Impact of BREXIT on India.

Before studying impact of Brexit on India, let us 1st understand what is BREXIT and what has actually happened.

Brexit simply stands for Britain + Exit. Britain joined European Union (EU) in 1973. Since then, from a simple regional trade agreement, EU has transformed to a monetary union, a borderless region and an example of regional integration for rest of the word to follow.

However BREXIT has challenged all these assumptions. After British people voted for Brexit in 2016, UK has officially left EU on 1st Feb 2020 and has till Dec 2020 to negotiate comprehensive trade deal, which will define future UK-EU relations. EU formed large part of Britain’s external trade and in 2016, EU alone accounted for 54% of Britain’s import and 43% of its exports.

Consequences of Brexit.

For Britain, though major battle is won, many battles are left. Now it has to worry about trade deal, foreign policy coordination, defense deals, visa permits etc. And for next one year, UK is trapped from both sides. At one end, it is to abide by EU court & at the same time it has no representation & influence in any EU body whatsoever. EU has already said that it will support Spain over Gibraltar dispute. And in trade negotiations, EU is likely to take a hard stand to create a strong deterrent for other nations, against any such exits.

For European Union, with UK gone, there will be search for new partner within EU to share burden (along with France & Germany) of foreign policy & security.

Future course of action.

UK has 3 options.
1] Strike a deal like Norway – only politically you’re out, but otherwise you’re part of EU. Given the original intention of BREXIT, such deal is least likely.

2] Australian option. WTO based trade deal. It is more loose & therefore not much beneficial. Such a deal is also less likely given the amount of economic interactions EU-UK had.

3] Canadian option. Here most of the trade is tariff free (98% between EU-Canada). And there are other agreements for harmonization. However it is a long 1600 page documents (EU-Canada agreement) and formulating such deal will be challenging task, given such a short time of 11 months.

Regarding immigrations, UK wants selective immigrants. Morris Johnson has said that he wants to have points based immigration like Canada, Australia. If it becomes reality, Indians will benefit enormously.

It is suggested that India should 1st go for having talks with EU. India -EU trade relation are very much underplayed. India EU has lot of mutual investments. We should focus on this sector. EU has been more supportive of India in UN and other international forums than UK. EU takes 16% of our exports while UK takes 3%. We’ve more eco relations with EU than UK. And perhaps EU will be more cohesive toward India without UK.

There is also another opinion according to which, there is no future of India-EU trade deal in near future. India wants to boost domestic manufacture and is adopting protectionist measures as evident from Union Budget. EU, on the other hand, is in no mood to concede service sector or immigration to Indians. Presently half of the EU countries are led by anti-immigration parties or at least main incumbents are challenged by them..

For India, we’ll have to wait till EU-UK deal is settled. Immigration issue with UK may not be settled completely, but we can talk about increasing work visa duration to 2 years from present 1 year. UK can also serve as a technology provider for Indian industries.

It is also predicted that UK growth will slow down given economic & political uncertainty. This is also a period of weakness for Britain. With BREXIT, Britain look to strengthen independent relations to bolster it’s independence. Given this temporary weakness, India can try to get short and medium term negotiations in it’s favour. Overall impact of Brexit on India is in it’s favour, only if India can capitalise it.