BREXIT IMPACT ON

INDIA

PRESENTED BY

Siddharath Joshi
Roll No. 120436650
MBA (FYIC)9th Semester
 BREXIT effect will be faster for those Indian
companies which compete with
British manufacturers in European markets
since the British companies can no longer treat
continental Europe as a home market in
so far as import taxes are concerned.
INTRODUCTION

Brexit refers to the possibility of Britain withdrawing from

the European Union (EU).

EUROPEAN UNION
The European Union often known as the EU is an
economic and political partnership involving 28 European
countries

REFERENDUM
A referendum is basically a vote in which everyone (or
nearly everyone) of voting age can take part, normally
giving a Yes or No answer to a question.

Reason for the Call for Referendum

Prime Minister David Cameron has promised to hold a
referendum if he won the 2015 general election
PROCEDURE
Eligible for vote
Procedure to vote
People wants the UK to leave the EU
Reasons for UK to leave
Reasons for UK to stay in the EU
Reasons for UK to stay

AGAINST AND FAVOUR

Who is Against Brexit?
1) David Cameron - PM, Britain
2) Mark Carney - Governor, Bank of England
3) George Osborne - Former Chancellor of the exchequer, Britain
4) John Major, Tony Blair and Gordon Brown - Former British PMs
5) Barack Obama - President of the United States

Who is favouring Brexit:

1) Boris Johnson - London Mayor
2) Nigel Farage - UKIP leader, UK
3) George Galloway - Respect party leader, UK
4) Michael Gove - Justice Secretary, UK
5) Vladimir Putin - President of Russia
KEY ARGUMENTS

Foreign affairs
Sovereignty
Security
Money
Trade
Business
Jobs
Consumer goods
 BREXIT IMPACT ON
THE UK AND THE EU
TRADE WITHIN EUROPE
Regulatory divergence that adds to the cost of trade
is likely to increase over time, damaging bilateral
trade volumes and the UKs position in European
supply chains.
The costs will be borne by consumers as well as
businesses.
 Post-Brexitoutcomes which reduce
trade or increase the cost of trade
between the UK and the rest of
Europe will be damaging for both
sides.
FOREIGN DIRECT INVESTMENT
Brexit could reduce the
 Many large European corporates are heavily
invested in the UK and the commercial logic for
this investment could be affected by Brexit.
LIBERALISATION AND REGULATION

The UK has championed the single market, but outside the EU

would no longer be an effective advocate of further liberalisation.
A paradox of UK euroscepticism is that following Brexit the UK
would lose influence over EU regulation without gaining much
freedom to regulate independently.

After Brexit the balance in the European Council on

economic policy debates would shift, with the loss of a
large member state supporting liberalisation.
INDUSTRIAL POLICY
UK industry benefits from research collaboration
in Europe and researchers have done well in EU
competitions.

The impact on industrial policy in the

EU depends on the Brexit model, but
we may see a weakening of
competition policy, looser
collaboration in education and
research, and fewer EU students in
the UK.
IMMIGRATION
The scope to tighten immigration depends on the
Brexit model. This risks damaging competitiveness,
particularly of London, and being economically
costly.

Businesses operating elsewhere in Europe can largely work

around any restrictions on the free movement of labour
imposed by the UK.
Perhaps the biggest risk, but the hardest to predict, is
of political contagion elsewhere in Europe if the UK
tightens border controls.
FINANCIAL SERVICES
Established advantages and agglomeration effects mean
the UK has a strong competitive edge that would be hard
to dislodge

Brexit may impact on the

location, liquidity and cost of
financial services in Europe if it
undermines Londons competitive
position. This would be costly for
businesses and households
across Europe.
TRADE POLICY
The UK would be free to set its own trade policy
priorities under some Brexit models, but these are
unlikely to be much different from the EUs.

The EU has an open, liberalising

approach to trade policy, in part
due to UK influence. The UK,
more than any other state, has
put top-level political weight
behind trade negotiations.
INTERNATIONAL INFLUENCE
The UK currently enjoys considerable
influence both in and through the EU. This
would be diminished if the UK leaves the
EU.

The EU would lose clout in foreign policy and

military terms, with the loss of one of top two
European powers, alongside France, that is a
permanent member of the UN Security Council.
BUDGET
The direct financial cost of EU membership is relatively easy to
quantify. However, the financial benefit from leaving the EU
depends on the Brexit model and the outcome of the negotiation
between the UK and the rest of the EU.

MOST EXPOSED COUNTRIES

Brexitwill impact on member states through some channels, such as international influence, to largely uniform
extent.
High Exposure
Three countries stand out for having the highest exposure the Netherlands, Ireland and
Cyprus.
Significant Exposure
Several countries have a significant exposure including Germany, Belgium and Sweden.
Niche Exposure
France and Poland are among a group of countries that are more exposed to Brexitin
specific areas.
Low Exposure
Italy is among a small group of states in the south-east of the EU with little direct
IMPACT OF BREXIT ON
THE WORLD ECONOMY
NOW AND LATER

In the short run ... If you run a British company that exports a lot
to Europe, or manage a European bank with thousands of
employees in London, nothing much changed with the results.
The immediate effects of "Brexit" will flow almost entirely through
financial markets. Markets may be flawed
Brexit hit to hammer corporate profits in the near future

In the medium run ... As the months pass, the economic

consequences of Brexit become less about financial market
disruptions and more about real economic activity.

In the long run ... Things like business confidence, market swings
and central bank responses shape the economy in the short and
medium run, but over time, bigger forces prevail.
ANALYSIS
The risk of the UK leaving the EU increases
financial market volatility in the short term, but
remains much less severe than the case of
Greece.
EIC maintains that the possibility of Brexit is low
due to large potential negative consequences.
The case of Brexit will hurt both the UK and the
Eurozone economies especially through the
uncertainty over trade and labor movement
agreements.

IMPLICATION
The UK referendum adds uncertainty to the
BREXIT IMPACT ON
INDIA
IMPACT ON INDIAS ECONOMY

The Sensex tanked by 450 points (from the opening value) on

June 24, 2016 falling below the 26000 mark and the Rupee value
crossed 68 for a US Dollar.

Gross Domestic Product

The performance of the agriculture sector is expected to improve
in the current fiscal year.
The prediction for monsoons is favourable this year and rains are
expected to pick up over the next two months (July-August 2016).
According to FICCIs latest Economic Outlook Survey, the median
GDP growth forecast for 2016-17 has been put at 7.7%.
Exports
Post Brexit there is a heightened chance of this
trend being amplified over the near term given
the possibility of disturbances in currencies and
UK facing a further slowdown in growth.

Foreign Direct Investments (FDI)

With the slew of measures announced in June
2016, India has opened up almost all sectors for
foreign investors barring a very small negative
list.
India is expected to get continued attention from
the investors including investments from the UK.
UK is third largest investor in India and accounts
Rupee can remain precarious
The Rupee can witness some volatility in the coming weeks
as there is still anxiety in the global markets.
Inflation to remain range bound
Oil and commodity prices have been subdued and there is
no intermittent risks at present that will make the prices
shoot.

IMPACT ON INDIAN BUSINESSES

Indian parties in cross-border contracts commonly include
English jurisdiction and governing law clauses.
Post-Brexit, there may be uncertainty over the recognition
of English judgments in EU countries.
The companies do have a cushion period to work out the
mitigation strategies as the deal between EU and UK will
take some time to materialize.
SOME SECTORS LIKELY TO FACE THE HEAT
Auto components
The anticipated slowdown in the UK and the EU region will
have a dampening effect on the sector.

Information Technology
The IT companies thus are expected to face the heat in
light of the Brexit. Given the risk of further moderation in
growth in the UK and EU, there is an increased probability
that the companies lower their IT budgets

Metals
Demand in the EU has been subdued and this latest
development is expected to further dampen demand.
Pharmaceutical
The pharma companies do not really expect a big
hit following the Brexit and have indicated a
limited impact of Pound depreciation.

Garment
the drop in the Pound is expected to impact the
un-hedged export contracts with British
counterparts.

Financial Services
important for India as it would be difficult to
imagine financing Indias huge infrastructure
IMPACT ON EDUCATION SECTOR
Britain's exit from the EU is expected to
open up significant business and economic
opportunities for the Indian Education
Sector

Impact on Outbound Education seekers

Pre-Admissions FAVOURABLE
Possibly better admit rates for Indian students,
as number of EU applications may fall.
Possible decrease in international student fee
Depreciation of Pound may lead to lower total
cost of education for Indian students
Post Completion NEUTRAL
Possible points based system may be more favourable for Indian
students completing education in UK
Higher levels of intolerance towards immigration of foreign nationals
(as observed during Brexit Debates and subsequent to the result)

Impact on Indian Higher Education institutes and Inbound

Education
Research and Innovation- FAVOURABLE
With Brexit ,UK Universities need to look for alternate
corporate/multilateral donor sources of research funding.

Collaboration and Exchanges FAVOURABLE

Loss of Erasmus program may lead to UK universities look for
exchange opportunities elsewhere which would be favourable for
Indian institutions.

Effect on international student enrolment in India

NEUTRAL/FAVOURABLE
IMPACT ON IMMIGRATION
While a majority of Indian companies with operations
overseas believe that signing an FTA will mitigate the
negative impact of Brexit (63 per cent)
 It must be noted that student mobility represents
an important migration pathway for high-skilled
workers from India.
POSITIVES AND NEGATIVES
Positives:
UK loses a huge preferential market in the EU and would
seek to build new alliances and trade pacts.
India being one of the the fastest growing economiesis
rightly poised to gain from this development.
Indian students should be able to secure more financing for
their college degree
With UK separated from EU, it would want to create new
economic alliances and may tilt towards its former colonies
Negatives:
The pound will loss some value in the shorter term
Some of the projects and negotiations will go on hold as
firms
Indian IT companies with European headquarters in the UK
would need to spend on infrastructure and staff
FINAL THOUGHTS
While uncertainty
looms large on the
future of Brexit, it is
important to
remember that if a
Brexit light option is
negotiated, it would
necessarily entail
accepting free labour
movement from the
EU.
CONCLUSION

First, the massive selloff of the British pound that followed Brexit
resulted in a roughly 8% decline of the currency relative to the
Indian rupee.
Second, Brexit will likely compel London to seek a more robust
trade relationship with New Delhi.
With Indias economy outperforming all of its counterparts, the
erstwhile crown jewel of the British Empire appears to be
shimmering brightly once again from Londons view.
Third, and closely related, the financial and political uncertainty
enveloping the EU makes the Indian stock market a more
attractive destination for foreign investment
Fourth, some analysts predict Brexit could lead to changes in UK
immigration policies that would favor high-skilled workers from
India.

Rupee may depreciate because of the double effect of foreign fund

outflow and dollar rise.
This will increase petrol and diesel prices to an extent.
THANK
YOU