EFFECT OF BREXIT ON THE INDIAN SERVICE SECTOR
Brexit is the departure of Britain from the EU thus breaking a nearly half a century old tie between the trading partners. The process which took nearly three years started with a referendum in June 2016 where 52% of the population of the UK voted to exit out of the EU. The primary reason behind the unrest was the increasingly free movement of immigrants to the UK from the EU thus leading to a reduced job opportunity for the locals. It led to a feeling of jingoism in the UK junta and the EU deal seemed too expensive and non-beneficial. But, this alternation in relationship and status quo will also have a long-lasting impact on India, as UK was a doorway for India into the EU group. The article briefly describes the implication of Brexit on the service sectors of India.
Other reasons too fuelled the immigration issue like,
· Drop-In real wages post Global financial crisis, leading to low disposable income and poor standard of living.
· Rise of housing cost especially in areas with higher foreigner population; leading to rising in cost of living. This along with reduced disposable income aggravated the situation.
· Insufficient funding and manpower to satisfy the increasing demand for the National Health Scheme (NHS).
· Better standard of living and opportunities like education and high-paying job for immigrants compared to the locals. This led to the feeling of “job-stealing”.
All of these commotions coincided with the rise in immigrants into the UK from the EU. This led to the misattribution of cause.
Opportunity for India-UK relation in service:
Brexit may pose as an opportunity for India as post-Brexit, India and China are the two emerging nations and are at the forefront of the UK’s wish list for future trading relations. India may have a good bargaining hold if it plays the cards right.
Services like education, financial, space, retail, IT, legal, health, etc may see a surge in India, as Britain exports most of these services. And, now with the preferential treatment for EU countries gone, India will see a level playing field. The present and future trends of 4 of the measure sectors are discussed below;
A. Mobility:
Visa types and restrictions:
The UK has four tiers of the point-based visa system, out of which the allocation of Tier 2 visas, given to skilled workers from outside European economic areas, is dominated by Indians. This can prove as an opportunity as India has a large pool of skilled workforce that is willing to migrate to a foreign land in search of better opportunity and the UK has a shortage of them.
Immigration & labour exchange:
The new immigration policy and point-based visa system allow a level playing field for Indians, as now they do not have to compete with EU nations, which could freely move into the UK in the old immigration policy. Apart from this there is increasing chances of post-study work options & time relaxation allowed to obtain a job in the new policy. Thus, making the UK now even more attractive destination for students.
But there is a downside too, as the new immigration policy is a rather lengthy process for obtaining visas and new criteria such as continuity after 3 years being introduced ate quite challenging to meet.
Education:
The major hurdles in the education sector between UK and India are;
· Restriction on the repartition of investment profits in the education sector
· Lack of mutual recognition of degrees as well as twinning programs by both countries.
· Not allowing foreign universities to set up satellite centres.
Now that non-EU members get equal preference as EU members hence, a considerable number of seats may get freed up for Indian students. Also, policy announcements like Graduate-Immigration Route (GIR) for the 2-year post-study work permit and low-cost higher education fees in the UK compared to the US will prove the UK as an attractive destination for higher education.
India is strategically posted to reap these benefits with its new National Education Policy. However, some glaring issues need to be resolved to succeed,
· The policy of only top 100 universities being facilitated for operation in India need revamp in term of how universities are ranked and more universities/institutions need to be added.
· To further the Make in India initiative, the manufacturing sector needs a boost, this can be achieved by having bilateral MoUs between UK & Indian universities, to offer diverse skills. Hence mutual recognition of degrees from both countries along the lines of what France and India have can be used as a guide.
· With the recent boom in the EdTech start-ups, the learning can be easily shared and courses can be offered to larger masses.
· Post-study work opportunities must be provided to students as an incentive to do a course from foreign institutes.
· The collaboration of universities in various areas of research must be pursued as India needs to improve the research & innovation ecosystem.
B. Health:
Healthcare is one of the fastest-growing sectors in India which is estimated at USD 280 B in 2020. India also ranks third in the most popular destination for medical tourism. And Post COVID 19 pandemic telemedicine, diagnostics, and alternative medication like Ayurveda is going to be vital in the Health sector.
Clinical Trials:
Post-Brexit the European medical agency and commission continued to abide by the EU clinical trial rule till 31st Dec 2020. Post that UK medical authority may act like US FDA and India may h
Health Start-up financing:
India could see deeper collaboration with the UK through a UK-India start-up launchpad like International Tech Hub Network. One such initiative is TeXchange’20 which focuses on Big data and AI in health care, telemedicine, and diagnostics. UK India Tech hub aims to create skilled digital jobs, develop rich collaborations & stimulate the digital economy of both countries. It is estimated that Indians can save up to USD 10B in 5 years by adopting telemedicine in place of in-person physician appointments.
C. Legal:
India is one of the very few large economies to prevent FDI in the Legal service sector. Such restrictions include limiting foreign players practicing foreign laws (as opposed to local law) and can only hire a domestic lawyer. This means foreign lawyers fly in and out of India to advise their clients. Given the Indian economy growing rapidly, such laws restrict foreign firms to set up their offices in India. As big lawyers and firms play a vital role in the planning and execution of multi-million-dollar investment decisions. Opening up FDI will allow quick M&A, cross-border transactions, & international arbitration. Opening up of this sector may lead to higher transparency, professionalism & expertise to businesses in India, which is missing in the Indian market. But the informal sector has developed its arrangement between Indian firms and foreign companies. Hence, to bring in reform through FDI may be the best way forward. At the present UK, firms allow Indian lawyers to practice in the UK only if they clear a special exam and training program. If the law colleges could accept degrees as only selection criteria and FDI is allowed in the sector it will be beneficial for India as 5/15 top law firms in the world have their base in the UK.
D. Financial:
India and UK have healthy bilateral cooperation across trade & investment in finance. UK’s solid foundation in the financial markets, accounting for ~37% of the forex trading globally, can benefit India with opportunities for knowledge exchange, start-ups, and overall positive feedback in developing the financial infrastructure of India. Furthermore, this collaboration helps the rather locally set-up Indian fintech firms access to consumers & investment in the UK, arguably a financial hub.
UK government is truly committed to make London a financial hub for Indian companies. This includes raising funds for masala bonds worth GBP 13.5B & UK banks carrying out a significant portion of their operation from India. But, FDI caps may hamper the operation and control of foreign firms in India. Hence a slight change in norms may bring heavy investments and can strengthen the ecosystem further which, is crucial for start-ups and other institutes to survive.
Conclusion:
UK leaving the EU has opened enormous opportunities for the Indian market. There are certain services like legal services which even post Brexit will not be changed to due to high political involvement. However, services like education, health, financial, business, and a lot of other services will see a potential boom both for the Indian and UK market.
Though the Indian market is attractive, the political environment in India is a primary deterrent to any meaningful progress in forming agreements. Policy decisions are generally only taken after long periods of unrest. This is also one of the reasons why India is not the most sought-after partner for the UK globally. In healthcare, the UK has shown immense interest in South Africa. This can be seen from their new fast-track visa, called the NHS visa, to attract workers in healthcare.
From the IT services perspective, however, India seems to be quite attractive, especially in case of a hard Brexit. With mutual interests in terms of skilled manpower supply and demand, requirements for expertise in IT, etc. as the base, agreements in the IT services sector seem possible within the next couple of years. Of course, this is subject to concerns regarding the 26 economy post-Brexit and now, Covid. If the economy itself is hit, then IT spending locally in the UK also reduces and the talks themselves may need to be pushed further into the future.
Complete project report: https://drive.google.com/file/d/11PPPG64HLdb5R1xddwFdsSYebdGQjStn/view?usp=sharing
Summarized by: Mr. Sarada Sahoo
