Reserve Bank of India report
Brexit in March could offer opportunities for Indian exporters if bilateral trade agreements are renegotiated
new delhi — Britain is set to leave the European Union on March 29 and concerns remain across the globe with financial markets already jittery over the possibility of a no-deal Brexit. For India, experts say Brexit might have a short-term adverse impact but benefits lie in the long run.
So far, Brexit talks between England and the EU have not been fruitful and there are concerns that Britain might have to leave the union without a deal, which may have severe economic impact including a recession in England.
“If there is Brexit without a deal then there could be short-term disruption while in the long run, it makes the UK less dependent on the EU giving countries like India an opportunity to negotiate directly with the UK,” said Mayuresh Joshi, fund manager at Angel Broking.
A Reserve Bank of India report published earlier this month had also noted that the “the likelihood of Brexit in March 2019 could offer opportunities for Indian exporters if bilateral trade agreements are renegotiated”.
Last year, the Bank of England had warned that a no-deal Brexit could send the pound plunging and trigger a recession worse than the financial crisis.
Explaining its impact on the domestic currency, Anindya Banerjee of Kotak Securities said that a nodeal Brexit will have a negative effect on the UK first; it will impact Europe, the US and, subsequently, emerging markets.
“An actual no-deal Brexit will impact the rupee only because of the outcome” but if the sell-off continues in pound, the rupee will remain unaffacted.
There is considerable confusion with respect to Brexit, said Gaurang Somaiya of Motilal Oswal, but as far as the Indian currency is concerned the impact will be shortterm, adding that the uncertainty around Brexit is already affecting the currency market.
Brexit has been indentified as a major headwind owing to the strong investment relationship as highlighted by RBI governor Shaktikanta Das earlier this month: “Brexit is a factor that has repercussions for India’s external sector. There are consequential policy challenges for India, which enjoys strong trade and investment relations with the UK and the EU.”
Pointing out India’s strong trade
relationship with the UK, Joshi said that Britain is among the top trading partners for India both in terms of inbound and outbound trade.
In pure trade terms, the UK ranks 12th but it is important because the UK is one of the seven large nations with whom India runs a trade surplus.
“Tata Group has already emerged as the largest employer in the UK through its stake in Jaguar Land Rover. The UK also happens to be a very large market for India’s software exports,” says Joshi. —