The world will never be the same again. In a stunning referendum, the UK voted 52-48% to leave the 28-nation (now 27?) European Union (EU) after 43 years, sending global markets into a tailspin and business leaders into crisis meetings, and also triggering David Cameron’s decision to exit as British PM. With far right-wing politicians across Europe demanding their countries break away too, the rising tide of strident nationalism, economic angst, anti-immigrant hostility and protectionism portends an uncertain future for liberalisation and globalisation.
Sir Winston Churchill, who led Britain to victory in WWII and whose statue is the centre of attraction at London’s Parliament Square, strongly backed a “United Europe”. However, a new day dawned at the Parliament Square on Friday after the historic Brexit vote, with many countries trying to understand their changing equation with Britain. Tremors of Britain’s exit from the EU were felt across the world. India was no exception as it was all red in the Indian equity and currency markets on Friday. Soon after the result of referendum was declared, India reacted cautiously. Indian Finance Minister Arun Jaitley claimed that Brexit’s impact on the South Asian country would be transient. “India is well-prepared to deal with the situation and the country’s fundamentals are sound,” he told the media in New Delhi. Apart from Jaitley, a number of ministers, political leaders, diplomats and foreign policy experts in India and Britain have expressed views on future of bilateral ties in the changing European political landscape.
British Minister of State for Employment Priti Patel has welcomed the outcome of historic EU referendum, saying that Britain’s exit from the bloc will prove a “massive boost” to its relations with India.
Speaking at a press conference in London on Friday, Britain’s senior-most Indian-origin minister said that Brexit would help develop stronger trade links that were allegedly hampered by EU laws. Patel (43), born in London to an Indian family that had migrated from Uganda, was one of six high-profile ministers in the Cameron government who had campaigned vehemently in favour of Brexit.
Patel, who will have higher responsibilities in the new government after Prime Minister Cameron steps down in October, told the media that both New Delhi and London should co-operate with each other more closely in order to develop stronger trading links. She expressed hope that it would be easier for the Narendra Modi government to boost bilateral trade ties, with the UK re-aligning its foreign policy and trade priorities.
“Over the last 40 years, the UK’s membership of the EU has acted as a barrier to developing trade and investment partnerships with the rest of the world, including India. Remaining within the EU will mean the UK will be in a weaker position to forge the closer trading ties that would benefit the Indian and UK economies. Importantly, an independent Britain free from the EU can ensure that we realise the full potential of our special relationship with India,” stressed Patel.
Although Patel’s ministerial colleagues criticised her views on Britain’s relationship with India, the minister said that British businesses, including those set-up and established by members of the Indian diaspora living in the UK, were ready to access the Indian market. Patel praised Prime Minister Modi’s leadership, saying that London would sign beneficial trade deals with New Delhi in near future in an attempt to strengthen business ties. “Although the focus of the Conservative government on enhancing our relationship with India has led to an increase in trade since 2010, we could go further if we were not held back by the vested self-interests of the EU,” she told the press.
Currently, Britain is the third largest investor in India after Mauritius and Singapore with a cumulative inward flow of USD 22.5 billion between April 2000 and September 2015. Also, Britain is 12th in terms of India’s bilateral trade with individual countries and among seven of 25 top countries with which India enjoys a trade surplus. Around 800 Indian-owned businesses in the UK employ more than 1.1 million people.
Meanwhile, economists are of the opinion that Brexit will certainly have an impact on India-UK ties. As India is the UK’s third largest foreign direct investor (with USD 2.75 billion in 2015), Brexit could see capital flight and hit the movement of professionals to Britain. India invests more in the UK than in all of Europe combined. Experts believe that Brexit could (to an extent) increase risks for Indian businesses, as depreciated Euro or pound could be tricky for India in a sluggish export environment. Tata-owned Jaguar Land Rover’s annual profit could be cut by USD 1.5 billion (or GBP 1 billion) by the end of the decade. The Tata Group, Britain’s biggest employer, lost INR 300,000 million in market cap on Friday.
However, some Indian economists believe that Brexit gives India the right break to hunt for new opportunities in the UK. As Brexit will hit India’s talks for a Free Trade Agreement (FTA) with the EU, New Delhi will try to strike better deals with EU-free Britain. At the same time, the Modi government will have to rework strategy and review products’ list before signing the FTA with the bloc. Chairperson of State Bank of India (SBI) Arundhati Bhattacharya explained: “As risk-aversion sets in, there would be decline in markets and India would see this along with other nations. However, as trade strategies are reworked, there could be advantages in the form of better market access to the EU and the UK.” According to Bhattacharya, Indian IT and telecom firms, who have invested in the UK, will have to rethink strategy, but stand to gain in the long term as Britain will no longer be bound by restrictive EU norms.