1.

The United kingdom intends to withdraw from the European

Union(EU), A process commonly known as Brexit, as a result
of June 2106 referendum in which 51.9% voted to leave EU.
2. On 2 October 2016, British Prime Minister Theresa
May announced she would trigger Article 50 by the end of
March 2017 which would make the UK set to leave the EU by
the end of March 2019.[1] The terms for withdrawal have not
been established; however May.
3. 'As far as India is concerned, if there is an entry point for us to the EU,
that is the UK
4. Narendra Modi, Prime Minister of India [November 2015]
5. Overall, Brexit might not be good for India as India would lose a friend
within the EU and would also have to deal with a fairly
insular/aggressive new leadership in the UK. There will be confusion in
some of the pending trade deals: India awaits EU stance on FTA. The
falling pound will also make it harder for Indian exporters whose profit
margins & competitiveness will erode.
6. UK has traditionally been among Indias closest friends in Europe.
Among the western countries, Great Britain is the most positive about
Indias influence. UK has thus been a traditional jumping pad for Indian
companies entering Europe. When UK loses a voice in EU, India loses a
partner in the EU.

Currency: Short-term negative, long-term neutral

The Indian rupee, according to Indranil Sen Gupta of BofA Merrill Lynch,
could depreciate if the UK leaves. The rupee could fall to the Rs68 per US
dollar level, in case of Brexit, the economist said in a note on June 20.
B. Bilateral trade with UK: Neutral
Britains exit from the EU probably wont have any significant impact on this,
said Biswajit Dhar, a professor of economics at the Jawaharlal Nehru
University (JNU).
Lord Meghnad Desai, an India-born economist and a UK Labour politician,
argued that the impact of Brexit on the India-UK trade will be hardly at all.
Asked whether Brexit will make it easy for UK to increase its ties with India,
Desai told Quartz that the EU is not preventing UK from making inroads into
India if it wants to even now.
C. Indian IT Sector: Short-term negative, long-term uncertain
Britains exit from the European Union will have a negative impact on the USD
108-billion Indian IT sector in the short term, industry body Nasscom has
said.
"An initial analysis indicates that the impact on Indias technology sector may
be mixed; clearly negative in the short term and harder to discern in the
longer term - with either scenario having some positive and some negative
points," Nasscom said.
D. Immigration (student and professional): Negative

Work-related visa restrictions have already resulted in a fall in the number of

Indian students in the UK. Following Brexit, the number of Indian students
applying to UK universities and colleges might reduce further. Sceptics also
fear that visitation rights of relatives who have families in UK might also be
affected. Also, those applying for visas in Britain may face a hard time. With
Brexit, the governments stance on immigration will likely curb overall
immigration into the country.
However, all claims and predictions must be taken with a pinch of salt. Firstly,
it is still not clear if Brexit will happen. The British parliament could very well
choose to ignore the referendum results and vote to stay-in (though that is
quite unlikely as rejecting the democratic mandate would be akin to political
suicide for the ruling party).
And even if it happens, no one is exactly sure how things will play out. The
impact on the UK economy is still not clear, ensuring that claims about the
ripple effects on India and other economies are not quite concrete yet.

How Brexit will impact

Indias exports; all you

want to know in
4 points
Beset by a protracted economic recovery, rising
cost of massive European Union (EU)
bureaucracy, and migrant crisis, British citizens
opted for an exit from the EU (now famous as
Brexit).
By: Ritesh Singh and Prachi Priya | Updated: September 1, 2016 6:57 AM

While Brexit Is Not Being Seen As Something That Could Lead To Global
Upheaval, Any Ripple Effect On Other EU Economies Like Italy, France
And Greece Which Are Not Happy With The Functioning Of The EU
Could Further Upset Any Hope Of Recovery In Global Trade.

Beset by a protracted economic recovery, rising cost of

massive European Union (EU) bureaucracy, and migrant
crisis, British citizens opted for an exit from the EU (now
famous as Brexit). However, the legal process (invoking
Article 50 of the Lisbon treaty) would give Britain around
two years to negotiate and complete the withdrawal from
the EU.
Many consider Brexit as the start of the problem and not
the end, as a high proportion of Europeans view EU
membership negatively. While Brexit is not being seen as
something that could lead to global upheaval, any ripple
effect on other EU economies like Italy, France and Greece
which are not happy with the functioning of the EU could
further upset any hope of recovery in global trade.
Moreover, the lack of a concrete plan by the British
government for negotiating the terms of withdrawal is
adding to Brexit jitters. With the EU being Indias largest
trading partner, it would be pertinent to examine whether
Brexit would be an opportunity or threat for Indias exports.

Major exports
The value of Indias exports to the EU in FY16 stood at $45
billion, i.e. 17% of its total merchandise exports in dollar
value terms. Of that, Britain alone accounted for over 20%,
i.e. $9 billion. However, the devil lies in the detail.

Of this $9 billion, roughly $2.5 billion or 28% is accounted

for by apparel and made ups. Britain accounted for over
30% of Indias export of pharmaceuticals to the EU, i.e.
$430 million out of a total of $1.51 billion. Roughly onefourth of Indias export of automobiles and components to
the EU were shipped to Britain, i.e. $530 million out of $2.3
billion. Thus, collectively, export of these three items to
Britain accounted for 40% of Indias total merchandise
exports to the EU.
Moreover, Britain is Indias second-largest destination for
export of IT services after the US, and accounted for half of
$24 billion IT exports to the EU. Brexit has already induced
RBS to shelve the idea of a separate Williams & Glyn Bank
thats a big loss to Infosys which had got the contract to
build IT applications. Britain is an important source of
income from travel and tourism, as roughly 10% of foreign
tourists in 2015 came from Britain.
Major impact
The impact on Indias exports will happen in two ways: (1)
decline in demand for Indias goods and services because
of Brexit-induced growth slowdown in the UK and EU, and
(2) unfavourable exchange rate movements.

Brexit will have direct and indirect impact on growth

prospects of both Britain and the EU. As per IMF, Brexit will
mop up anything between 1% and 9% of Britains GDP
growth rate, depending upon actual terms of its withdrawal
from the EU. If Britain fails to retain duty-free market
access, rise in EU tariff and non-tariff trade barriers will
disrupt existing supply chains. That, along with slowing
GDP growth, will reduce the demand for Indias exports to
the region.
Brexit comes a time when emerging economies have been
struggling to export to the rest of the world. Indias
merchandise exports grew by just 1.27% in June after
declining for 18 months in a row, but fell 6.84% in July.
Brexit will make Indias exports revival difficult.
Exchange rate movements
The net impact of Brexit on Indias export competitiveness
will depend upon the relative movement in exchange rates
of the pound, euro, yuan and rupee against the dollar, and
also the sensitivity of Indias export basket to change in
prices/exchange rates. Between June 23 and August 10, the
rupee gained 0.9%, while the yuan, euro and pound lost
1.1%, 1.7% and 13.2%, respectively, against the dollar.

Obviously, the rupee has become relatively stronger vis-avis the dollar compared to the yuan by 2%, euro 2.6%, and
pound by over 14%. That is likely to adversely affect Indias
export competitiveness in price-elastic items such as
textiles and clothing.
The biggest threat to Indias export is, however, from the
weaker yuan. Indian exports could face increased
competition from cheaper Chinese productsfrom steel to
textilesnot only in European markets but also in third
country export markets such as the US, because of relative
weakness of the yuan vis-a-vis rupee against the dollar.
The weakening of the pound and euro will make it
expensive for European tourists visiting India and hurt
Indias forex income from travel and tourism. A weaker
pound and euro will also affect the price competitiveness of
Indias IT companies and hurt overall IT exports.
The EU imported $1.8 trillion worth of merchandise from
non-EU countries such as China, India and the US in 2015,
which is roughly 10% of global imports. Yet the direct
impact on Indias exports due to Brexit may be limited, but
further turmoil in the UK or EU may lead to competitive
devaluation of currencies of other emerging economies

seeking to protect their export market share in a sluggish

global demand.
This could put pressure on the rupee despite Indias
comfortable forex position and better control on current
account balances. In case RBI doesnt allow comparable fall
in the rupee vis-a-vis currencies of emerging economies,
Indias exports will further lose price competitiveness and
continue to under-perform.
Brexit & India-EU FTA
India could think of a separate FTA with Britain, as hinted
by British Business Secretary Sajid Javid, to maintain
existing bilateral trade. However, the expected benefit from
an India-EU FTA could be lost as India will have to
renegotiate a trade pact with the EU with recalibrated trade
tariff offers. This could delay the conclusion of negotiations
on India-EU FTA. Till that happens, Indias apparel exports
will continue to suffer from comparative tariff disadvantage
and unfavourable exchange rates vis-a-vis countries like
Bangladesh and Pakistan.
Brexit and the TPP are the two big threats for the revival of
Indias exports. On the positive side, India has diversified

its exports significantly away from the EU and other

developed markets towards emerging markets of Asia,
Africa and Latin America. That could minimise the damage.
However, Brexit could be problematic for sectors which are
overexposed to Britain/EU, like textiles and clothing, IT and
pharmaceuticals. The Japanese yen has gained immensely
against the dollar over the last few quarters and that
makes its imports cheaper. India can use this limited
window to push exports (to Japan) to make up for the likely
loss from Brexit.
Ritesh Kumar Singh is a former government official and
currently a corporate economic advisor based in Mumbai.
Prachi Priya is Asia economist for a top corporate house.
Views are personal

UK has always been a gateway for Indian firms to enter

into EU.
After Brexit, this will cause short-term distress to Indian
firms

If Article 50 is invoked, the UK will have a 2 year window to

negotiate terms of its departure from the EU.
This can only be extended with the unanimous consent of all
Member States.

There are various schools of thought on whether Article 50

notification can be withdrawn unilaterally. One school of thought
says that it can be withdrawn and the UK could remain even once
notice has been given. The other says that it requires the consent
of all members. Another is that it requires the consent of a qualified
majority i.e. 21 other members and the third is that it requires no
consent at all!