BREXIT

BREXIT

• Brexit refers to Britain’s formal exist from the single market and customs union of the EU. On a historical move, UK has finally left the European Union on 31st January 2020.
  • Britain’s resentment with EU was mainly due to factors like Eurozone economic crisis, populist nationalism and British exceptionalism, etc..
• Brexit will weaken the EU economically and politically as UK was EU’s 2nd biggest economy, a major net budget contributor, key military force and one of the bloc’s two nuclear powers and permanent UNSC members.
• By leaving the EU, the U.K. automatically leaves hundreds of international agreements concluded by or on behalf of the EU, on areas like trade, aviation, fisheries, or civil nuclear cooperation.
  • Now, a trade deal has to be concluded between EU & UK to ensure tariff-quota-free flow of good between them.
  • Negotiations can clash over EU’s refusal to bring services into the trade deal
  • Even the non-trade subjects will be full of political troubles because the EU Member States will have to change their policies according to the new deals and the regulations.

Brexit & Challenges for India:

• Businesses – India’s businesses based in the U.K. will be hampered as till now they had border-free access to the rest of Europe.
• Indian investors are concerned as India invests more in the UK than the rest of Europe combined.
• Since the existence of EU single market, UK had been the bridge through which Indian companies used to enter into EU. Now Post Brexit, the Indian companies would have to strive separately for these two different markets.
• Exchange rate uncertainty – Pound and Euro devaluation impacts Indian Rupee; Current Account Deficit may worsen as dollar will be strengthened.
• Loss of FDI – With the UK being among the largest source of FDI to India, the Brexit deal will have a significant ripple effect back in India.

Brexit & Opportunities for India:

• Easier to negotiate new partnerships – As post Brexit, both EU and the UK will look for new trade partners. It would be easier for India to negotiate FTA with the UK, and resume negotiations on long stalled BTIA with EU.
• Service sector – India’s services sector is likely to make gains from the curbs on the free movement of professionals between the two markets of UK and EU. Indian can benefit from opportunities in service sectors like IT, architecture, R&D, and engineering in both the markets as the EU-UK trade pact does not cover services.
• Freedom of movement between EU and UK shall be curtailed post Brexit and hence the UK will have to look for other countries like India for Human resource.
• This might benefit students and professionals from India as after Brexit, the same set of rules would apply to students from the EU and India, and so would the opportunities. Indian professionals will be competing on merit rather than on nationality, as the UK will no longer have to favour EU nationals.
• The actual impact of the Brexit deal will depend upon the way in which India handles its trade and diplomatic relations with the UK and the Post-Brexit EU
• BREXIT clearly offers a favourable position for India to renegotiate the trade deal with EU and place itself as a key player of the region.