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Brexit is a term coined for Britain’s referendum to exit the European Union.
Brexit is used for “British exit,” that refers to the June 23, 2016, referendum whereby British
citizens voted out to exit the European Union.
Reasons for British existing the European union are based on a variety of factors like
`No Deal Brexit' refers to the UK leaving the European Union without any agreement about
post-exit trade and customs arrangements. UK will be operating as an independent country not
part of the 28 (EU member states),. This `No Deal Brexit' would happen after cut-off date
October 31 2019.
Because of ‘No deal Brexit’, India would be the major partner for UK.
Brexit might have a positive effect, but these results may not show up immediately. The
process might take time
Because the UK pound sterling (£) value has reduced in comparison to Indian rupee.
1. Since the pound value has come down, Indian companies may be able to acquire many
high value assets.
2. Because of fall in value of Pound sterling, Indian companies importing from UK will
gain.
Effect of Brexit and commodity prices
3. Brexit would weaken global growth leading to decline in commodity prices.
4. The immediate after effect of Brexit is US dollar appreciating, thus the commodities
market with strong link to markets weakens the commodity market.
5. On the positive side, Brexit has driven away fears of US Fed rate hike and could lead to
lower commodity prices.
6. Since money moves towards appreciating dollar, commodity prices might come down.
7. Lower commodity prices will help the macro fundamentals: fiscal deficit, current
account deficit or inflation.
Before BREXIT British universities has to give scholarship to UK and EU students. Presently
more Indian students might be able to get scholarships.
10. Jobs: It is expected that Indian immigrants will be better position to get jobs in UK.
Because of lower Indian labour cost unlike from the EU. So they may get preference.
In the long run, Brexit will help strengthen our ties with Britain because India's focus on
innovation and entrepreneurship still makes it an attractive destination for outsourcing and
investment.
In the last four years after 2016 referendum, the investment from India has increased by 4 times
in UK. In the last one year the Indian companies has increased by 50 numbers. Thus the total
Indian companies in UK have increased to 850.
Among the G 20 countries, UK is the biggest investor in India, around 450 numbers of
companies operating in India.
Compared to other emerging economy India GDP growth is 5 % and above, Thus Indian
financial sector companies have to use the current BREXIT turmoil as an opportunity and
should drive to get greater returns for the investments.
The investors have been pulling money out of the UK and this would reduce the Pound sterling value.
Britain provided a gateway to the European Union. But with Brexit, this benefit will be taken
away and may result in companies relocating their business set ups to other places.
Automobile, Pharma ,IT, Steel products, textiles, apparel, financial services might be the most
affected.
Due to BREXIT and the devaluation of pound sterling, IT industry will be gainer or loser?
In short run IT industry would be a loser, there is a possibility of re-negotiations for all the
ongoing projects. Information technology companies would get less profit.
Indian Automotive & Pharmaceutical companies operating in UK would get affected, Brexit
may lead to reduction in sales and companies that derive profits from Britain will get less
revenue.
Trade: The India-UK bilateral trade is of about $14 billion. In short run this BREXIT would get
affect the trade, till the new trade agreements are re-negotiated and approved?
A slowdown in the British economy as a result of Brexit will also hit India-UK trade.
Commodities: Recovery in prices of commodity has hit a bump with Brexit. The immediate after effect
of Brexit has been reflected as the US dollar appreciating and this usually witness commodities with
strong links to financial markets to weaken. Since money gravitates towards the appreciating dollar,
commodities take a back seat. Government and central bankers in the EU may counter with measures
to prevent the adverse effects of Brexit. The US Federal Reserve may do its role by postponing further
rate hikes
Investors moving to safe haven - gold.
Britain's decision to leave the EU has forced many to sell their risky assets and rush towards safe haven investment
option like Gold. Gold prices in India had breached Rs 32,000 per 10-gram level.
In the long run, Brexit will help strengthen our ties with Britain because India's focus on innovation and entrepreneurship
India's economy is doing well and should use the current turmoil as an opportunity. For the common man, with every
uncertainty there is a bigger opportunity to pick great stocks. It pays to focus on companies in the consumer driven sector.
Disclaimer: The views expressed are that of the expert alone, and do not necessarily represent that of the brand.
Rishabh Parakh
Rishabh is a Chartered Accountant and a founder Director cum Chief Gardener of Money Plant Consulting, A leading tax and
investment service provider He also writes for several leading publications in India.
https://www.jaagore.com/current-issues/brexit-and-its-effects-on-the-indian-economy
deloitte.com/content/dam/Deloitte/in/Documents
/in-brexit-focus-on-india-noexp
https://www2.deloitte.com/content/dam/Deloitte/in/Documents/tax/thoughtpapers/in-brexit-focus-
on-india-noexp.pdf
In the scenario that the UK decides to become a member of the EEA, this could possibly be
advantageous for India in terms of trade. In particular, the UK would have the liberty to set its own
external tariff and independently negotiate trade deals with countries outside of the EU. As such, trade
deals negotiated between the UK and India could provide for huge potential for improvement and
closer collaboration in terms of trade. This scenario would allow the UK to independently negotiate
trade deals and realign trade priorities towards India, something which the UK has shown great
interest in over the past months, and India-UK trade would likely see a boost. A number of Indian
businesses currently enjoy exporting to the EU through the UK without paying any tariffs. Since the UK
will have access to the single market, India would still be able to use the UK as a gateway to the EU in
terms of trade, i.e., it would be able to export to all members of the EU through the UK. However, since
EEA members are required to meet ‘rules of origin’ requirements wherein they must have only a
certain level of inputs from international sources in their merchandise, the ease of doing business
between the UK and other European countries would be affected. Broadly, if at the end of the two-
year process, this scenario occurs and the UK becomes a member of the EEA, India and Indian
businesses are expected to largely remain unaffected. Some key factors such as immigration, tariff
structure, and using the UK as a gateway to the EU will remain broadly unchanged from an Indian
business perspective.
Ahmedabad:
`No Deal Brexit' refers to the UK leaving the European Union without any agreement about post-exit trade and customs arrangements.
"Under our current prime minister (Boris Johnson), we are focused on exit from the European Union by October 31, preferably with a deal. But we
are ..