Brexit Positive for India?
While many business people, financial institutions, and chambers have been labeling Brexit as a disaster for India, much of the negativity is overhyped and the positive side not completely explored.
A large part of what has been discussed in the media involves the UK being a comfortable and familiar stepping stone for Indian businesses into the rest of the EU.
The fact remains that for Indian exporters Britain has always been a different entity from Europe. The language is different, the visas required are different, the currencies are different (important, since this is high risk), the ports of landings are different, the regulatory authorities (e.g., pharmaceuticals) are different, and the way of doing business is different.
India does as much direct business with the Netherlands and Germany as it does with the UK. Most Indian businesses are very comfortable in this, dealing directly with these countries without need of the UK. Britain leaving the EU will have very little influence on existing relationships. They earlier quoted in euros for these countries (and pounds for the UK) and would continue to do so. For those who have been using warehousing and port facilities in the UK (highly unlikely given the geography and shipping routes), a simple change to Rotterdam or Hamburg would take a few months to execute.
For those with representative offices in the UK, nothing really changes as their networks, experts, and supply chains can be easily adjusted with not much trouble and without having to fire or move those working in the UK. Just because Britain left Europe doesn’t mean that those employed in UK offices suddenly lose their European expertise and ability.
Beyond the “global financial market volatility” predicted, Indian businesses in India are not really affected by Brexit. Large multinationals (Tata, for example) that happen to be Indian companies face the same trauma that every other multinational faces.
The upsides, however, are promising.
Possibility of an India–UK FTA (Free Trade Agreement): India has utterly failed to sign an FTA with the EU, with enough blame to go around for India and every EU member. Given the close relationship between India and Britain, as well as the comparative trade advantages, it would be quite easy for an FTA to be signed if the countries move fast. Britain needs a quick FTA win in Asia as a negotiating balancer with the EU, and to shore up business confidence in it as an independent trading partner. Britain would now be much more willing to compromise and a sign a deal favorable to India than it would had as a member of the EU. While some would argue that Britain is not a huge trading partner for India, this could change with a proper FTA in place given its large consumer purchasing power and reasonably sized population.
Outsourcing Plays: European Union regulations on keeping EU resident data within the EU have created quite a stumbling block for the Indian outsourcing industry, which would love to get lucrative contracts ranging from financial services to health care processing. With Britain out of the EU and more aligned to the American way of thought there could be a mini-boom should these regulations be opened up, either in general or specific form as part of a greater India–UK agreement.
Cheaper Asset Buys: There should be a golden opportunity for Indian businesses to snap up interesting British assets ranging from small businesses to large operations. With a commonly understood legal system and language, Indian businesses would rather buy British businesses than those elsewhere in Europe. Britain has in the last decade managed to create a reasonable number of high technology start-ups and intellectual property-based companies, and while not as deep or industrial as the Germans, many of these companies will be attractive to Indian buyers.
Looking Good by Comparison: The proverb famously uttered recently by Raghuram Rajan, India’s soon to be ex-central banker, would seem accentuated: “In the land of the blind, the one-eyed man is king.” With Europe in turmoil for the next couple of years, India might look comparatively stable and with spectacular high growth. Once things have calmed down in a few months, investors should unwind their dollar and gold positions and go back on the hunt for reasonable returns. India with Prime Minister Narendra Modi would then be waiting with open arms and great speeches.
Tourism to India: India has been losing out on UK tourism with cheap flights taking youngsters and old people alike all over the EU to spend their high value pounds in euro-based Spanish or multicultural German cities (Berlin). Suddenly, cheaper rupee-based India would be a much more attractive place if only for tourists avoiding “You left the EU!” talks with every stranger they encounter.
Perhaps most important, summer vacations in the UK would become much cheaper. With the expected pound depreciation, much coveted UK goods and vacations would become more accessible, or at least gentler on the wallets. It would appear from a number of publications (including The Economist) that the entire elite of India seems to disappear to London for the summer. A Brexit would ensure that their jaunts to colonial routs would be cheaper and perhaps more satisfying now that Britain also has an “independence day” to celebrate.
