oppn parties India Beats the Brexit Blues

News Snippets

  • Crude prices fall sharply as Saudi Arabia assures normal production in a few weeks. Prices fall by 5.4% to $65.30 per barrel
  • Sensex tumbles 700 points over fears that rising crude prices will deal a body blow to the tottering Indian economy
  • As Rajeev Kumar fails to appear before the CBI despite several notices, the agency forms a special team to locate and apprehend him
  • S Jaishankar says Pakistan is not a normal neighbour and its behaviour is a "set of aberrations"
  • External Affairs Minister S Jaishankar says PoK in Indian territory and the country hopes to have physical jurisdiction over it one day
  • Barasat Sessions court near Kolkata rejects Rajeev Kumar anticipatory bail application citing lack of jurisdiction as the reason
  • PM Modi celebrates his birthday with Narmada aarti and later has lunch with his mother.
  • All 6 Bahujan Samaj Party MLAs merge with the Congress in Rajasthan
  • Bengal CM Mamata Banerjee to meet PM Modi on Wednesday, state issues on the agenda
  • Pakistan to open Kartarpur corridor on Nov 9
  • Rajeev Kumar, ex-police commissioner of Kolkata and wanted for questioning in the Sarada scam does not appear before the CBI despite the state administration requesting him to do so
  • Supreme Court asks the Centre to restore normalcy in J&K but keeping national interest in mind
  • As Trump accepts the invitation to attend a programme in Houston with PM Modi, India rushes to settle trade issues with US
  • After drone attack on Aramco's Suadi Arabia facility, oil prices jump 19% in intra-day trading causing worries for India
  • Imran Khan raises nuclear war bogey again, says if Pakistan loses a conventional war, it might fight till the end with its nuclear arsenal
Sunni Wakf Board and Nirvani Akhara write to the Supreme Court for a negotiated settlement to the Ayodhya dispute
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India Beats the Brexit Blues

By Sampriti Sarkar

About the Author

Sunil Garodia Post graduate student of Calcutta University. Aspiring economist. Budding writer.
Image courtesy: socialnews.xyz

Brexit created shock waves in financial markets globally. India was no exception. As the pound crashed to a 31 year low it had its repercussions on the rupee also which depreciated by 89 paise against the US dollar to settle down to a 4 month low. In spite of the many fears voiced about the adverse affect of Brexit on the Indian economy, the country seems to have withstood the shock and absorbed it amazingly well. In hindsight, it seems FM Arun Jaitley’s words in the accompanying image were prophetic.

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When, despite opinion polls indicating the contrary, 52% Britons voted for Brexit, PM David Cameron, who had opposed the idea, reigned. With uncertainty prevailing, all the currencies in the world, except those of USA and Japan, depreciated. This made some economists fear long term negative effects of this external shock on the Indian economy. Some of the concerns raised by economists were:

Uncertainty over future: The uncertainty which followed after 24th June was because the Brexit campaign did not map out the future course of action and relationship with EU and other countries. Because of these uncertainties and unanswered questions, global markets became volatile.
Increase of global risk aversion: Britain presently is the second highest source of FDI for India. After Brexit, this scenario may change. Investors may become more risk averse. The sudden increase in global risk aversion can impact inflow of Foreign Portfolio Investments (FPIs) to India.
New Equations: As Narendra Modi once mentioned in 2015, Britain is the Gateway to the EU for India. India may be forced to build relationships with other countries in EU to access the large European market.
Impact on GDP: Brexit will affect India’s GDP growth due to uncertain market conditions for its exports. It will also add significant pressure on the rupee.
Uncertainty in sectors investing largely in UK: Sectors like IT, automobile and telecom which do a lot of business with Europe would be adversely affected.

However, despite such concerns, India has done fairly well. In most of the instances, in contrast to what was expected, Brexit has not proved to be harmful. A research report by the SBI has stated that Britain’s exit from the EU, while creating a lot of uncertainty in the financial markets, might open up many opportunities for India. This is because of the following reasons:

Amongst the fear of currency depreciation it was believed that rupee would depreciate further and touch the 70 mark. However, even after more than month the rupee has remained more or less stable at Rs 67.1900 against dollar.
Britain will look for new trading partners after leaving the common EU market. Many proponents of the leave campaign suggested UK to look for partners in the commonwealth countries. India would be a natural choice for Britain, it being one of the fastest growing economies.
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UK business secretary Sajid David, in a meeting with Commerce and Industry minister Nirmala Sitharaman in New Delhi ,assured positive future relationship between India and Britain. This reduces the uncertainty regarding future.
The pound being lower, Indian students and tourists going to Britain will be benefitted. Also, with migration from mainland Europe drying up, Britain will be able to accommodate migration from other countries.
The debt market, which reacted negatively to Rexit, remained relatively calm on Brexit.
The MSCI India index, too, has done well lately—boasting a 15% return from its lows in February this year in local currency, outperforming other emerging markets in Asia.
The imports from UK will be getting cheaper on the event of Brexit, mainly rough uncut diamonds, spirits etc.

Considering all the reasons, it may be said that India has absorbed the economic shock of Brexit relatively well. The Brexit blues have now started to disappear as the resilient Indian economy, being managed by sensible monetary and fiscal policies, continues to take confident steps ahead regardless of external shocks.