Brexit and its Impact on India

 June 23rd,2016 , a momentous day for Britain , as the United Kingdom has voted by a close margin to leave the European Union .The news immediately sent shock waves around the globe and left the financial markets tumbling .While some  spoke of the shock of the decision, others were not surprised, talking instead about how it marked a defeat for the European Union,once described as “complete” .Many described the  outcome of the  results as an “welcome catastrophe” as Brexit now  offers a unique opportunity for Britain to make their own decisions,frame their own rules and have their own say in matters related to their nation.It is regarded as the new "Independence Day" by the people who voted to leave the EU .However the reaction in the financial markets to Britain’s vote to leave the European Union was rather less euphoric as the pound plunged against the dollar by over 10% ,to a 30-year low.

The effect of this referendum will have consequential impact on economy all over the world including on India.India is one of the top investors in the UK  .India invests more in the UK than in the rest of Europe combined..Also UK is the third largest source of foreign direct investment in India and India’s largest G20 investor.Hence the result of this referendum will have a notable impact on India.

Some of the negative effects on India are as follows:

1)There may be foreign fund outflow and dollar rise as  a result Rupee may depreciate because of the

  double effect of foreign fund outflow and dollar rise.

2)Falling value of the pound could render several existing contracts loss making.

3)Many Indian companies are listed on the London Stock Exchange and many have European        headquarters in London.   Brexit will take away this advantage.

4)Due to fall in value of Pound sterling, Indian exports to UK will suffer. Cheaper rupee will make Indian exports, including IT and ITeS, competitive. Indian import companies operating in UK may also report loss. 

Postive Effects on India:

1)With lower pound value, Indian companies may be able to acquire many hi-tech assets.

2)Brexit might give a boost to trade ties between India and the UK as Britain will now be free 

   to discuss a bilateral trade pact with India.

3)More Indian tourists can afford to visit Britain in coming days as the currency value has fallen.Also    more . Indian students can now afford to study in Britain (for higher education) 

4) Britain will need a steady inflow of talented skilled worker, and India fits the bill perfectly 

   due to its English-speaking population.

Thus, there may be short-term pains for India because of Brexit but the net effect can turn out to be positive  for India as the Indian markets would be relatively stable in comparison to other markets .But it is almost impossible to predict the  effect of this referendum  and only time will tell the true impact of this decision.