It’s a BREXIT! This is how India gets impacted

It’s final. The United Kingdom will ‘LEAVE’ the European Union. It will no longer be a part of the 28 member European nation’s bloc that constituted the EU. As historic a decision as it is, it will also have a sure shot impact on India as well. This is what will happen now:

Volatility in the Stock Market
As a result of huge sell-offs by foreign investors, to hedge their losses in emerging markets. While stock markets in the UK are expected to tumble as much as 20%, in India, post an immediate knee-jerk reaction in the markets given sell-offs, it will largely smooth out. In fact, Sensex opened 780 points down at 26227, while the Nifty was down 247 points at 8022. That said, Indian markets are expected to largely stabilise over a 10-15 day window, given domestic indicators like monsoon and inflation are largely stable and healthy. The Government in India and its other independent regulators protecting its currency are however in full charge of the situation. In a statement released on June 22, the Reserve Bank of India said, “In the run up to the referendum in the United Kingdom on its continuing in the European Union, uncertainty about the poll outcome has resulted in some amount of turbulence in global financial markets, including in India. The RBI is maintaining a close vigil on developments, and will take all necessary steps, including liquidity support, to ensure orderly conditions in financial markets.” There is an impending worry by experts who fear the rupee could fall to Rs68 to a Dollar, now that Brexit is a reality.

Trade
India will largely benefit from the Brexit. India’s trade with the UK has been significantly rising over the last decade, more so over the last 5 years, whereas it’s trade with the rest of the EU has seen a steady decline, given unclear and confusing regulations along with tariff issues. India will now have greater flexibility to negotiate a bilateral Trade Agreement with the UK that has been languishing mostly given the ambiguous and extremely confusing laws governing the EU. India for the last 8 years now has been trying to strike a Free Trade Agreement with the EU, but again, given the complexity of the laws that require it to keep in mind and safeguard economies of 27 (post Brexit) member nations, it hasn’t seen the light of the day yet. Meanwhile, India’s bilateral trade with the UK stood at $14bn in 2016, with India exporting goods and services worth close to $9bn and imports from the UK counting at just over $5bn.

Indian Companies in the UK
There are over 800 Indian companies with operations in the UK, employing over a million people. However, the biggest company to get impacted will be Tata Motors, which owns UK’s largest carmaker, JLR. Tata Motors stocks were already down over 12% as soon as trade opened this morning. The others to face the music will be Motherson Sumi which was down over 10% as soon as trade opened. Then there are Pharma companies like Aurobindo Pharma and banks like ICICI and Axis Bank that have significant UK exposures. Most Indian companies in the UK use that country as an exporting base to the rest of the EU and some of their strategies will now have to be relooked into, given how domestic laws in the UK now change with regards exports and imports.

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