"March 29, 2017 would be officially marked as the day when the UK government formally initiated the process of the country’s exit from the European Union (EU). While there are many speculations surrounding this move, analysts believe Brexit would bring good news for India. Well there are reasons for this analysis. After losing access to EU single market, the UK would like to develop trade relations with emerging markets and who better than India."

March 29, 2017 would be officially marked as the day when the UK government formally initiated the process of the country’s exit from the European Union (EU). While there are many speculations surrounding this move, analysts believe Brexit would bring good news for India. Well there are reasons for this analysis. After losing access to EU single market, the UK would like to develop trade relations with emerging markets and who better than India. India’s high proportion of skilled working-age population and high growth rate will be of particular interest for the UK. Potential sectors to benefit from an FTA between the UK and Indian include textile, machinery, engineering goods, information technology and banking.

What works for India

India has been putting greater thrust on innovation and high-end works. The country’s BPO market could see strong growth prospects if FTA between the two countries was to foster easy visa regime and greater market access for Indian firms. India is the major Foreign Direct Investment (FDI) source for the UK because many Indian firms have used it as a gateway to Europe. With the UK moving out of EU, it might not be as attractive for Indian firms as before. Naturally, the UK government would not like to miss out Indian investment and will try to attract them by offering more incentives such as tax breaks, easy regulations and opening up markets. The UK’s currency is expected to remain weaker for some period, which will prove to be less expensive for Indian firms to import from their subsidiaries in the UK.

Education industry also stands to gain from Brexit. There are possibilities that educational institutes in the UK might offer more incentives, which could essentially make education in that country less expensive. Importantly, in post-Brexit era, Indian students studying in the UK might get a more level playing field compared with other EU students who until now enjoyed an advantageous position.

The negatives

As the UK formally begins the exit process, analysts believe this scenario might compel several other European economies to consider referendums and renegotiation of terms with the EU. Apart from regional uncertainty, the changing dynamics might potentially impact India. While India currently enjoys improved macroeconomic stability, the country cannot be isolated from the impact of global and regional subdued growth. There needs to be renegotiation of FTA with the union amid the Brexit scenario. Additionally, a separate trade agreement with the UK might also need to be worked out.

There are expectations that immigration rules for Indians into UK might take on a relatively favourable stance. While this might imply positive news for Indian companies in the UK to expand workforce, companies with operations throughout EU will now have to reassess their workforce mobility, along with expansion plans and operations.

Rethink strategies

Reports indicate, deepening recession risks and unhedged exposure the British currency due to Brexit might impact IT demand, affecting revenues of Indian companies in the UK by almost 10 per cent. While the rupee is primarily anchored to the dollar, the currency is not completely devoid of volatility, necessitating RBI’s intervention when applicable. Reports suggest, currently, over 800 Indian companies in the UK employ over 1.1 lakh people. The top-growing Indian companies have generated over £26 billion in turnover in 2015. Additionally, the number of Indian companies in the UK is growing at more than 10 per cent given that Britain for long, has served to be India’s point of entry into Europe. While this might be an early phase to conclude the empirical impact of Brexit on India, is imperative, the above considerations demand a thorough assessment of evolving developments and prioritisation of contingency planning.