Impact of BREXIT on Indian Banking

Impact of BREXIT on Indian Banking: The Impact of Brexit on the Indian Economy will mainly focus on goods and services. India stands to gain little from the UK's exit as it was one of the largest sources of FDI in India. The term Brexit refers to the separation of the United Kingdom. The United Kingdom (UK) left the European Union (EU) on January 31, 2020. The United Kingdom has been a member of the EU since January 1, 1973.

Impact of BREXIT on Indian Banking

• Brexit is short for "Britain leaving" the EU.
• After the 2016 election, it took four years to complete.
• A new trade deal between the UK and the European Union will keep their tax-free status.
• Immigration restrictions could hurt the UK workforce.
• Britain could lose Scotland, which could decide to join the EU.

History of BREXIT

• Brexit was an abbreviation of "Withdrawal of the United Kingdom" from the EU, with which the United Kingdom has been an economic and political union since 1973.
• In 1992, the European Union was officially renamed the European Economic Community (EEC).
• The Treaty of Maastricht, formerly known as the Treaty of the European Union, signed in 1991, entered into force on November 1, 1993. Through the treaty, all citizens of the member states acquired citizenship and the EU was born. In addition, a central banking system and a currency (euro) were created.
• In 1999, member states decided to use the "euro" as their common currency, but they could use their own national currency instead.
• The voice for the implementation of BREXIT grew stronger when the UK Independence Party took office in 2014.
• In June 2016, Prime Minister David Cameron held a referendum in the UK, where 51.9% of voters chose to leave the EU.
• The population has decided that the benefits of free trade are not enough to offset the costs of free immigration. 17.4 million people voted to leave and 16.1 million people voted to remain.
• In March 2017, the next government led by Theresa May began the formal two-year process of Britain leaving the EU.
• In July 2019, former British Prime Minister Theresa May was succeeded by Boris Johnson. He revised the treaty and made a number of changes, the most important of which was the establishment of customs barriers between Great Britain (England, Wales and Scotland) and Northern Ireland.
• The UK officially left the EU on 31 January 2020 at 23:00 GMT.

BREXIT Impact on India

BREXIT Positive Impact on India

• Brexiteers argue that the UK can now sign bilateral agreements without restrictions imposed by the EU.
• Experts predict that restricting the free movement of professionals between the two markets will benefit India's service sector. Under the Brexit trade and security deal, British citizens will no longer have unlimited freedom to work, study, set up business or live in the EU, although both sides will have duty-free and fee-free access to each other's markets.
• Indian students in the UK will benefit as applications from EU countries to UK universities are expected to decline due to Brexit.
• In addition, a weaker pound could lower the overall cost of education for Indian students.
• A fall in the pound could be an advantage. India may benefit from the overall effect, as it imports more than it exports (unless the dollar appreciates significantly against the rupee). Indian companies can buy many high-tech assets with a weaker pound.
• India stands out for stability and growth at a time when investors are looking for a safe haven globally.
• Trade relations between India and the UK may improve due to Brexit. The debate on a bilateral trade agreement between the UK and India is now open.
• Due to currency devaluation, more Indian tourists may visit UK soon.
• Declines in commodity prices such as crude oil allow India to significantly reduce its import bill (every $1 drop in crude oil prices causes India's oil import bill to decrease by about $1 billion), thereby reducing its current account and trade deficit (CAD).
• The UK accounts for 17% of India's IT exports, with overheads rising due to Brexit. In its report, Nasscom stated that the Indian IT sector will be adversely affected in the near future. The weakening of the pound will also affect the earnings of these companies. As a result, sectors like IT, R&D, architecture and financial services are likely to shine in India.

BREXIT Negative Impact on India

• India is the UK's third largest source of foreign direct investment. There are over 800 Indian companies in the UK. BREXIT will affect the operations of these companies. The performance of these companies is affected by fluctuations in exchange rates.
• India sees Britain as a gateway to the EU; Now that Britain has set it aside, India has lost its advantage. As a result, unrestricted access is required.
• The Comprehensive Trade and Investment Agreement (BTIA) negotiated by India with the EU (India EU BTIA) does not have the same effect (negotiations have been ongoing since 2007). Now that Britain has withdrawn, India will have to negotiate a separate treaty with Britain.
• Brexit will affect commodity prices. As a result of the decline in global demand, the slowdown in China and many European countries has caused a fall in commodity prices, which will be exacerbated by BREXIT.
• The share of Great Britain and the European Union in the effective exchange rate of the rupee is 23.7%. BREXIT would lead to an outflow of foreign securities investments, further weakening the Indian rupee.
• Except for a few companies with significant exposure to the European Union, the impact of BREXIT on the Indian stock market is unlikely to be significant.
• Some of the major companies whose share prices fell due to Brexit are Tata Steel, Apollo Tyres, Tata Motors, TCS etc.

Latest on India and Britain on BREXIT

• The UK and India recently started negotiations for a post-Brexit free trade agreement.
• Prime Minister Boris Johnson said in a statement that a trade deal with India's booming economy would be very good for British businesses, workers and consumers. We will take advantage of the opportunities offered by India and the emerging economies of the Pacific region to strengthen our position on the international stage.
• These negotiations could lead to improved trading conditions for UK exporters and significant growth in trade with India over the next ten years.
• India's service sector is likely to benefit from restrictions on the free movement of professionals between the two markets.

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