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How India could gain from Brexit
20
Jul '16
Even as the immediate effect of Brexit is likely to be negative and affect Indian exports especially of textiles, clothing, machinery, auto ancillaries, and pharmaceuticals, it offers new growth opportunities for India, according to an analysis by a market research and consulting group.

Brexit creates future growth opportunities for India. A nimble UK may be in a better position to provide more tax concessions, financial incentives, and preferential treatments thereby giving a new thrust to Indo-UK trade ties, the impact analysis by Frost and Sullivan said.

Initially the impact on exports is likely to be negative as individuals, markets and businesses come to terms with the results and the new British leader kickstarts the process of withdrawal from the 28-nation bloc later this year.

Until the dust settles and a clear picture emerges, business entities are most likely to avoid risks resulting in currency volatility and a flight of foreign capital to safe havens and assets, the report said adding that lack of a precedent makes it difficult to predict the ultimate outcome.

Nonetheless, it suggested that in the medium term, India Inc. may revisit its European business plans and overhaul or calibrate them, as the case may require.

Although the region is not without opportunities, Indian manufacturers and service providers may have to adjust to lower demand in the UK, increased costs of operations including compliance requirements of two separate regulatory frameworks, and restrictions on mobility of employees across EU countries.

Indian investors with factories in the UK and the country acting as a gateway to Europe may rearrange their investment plans, resulting in a lower flow of foreign direct investments to the UK – India is the third biggest source of FDI for UK - and higher to the EU.

At a global level, increased political risks emanating from the fragmented UK, other EU exits, protectionist measures, and a weakened European economy might result in 'lost years', the report said but insisted that the impact of Brexit will not be felt in the same way and to the same degree by various sectors and countries.

For instance, withdrawal of subsidised rates for EU citizens in UK universities will open up funds to provide scholarships to students from other countries. Equally, it may lead the UK government to ease immigration rules for non-EU students. These welcoming conditions coupled with lower costs of higher education is likely to entice more Indian students to the UK and reverse the trend of falling admissions. (SH)

Fibre2Fashion News Desk – India

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