the 23rd of June 2016 the people of Britain will vote to
stay in the 28-nation European Union (EU) or to exit from EU, the latter is
being termed as Brexit. From Britain’s perspective, it’s a huge dilemma. On one
side, in the event of Brexit the country can exercise its independence in
decisions of economic and strategic significance without having to worry about
the fallouts on other members and other EU constraints. On the flip side, in
one stroke the country will lose the common market and luxury of backing of all
the members in economic and other strategic matters. Italy used EU to coerce
India on marine issue.
Why should India be
bothered about an internal event of the European Union?
Union is economic and political union of 28 countries having a common single
market and allows free movement of people, goods, services and capital between
member states. In case the referendum ends in ‘leave’ vote:
other countries may follow suit.
using Britain or UK as EU gateway for doing business will be suffered.
currency markets will be shaken as Pound and Euro will be affected adversely
owing to preference to safer bets like USD and Gold.
is estimated that GDP of many countries including UK and Germany will be hit as
EU export import dynamics will change.
800 Indian companies having businesses in UK including Tata Steel & Tata Motors will suffer.
is among the top FDI contributor for India and the contribution may go down
owing to their own economic problems.
to the factors listed above, the equity investors world over will sell riskier
equity assets from emerging markets and park their money in cash or other safer
heavens. India too will suffer an exodus till haziness of actual impact is
over. However, experts are confident that India’s relative attractiveness will
mitigate the length and extent of overall impact on Indian equity markets.
the flip side, the Brexit may allow UK to independently enter into trade
agreements with India without EU constraints. UK may consider India much more
favorably considering increasing economic clout of India owing to ‘fastest
rising large economy’ status.
nutshell, the Brexit will cause tremors worldwide including India, although for
India the intensity will be relatively low and damage would be temporary.