Britain’s exit from the European Union took the world by surprise. Experts describe this as a ‘once in a lifetime’ event that will haunt economies across the globe for years to come. Like every other economy, India too suffered the effects of Brexit. Here, are a few points to understand why exactly we must worry about the event.
Impact of Brexit on Indian Economy
India is one of the most lucrative markets for foreign investors and, hence, we attract attention globally. As per The Bank of England, there are changes in laws, rules, and regulations which slowly saw the shutdown of the investments in our country. So, any major change across the globe, be it political or economic, is bound to have an impact on India too.
Britain always provided a gateway to the European Union. Many Indian businesses have their offices in Britain so they can avail benefits and continue to remain a part of the EU. But with Brexit, this benefit will be taken away and may result in companies relocating their business setups to other places.
India was not barred from the effect of the currencies falling which caused panic and saw the Sensex falling 450 points on June 24, 2016. Though the Sensex has since recovered from the shock of Brexit, one can expect that as news on the current state of the negotiations continues to trickle out, which you can find here, we will see similar volatility in the stock markets.
Brexit might also have a positive effect, but these results may not show up immediately. The process might take time considering that the new government will take time to design and implement their policies.
Indian sectors that will be affected by Brexit?
Many Indian companies are interlinked with the various sectors present in the UK. These sectors will see some volatility as a result of a change in demand, currency fluctuations and new trade agreements.
Automobile, Pharma and IT might be the most affected. NASSCOM has predicted that the effect of Brexit will be felt on the $108 billion Indian IT sector in the short term. The UK is responsible for 17% of India’s total IT exports.
These things can be covered up in the next few years wherein alternate arrangements can be placed between the countries. This will be a result of “further moderation in growth in the UK and EU and the resulting probability that the companies lower their IT budgets” (FICCI). This issue will be further compounded with changes in labor mobility laws/regulations and the fluctuating pound.
In the automobile industry, Brexit may lead to a reduction in sales and companies that derive good revenues of profits from Britain could get hurt majorly.
Brexit’s Impact on Foreign Education
Britain is one of the most sought after education destination for Indians. Before Brexit, British universities were forced to offer scholarships and subsidies to the citizens of the UK and EU. But due to the falling value of the pound, Brexit frees up funds for the other students and more Indian students might be able to get scholarships. EU students may no longer enjoy the visa and tuition benefits that they enjoyed when the UK was a part. It will be less expensive and more competitive.
Reduction in pound value will reduce traveling cost to the UK and will make it a good travel destination.
Effect of Brexit on immigration and work
Indian citizens and other non-EU citizens will have the same immigration rights as EU citizens in the U.K., under a system that will give priority to high skilled workers. However, the new system will introduce even further restrictions on the ability of Indian workers and their families to come to the U.K., requiring any family to be sponsored by the employer.
The government also said it would introduce a “swift system of e-gate visa checks for tourists and visitors coming to the country for short- stay business trips from all low-risk countries”. These countries would receive relaxed student visa rules, making it easier to pursue international education.
Immigration changes are the worst consequence of Brexit. Read our article on the aftermath to the know more.
It is unlikely that India would be included in this list. This may have been as a result of statistics, which indicate that there are 100,000 Indian illegal immigrants in the UK (UKIBC).
When Britain explained its reasons for excluding India from an easing of visa documentation requirements for foreign students earlier this year, it pointed to risk assessments of different countries when it came to their risk of overstaying, suggesting India continues to be considered a high-risk country in Britain.