Brexit and Its Impact on Indian Economy.
What is Brexit?
A lot of talk is going on from last few weeks about Brexit. What is this let’s try to understand in simple terms which can be understood easily by my reader. This term Brexit is mix of Britain and Exit. So from where Britain wants to exit. Then European Union(EU) comes into picture, EU Is the politico-economical union of 28 countries that are located in Europe. They have signed a treaty to developed a single Internal market by a standardized system across the countries.EU ensures that people, goods, services and capital can be freely moved among the EU countries. The monitory unit of EU established in 1992 and comes in full force in 2002. In February 2015 Britain Prime Minister David Cameron announced the EU referendum and after a long 17 month campaign on June 23 Britain voted for leaving the EU.
Impact of Brexit on India.
Though Britain voted to exit EU but still there is no road-map decided about the trade policies of Britain with EU and rest of world. This uncertainty adversely impact the European and Us market. Value of pounds will go down against US dollar. In impact of world economic uncertainty and volatility Indian stock market definitely sink. But in long run it will help country like India because Britain is more like importer than exporter so it will depend more on trade with emerging economy like India China.
Short Term Impact of Brexit on India.
India is the second largest source of FDI (Foreign Direct Investment) IN Britain. Indian companies which has set up their factories in Britain now they can not directly access the EU Market. Various auto companies pharmaceutical companies and IT companies which export their product and services to Britain and other EU countries will face the loss of Earning since they are not allowed to do business in other EU countries. They need to set up new units to other countries of EU to do the business inside EU which is in tern an expense for business for them.
Long Term Impact of Brexit on India
In my opinion Brexit will help India in long run, Since Britain is big importer it will now more dependent for trade on growing economy like India and China, So Britain will put an extra effort to attract FDI and trade from country like India,It will help India.
Since Britain cut the ties from EU it need more trade, labor and skill from other part of world it in tern help Indian English spiking skilled population. Since India can not access the EU market through Britain India will force to find new direct partner it will help India for long runs. India is already trying to build trade negotiation with Netherlands, France, Germany.
So don’t feel socked of Indian Stock market sink it will definitely fly again. Wait and keep keen eye on this event.