. ‘Brexit’ is now going to be a reality soon, with UK government initiating the formal procedures to separate from the EU. This exit is going to affect businesses worldwide, including India. Immigration laws are also going to be different (stricter) and since Indian immigrants are in huge numbers in Britain, they would be facing the Brexit intensely. What would be the effect of Brexit on the Indian stock market, students and immigrants? Let’s find out.
9 – Effects of Brexit on India
1. Easier access to British market
The Indian market is one of the major foreign direct investments avenues for UK, as many Indian companies use the UK as a gateway to Europe. But as the UK is moving out of the EU, then Indian companies may not use the British gateway resulting in a loss of revenue for Britain. Indian economists are predicting that Britain might be offering various incentives such as easier regulations, tax breaks and so on, and open up the markets. This could be one of the positive effect of Brexit for India.
Britain has not been able to spread her wings during the time in Brexit, having to be happy with a back seat. With Brexit, Britain will slowly regain her position, and as India ranks third in the British investor’s list, then there is a chance that Britain will look to India to help make the country’s position stronger.
2. Opportunity for FTA between UK and India
After Brexit, UK will no longer have access to the EU’s single market. This might lead to an FTA or Free Trade Agreement which would lead to more trade opportunities for the Indian market. UK would benefit from the strong emerging economy of India, and the highly skilled, youthful workforce of Indians. India has a strong growth rate across different sectors. The potential sectors which are perceived to benefit from Brexit are textile, engineering products, machinery, banking and IT.
As the EU companies will no longer enjoy the same amount of freedom within the UK, they might also plan to expand in other countries, such as India. So India stands to benefit from trade opportunities in the UK and EU as well.
3. Service sector
India’s high tech sector has seen some great innovations. The BPO industry of India might also benefit from UK, especially if the UK government would foster an easy visa system and a better market access for Indian companies. Many millions of Indians employed in the BPO industry could benefit financially as a result of this, which would be another positive effect of Brexit on India.
Apart from the BPO sector, many experts are suggesting that Britain might look towards the commonwealth for skilled workers, when the migrant workforce from Europe reduces after Brexit.
Every year, thousands of Indian students go to the UK for undergraduate, graduate and post graduate studies. Indian students are a major source of income for British Universities. Studying in the UK however is an expensive proposition as the Institutes/Universities charge a hefty fee from Indian students.
One effect of Brexit could be that British Universities might make education less expensive, and charge Indians the same fee as they charge from EU students. Before Brexit, UK universities and other educational institutions had to charge a subsidized fee from EU students. This made education cheaper for European students and expensive for students belonging to other non-EU countries.
EU students were also able to access grants and scholarships. After Brexit, UK colleges will not be law bound to offer subsidies, grants and scholarships to EU students, and Indians and other students might benefit from scholarships etc.
5. Cheap imports
UK currency might remain weak for a time, so it might be more lucrative for Indian companies to import from the UK. As it is, India’s imports from Britain stood at $5.19 million. These imports which might become cheaper might include uncut diamonds and liquor, among others. So cheaper imports could be one of the better effects of Brexit.
6. Global political fallout
Though we should maintain a positive outlook on Brexit, there are some situations which can crop up due to Britain’s exit from EU. Brexit might pave the way for other European countries to reconsider their inclusion in EU. They may renegotiate terms with EU, which would lead to change in the political dynamics of the region, as well as financial. Apart from the regional changes, there might be a change in the global political scenario too.
UK had put in place strict immigration laws and regulations. It is expected that after Brexit, UK might have a policy favoring immigrant laws for Indians, in order to add to their skilled worker workforce, especially Indian companies based in UK. Companies from the EU based all over the UK will have to assess their mobility, expansion plans as well as operations.
These companies may also need workers, and if immigrant laws are made easier for Indians, then EU companies might also utilize the skills and knowledge of Indians. Therefore, skilled workers from India may be able to migrate to UK and earn good revenue for themselves and the country.
8. Possible negative impact on Indian IT firms
The deepening recession, and the unhedged exposure of the Pound due to Brexit may impact the demand for IT firms from India. This may affect the revenues by 10% reduction almost!
9. Devaluation of pound may lead to devaluation of rupee
Though the Rupee is more anchored to Dollar, but it is also affected by other currencies’ devaluation, for example, the devaluation of the Pound. After Brexit, the pound may fall by almost 20%. Indian companies which have a large UK presence will have to face some losses. India will have to rework and renegotiate the FTA with the UK and probably EU too.
Due to the single gateway system before Brexit, many items were cheap. With Brexit in place, Britain could levy some harsh taxes and prices of many things could increase. This might be a demotivating factor for new Indian companies trying to set up a business in UK. India will have to wait and watch to see and hope that Brexit turns out to be positive for India.