The Brexit has caused a stable situation, as far as the Indian Economy is concerned, with equal pros and cons. In short, the pros are for the Indian export sector, since the predicted recession and pound depreciation are short term issues.
The cons are for the Indian multinational companies located in the UK. In the longer run, Indian economy stands to gain from Brexit. With the historic referendum on June 23rd, the UK chose to leave the European Union by opting for Brexit. This significant act has also got a major impact on the Indian economy.
The Brexit has got its pros and cons concerning India’s economy as follows:
Advantages of Brexit for India
- Brexit is an advantage for Indian companies, which compete with European companies. Let us consider an example situation. Before Brexit, say one of India’s leading automobile manufacturers wants to sell its trucks to the UK.
- There is competition from another German vehicle manufacturer. For India to sell its products in the UK, a duty will be levied. Hence, people from the UK would prefer to buy German brand, as it does not come with tax, as it is a trade within the EU. After Brexit, the UK has to purchase by paying duty to both Indian and German manufacturer. Hence, India has got more chances of recognition if it sells its products at a reasonable rate.
- The UK was a significant financial power of the EU. After Brexit, the EU now has to search for suitable trading partners. This scenario has paved a way for a critical chance to India. As a country, India is a potential hub to fill the void created by the UK in EU.
- Mumbai, India’s financial hub and Chennai, the major automobile hub and other major industrial cities in India have proved to be an active support for the growth of Indian economy after
Drawbacks of Brexit
- Analysts and academicians have predicted a recession to occur in Europe due to For India, export revenue from Europe is significant. If a downturn happens, India’s export to Europe would be adversely affected.
- Due to Brexit, the value of Pound has depreciated drastically. The value of Pound which was equivalent to INR 98 has gone down to INR 89, which is a historic drop. As an immediate effect of this, the value of goods imported by the UK has become costlier. Hence the demand reduces, thereby reducing export from India.
- Indian companies which had their offices in the UK were able to trade throughout the European Union apart from the UK, as a benefit. With UK moving out of EU after Brexit, there is no added benefit and trade cost will be imposed.
According to the above report, the Brexit has played a significant impact on the Indian economy, but not on a massive scale.