Brij Mohan Institute of Management &

Technology
MBA 2016-2018

International Business
BREXIT and its impact on India

Submitted By:
Ashish Chander
Komal Kataria
Prabhat Mishra
Sooraj Sharma

Submitted to:
Dr. Sridhar Panda
Submitted on:
07-04-2017
 ACKNOWLEDGEMENT

It is pleasure to acknowledge many people who knowingly and unwittingly helped us, to
complete our project. First of all let us praise God for all the blessings, which carried us through
all those years.

First and foremost, we would like to express our regards to Dr Sridhar Panda for his constant
encouragement and support. We would also like to express our immense gratitude towards all the
lectures of our college for providing the invaluable knowledge, gratitude, encouragement
extended during the completion of this project.

We extend our sincere gratitude to all our teachers and guide who made unforgettable
contribution. Due to their sincere efforts we were able to excel in the work entrusted upon us.

Submitted By:
Ashish Chander
Komal Kataria
Prabhat Mishra
Sooraj Sharma

CONTENT
WHAT IS GREAT BRITAIN? 4
WHAT IS EUROPEAN UNION?

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 WHAT IS BREXIT? 5

WHAT IS ARTICLE 50?

WHO WANTED THE UK TO LEAVE THE EU? 6
WHO WANTED THE UK TO STAY IN THE EU?

REFERENDUM MEANING AND HISTORY? 7-8

WHAT HAPPENED JUST AFTER THE REFERENDUM? 9

WHAT DO 'SOFT' AND 'HARD' BREXIT MEAN?

HOW LONG WILL IT TAKE FOR BRITAIN TO LEAVE THE EU? 10
COULD NO BREXIT BE AN OPTION?

BREXIT IMPACT THROUGH THE THEN CHANNELS 11

STEPS TO UK TO LEAVE THE EUROPEAN UNION 12

BREXIT AFTER SHOCKS 13

WHAT WILL HAPPEN TO THE ECONOMY WHEN BRITAIN LEAVES THE

EU? 14
IMPACT OF BREXIT ON INDIA AND INDIAN ECONOMY?

WHICH ARE THE SECTORS WHICH WILL BE AFFECTED BY BREXIT? 14-16

IMPACT ON GDP OF INDIA

BIBLIOGRAPHY 17

What is Great Britain?

Great Britain is an island lying off the western coast of Europe, comprising the main territory
of the United Kingdom.

Great Britain is the official name given to the two kingdoms of England and Scotland, and the
principality of Wales.

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Great Britain is very often, but incorrectly, used as a synonym for the sovereign state properly
known as the United Kingdom of Great Britain and Northern Ireland or the UK for short.
If you look at the full name of the UK, you will see that the UK includes "Great Britain AND
Northern Ireland".

Great Britain is a political term which describes the combination of England, Scotland, and
Wales, the three nations which together include all the land on the island. It is also a
geographical term referring to the island on which the greater parts of England, Wales and
Scotland are situated.

What is European Union?

The European Union is a unique economic and political union between 28 European
countries that together cover much of the continent.

The EU was created in the aftermath of the Second World War. The first steps were to foster
economic cooperation: the idea being that countries that trade with one another become
economically interdependent and so more likely to avoid conflict.

The result was the European Economic Community (EEC), created in 1958, and initially
increasing economic cooperation between six countries: Belgium, Germany, France, Italy,
Luxembourg and the Netherlands. Since then, a huge single market has been created and
continues to develop towards its full potential.

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What is BREXIT?
It is a word that has become used as a shorthand way of saying the UK leaving the EU - merging
the words Britain and exit to get Brexit, in a same way as a possible Greek exit from the euro
was dubbed Grexit in the past.

Put simply it is the merging of Britain and exit following the referendum vote to leave the EU.

The term has been widely used in the media ever since the idea of a referendum on the issue was
put forward by those in power.

More than 30 million people voted in the referendum with a turnout of 71.8 per cent. Leave won
by 52 per cent to 48 per cent.

People now talk about soft and hard Brexit in reference to how close the UK will be to the
EU post separation.

The road to triggering Article 50 which will see Britain officially start the process of leaving
the EU has been paved with complications for the PM, including a Supreme Court case ruling
MPs needed to vote on Brexit negotiations.

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What is Article 50?

Article 50 is a plan for any country that wishes to exit the EU. It was created as part of the Treaty
of Lisbon - an agreement signed up to by all EU states which became law in 2009. Before that
treaty, there was no formal mechanism for a country to leave the EU.

It's pretty short - just five paragraphs - which spell out that any EU member state may decide
to quit the EU, that it must notify the European Council and negotiate its withdrawal with the
EU, that there are two years to reach an agreement - unless everyone agrees to extend it - and
that the exiting state cannot take part in EU internal discussions about its departure.

For the UK to leave the EU it had to invoke Article 50 of the Lisbon Treaty which gives the two
sides two years to agree the terms of the split. Theresa May triggered this process on 29 March,
meaning the UK is scheduled to leave on Friday, 29 March 2019. It can be extended if all 28
EU members agree.

Who wanted the UK to leave the EU?

The UK Independence Party, which received nearly four million votes - 13% of those cast - in
May's general election, has campaigned for many years for Britain's exit from the EU. They were
joined in their call during the referendum campaign by about half the Conservative Party's MPs,
including Boris Johnson and five members of the then Cabinet. A handful of Labour MPs and
Northern Ireland party the DUP were also in favour of leaving.

Reasons:

They said Britain was being held back by the EU, which they said imposed too many rules on
business and charged billions of pounds a year in membership fees for little in return. They also
cited sovereignty and democracy, and they wanted Britain to take back full control of its borders
and reduce the number of people coming here to live and/or work.

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One of the main principles of EU membership is "free movement", which means you don't need
to get a visa to go and live in another EU country. The Leave campaign also objected to the idea
of "ever closer union" between EU member states and what they see as moves towards the
creation of a "United States of Europe".

Who wanted the UK to stay in the EU?

Then Prime Minister David Cameron was the leading voice in the Remain campaign, after
reaching an agreement with other European Union leaders that would have changed the terms of
Britain's membership had the country voted to stay in.

He said the deal would give Britain "special" status and help sort out some of the things British
people said they didn't like about the EU, like high levels of immigration - but critics said the
deal would make little difference.

Sixteen members of Mr Cameron's Cabinet, including the woman who would replace him as PM,
Theresa May, also backed staying in. The Conservative Party was split on the issue and officially
remained neutral in the campaign. The Labour Party, Scottish National Party, Plaid Cymru, the
Green Party and the Liberal Democrats were all in favour of staying in.

US president Barack Obama also wanted Britain to remain in the EU, as did other EU nations
such as France and Germany.

Reasons:

Those campaigning for Britain to stay in the EU said it got a big boost from membership - it
makes selling things to other EU countries easier and, they argued, the flow of immigrants, most
of whom are young and keen to work, fuels economic growth and helps pay for public services.

They also said Britain's status in the world would be damaged by leaving and that we are more
secure as part of the 28 nation club, rather than going it alone.

Referendum meaning and history?

A referendum (plural referendums, see below) is a direct vote in which an entire electorate is
asked to vote on a particular proposal. This may result in the adoption of a new law. In some
countries it is synonymous with a plebiscite or a vote on a ballot question.

Some definitions of 'plebiscite' suggest that it is a type of vote to change the constitution or
government of a country. However, some other countries define it differently. For example,
Australia defines 'referendum' as a vote to change the constitution, and 'plebiscite' as a vote that
does not affect the constitution. In Ireland, the vote to adopt its constitution was called a

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"plebiscite", but a subsequent vote to amend the constitution is called a 'referendum', and so is a
poll of the electorate on a non-constitutional bill.

History:

1st referendum 1975

In 1975, the United Kingdom held its first ever national referendum on whether the UK should
remain in the European Communities. The opposition Labour Party, led by Harold Wilson,
contested the October 1974 general election with a commitment to renegotiate Britain's terms of
membership of the EEC and then hold a referendum on whether to remain in the EEC on the new
terms.

All of the major political parties and mainstream press supported continuing membership of the
EC. However, there were significant divides within the ruling Labour party, with a 1974 one-
day party conference voting 2:1 in favour of withdrawal and seven of 23 cabinet ministers
opposed to EC membership, with Harold Wilson suspending the constitutional
convention of Cabinet collective responsibility to allow those ministers to publicly campaign
against the government.

On 5 June 1975, the electorate were asked to vote yes or no on the question: "Do you think the
UK should stay in the European Community (Common Market)?" Every administrative county
and region in the UK returned majority "Yes" votes, apart from the Shetland Islands and
the Outer Hebrides. With a turnout of just under 65%, the outcome of the vote was 67.2% in
favour of staying in, and the United Kingdom remained a member of the EC.

2nd referendum 2016

A referendum - a vote in which everyone (or nearly everyone) of voting age can take part - was
held on Thursday 23 June, 2016, to decide whether the UK should leave or remain in the
European Union. Leave won by 51.9% to 48.1%. The referendum turnout was 71.8%, with more
than 30 million people voting.

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What happened just after the referendum?

After the result was declared, Cameron announced that he would resign by October. He stood
down on 13 July 2016, with Theresa May becoming Prime Minister after a leadership
contest. George Osborne was replaced as Chancellor of the Exchequer by Philip Hammond,
former Mayor of London Boris Johnson was appointed Secretary of State for Foreign and
Commonwealth Affairs, and David Davis became Secretary of State for Exiting the European
Union. Labour leader Jeremy Corbyn lost a vote of confidence among his parliamentary party
and a leadership challenge was launched, while on 4 July, Nigel Farage announced his
resignation as head of UKIP.

Outside the UK many Eurosceptic leaders celebrated and expected others to follow the UK
example. The right-wing Dutch populist Geert Wilders said that the Netherlands should follow
Britain's example and hold a referendum on whether the Netherlands should stay in the European
Union. However, opinion polls in the fortnight following the British referendum show that the

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immediate reaction in the Netherlands and other European countries was a decline in support for
Eurosceptic movements.

A week after the referendum, Gordon Brown, a former Labour Prime Minister who had signed
the Lisbon Treaty in 2007, warned of a danger that in the next decade the country would be
refighting the referendum. He wrote that remainers were feeling they must be pessimists to prove
that Brexit is unmanageable without catastrophe, while leavers optimistically claim economic
risks are exaggerated.

The previous Labour Prime Minister, Tony Blair, in October 2016 called for a second
referendum, a decision through parliament or a general election to decide finally if Britain should
leave the EU. Former leader of the Conservative Prime Minister John Major argued in November
2016 that parliament will have to ratify whatever deal is negotiated and then, depending on the
deal there could be a case for a second referendum.

What do 'soft' and 'hard' Brexit mean?

These terms have increasingly been used as debate focused on the terms of the UK's departure
from the EU. There is no strict definition of either, but they are used to refer to the closeness of
the UK's relationship with the EU post-Brexit.

So at one extreme, "hard" Brexit could involve the UK refusing to compromise on issues like the
free movement of people in order to maintain access to the EU single market. At the other end of
the scale, a "soft" Brexit might follow a similar path to Norway, which is a member of the single
market and has to accept the free movement of people as a result.

How long will it take for Britain to leave the EU?

Once Article 50 is triggered, the UK has two years to negotiate its withdrawal. But no one really
knows how the Brexit process will work - Article 50 was only created in late 2009 and it has
never been used. Former Foreign Secretary Philip Hammond, now Chancellor, wanted Britain to
remain in the EU, and he has suggested it could take up to six years for the UK to complete exit
negotiations. The terms of Britain's exit will have to be agreed by 27 national parliaments, a
process which could take some years, he has argued.

EU law still stands in the UK until it ceases being a member. The UK will continue to abide by
EU treaties and laws, but not take part in any decision-making.

Could no Brexit be an option?

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The UK referendum was not binding constitutionally, and many scholars have argued that a very
tight referendum does not send a clear signal for fundamental constitutional change. The UK
Parliament is sovereign and thus even a very clear Brexit referendum cannot bind it legally. So
Parliament and, with added emphasis, a new parliament elected in a new general election
could decide to ignore the referendum. Politically, however, it would be very difficult to
completely ignore the referendum. Given the implications of leaving the EU internal market,
some have suggested that a second version of the Brexit deal, with greater control over
immigration, could still pay lip service to Brexit while largely maintaining the status quo.

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What will happen to the economy when Britain leaves the EU?

The Treasury has issued a series of dire warnings, even claiming that Britain would be plunged
into a year-long recession in the event of Brexit.

Pro-EU Chancellor George Osborne warns that the pound would weaken, while up to 820,000
jobs could be lost within two years.

He has claimed that the economy would be six per cent smaller and British households would
each be worse off by 4,300 a year by 2030.

But Brexit campaigners have dismissed the Governments scaremongering analysis saying there
is no evidence that the pound would fall.

Eurosceptics believe that Brexit would allow Britain to take back control of its economy, paving
the way for future prosperity.

Impact of BREXIT on India and Indian Economy?

India is one of the most lucrative markets for foreign investors and, hence, we attract attention
globally. 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 set
ups to other places.

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.

Which are the Sectors which will be affected by Brexit?

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. Leading Indian IT
firms have not commented on it as since there is a possibility of renegotiations for all the
ongoing projects because of the devaluation in the value of pound. These things can be covered
up in the next few years wherein alternate arrangements can be placed between the countries.

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In the automobile industry, Brexit may lead to reduction in sales and companies that derive good
revenues of profits from Britain could get hurt majorly.

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.
Brexit frees up funds for the other students and more Indian students might be able to get
scholarships.

Reduction in pound value will reduce travelling cost to the UK and will make it a good travel
destination.

Impact on GDP of India

Brexit will have an impact on India's GDP growth. "We have lowered our aggregate 2016 GDP
growth forecast for Asia excluding Japan from 5.9% to 5.6% and India's 2016 GDP growth
forecast to 7.3% from 7.6%," said the Nomura Report. However, there is no need for Indian
investors to worry about this small fall in the growth rate, because we will still be the fastest
growing major economy of the world. The government is also taking steps to boost the GDP
growth and steps such as the recent FDI liberalisation will help in achieving it.

When we look at the whole picture, it emerges that long-term investors need not worry about
Brexit. "Investors should not change their asset allocation based on events like this. Since India's
economy is doing well from a longterm view, there is nothing to worry," says Sachdeva. A.
Balasubrahmanian, CEO, Birla Sunlife MF concurs with this view: "Investors should not bother
too much about such events. The country is on the right direction and the long-term direction of
the market is driven by fundamentals and not just by such events," he says.

Long-term impact on trade and policy: India has been negotiating a free trade agreement
(FTA) with the EU, which has been at an impasse on the issue of negotiating bilateral investment
treaties. Now that the UK is out of the EU, India may not only have to renegotiate the FTA with
the union, but also have to work toward a separate agreement with the UK. To be sure though, it
could take more than two years for the UK to formally exit the EU.

Impact on Indian companies: As many as 800 Indian companies do business with the UK, and
in some manner or measure, the UKs exit from the European common market would impact
them all, although the jury is still out on whether it would be positive or negative. In recent
times, Indian conglomerates like the Tata Group (Tata Consultancy Services, Tata Motors and
Tata Steel) have acquired businesses in the UK. Other notable Indian companies operating in the
UK or doing business with that country include Infosys, Wipro, Hindalco, Dr. Reddys
Laboratories, Lupin, Tech Mahindra, Lodha Developers, Indiabulls Housing Finance, Bharat
Forge and Motherson Sumi.

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IT industry body Nasscom said Britains exit will mark a phase of uncertainty for the $108-
billion Indian IT sector in the near term. However, in the longer run it will be a mix of challenges
and opportunities as the UK would seek to compensate for loss of preferential access to EU
markets, Nasscom said.

Mahindra Group CFO VS Parthasarathy said the impact on India and Indian industries will not
be significant. The impact on Mahindra Group will be muted, he added. Tata Motors-owned
Jaguar Land Rover said it is business as usual and that it will manage the long-term impact and
implications of the decision.

However, Biocon CMD Kiran Mazumdar-Shaw told the Press Trust of India that the UK vote to
leave the EU has opened up a Pandoras box of grave uncertainties and India cannot be in
denial that it will be immune to the development.

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 BIBLIOGRAPHY

Websites:

1. https://www.global-counsel.co.uk
2. http://www.bbc.com/news
3. https://www.cigionline.org
4. http://www.express.co.uk/news
5. https://en.wikipedia.org
6. https://www.jaagore.com
7. http://www.express.co.uk

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