You must have heard the term Brexit lately. Appearing so much in the news, what exactly does this term mean? Is it going to have any impact in India? If yes, then how is it going to impact the various sectors in India? You will find answers to all these questions in this post.
For those who are unaware, Brexit is a shortened form of ‘British exit’. It is about Britain’s exit from the EU. It refers to referendum on 23rd June 2016 , by British voters to exit the European Union. As for the voting results, 51.9% votes were in support of an exit. The British Prime Minister, David Cameron, who supported the UK, announced that he will resign in October.
What Is Brexit
Brexit is Britain’s exit from the EU. In simple terms, it is about British people wanting to exit the EU. The idea behind Brexit is ending the control of EU and give Britain more powers to manage its affairs on its own, rather than just being an implementer of policies. Britain people want more freedom in decision making of their country instead of just implementing the policies made by the EU. Voting was held to decide whether Britain should remain with the EU or leave it and 51.9% votes were in support of an exit.
Impact Of Brexit In India
Brexit will certainly impact the economy across the globe. Here is what impact will the Indian economy face due to Brexit:
Due to Brexit, the stock markets in the US and UK will be impacted which will in turn, have an impact in India. The stocks in UK and the US are expected to fall which will make the foreign investors to balance the losses in the countries like India. If Brexit happens, the Indian rupee is expected to move between Rs. 67.5 to Rs. 70 per dollar.
The clients of IT companies in UK and the EU are likely to postpone their spending which may negatively impact the IT sector. The revenue from the EU will thus be affected. Indian companies may have to remake their strategies and establish separate operations for the EU.
Automobile industry is also expected to be hit by Brexit. Automobile company, Tata Motors has huge operations in the UK. Tata Motos owns the JLR (Jaguar Land Rover), which is Britain’s largest car maker. If Bexit happens, the annual profit of the company is likely to drop in long term.
Major exports from UK to India are in the form of textiles and machinery. As for pharma exports, major exports are from the US, followed by UK and Europe. If Brexit happens, these industries are also expected to face a big hit. Many pharma companies such as Wockhardt, Dr Reddy’s, Aurobindo and Glenmark, have their operations in the UK. These companies are likely to be negatively affected by Brexit.