Aditi Bhavsar Bagul
1. The biggest drawback of the Leave Campaign is that they have not mapped out the future course of action. Markets across the world will tank. The pound will depreciate against most major economies. India cannot remain immune to this. Sensex and Nifty will tumble in the short-run.
2. The immediate fallout of Brexit on the IT industry in India would be the impact of the decline in the value of the British pound, which would render many existing contracts losing propositions unless they are re-negotiated. India is presently the second biggest source of FDI for Great Britain. Now since Britain is leaving the EU due to the latter’s complex bureaucratic regulatory structure, Indian companies can expect a deregulated and freer market in Britain, in longer run.
3. For India, Britain was the gateway to EU. Now it has to build trading partnership with other EU nations in order to access the large EU market.
4. Britain will need a steady inflow of talented labour, and India fits in perfectly due to its English-speaking population. Similar is the case with Indian students studying in Britain.
5. Europe needs to counterbalance United States and China geopolitically and would also need to hedge against a slowing China for its economic interests. Therefore there will be an inclination towards India which is very good from Indian prospects.
6. India’s bilateral trade with Britain was worth $14.02 billion in 2015-16, out of which $8.83 billion was in exports and $5.19 was in imports. The trade balance thus was a positive $3.64 billion. After Brexit, the Indo-British trade could take a hit if the British economy slows down.
7. The British exit will also lead to greater investments into less risky assets like gold and increase the overall outflows from the domestic equity markets.