the impact on india is minimal in the short term if brexit happens apart from some knee jerk reactions in the market , the long term implications are very negative for india as EU is the biggest trading partner of India . If Brexit happens then there are chances that other countries also will start thinking about a exit from EU as Well and Anti -EU political parties are gaining vote share in EU countries since last 2 years and thats a threat to the very existence of EU as a Political Union . For Eg - If tomorrow Brexit is succesful then there are countries like Greece , Portugal , ireland , spain , sweden , and many more countries plan to leave the EU by having their respective Referendums , If that happens then the Financially Weaker Countries of EU leave the Union , as a result of them leaving EU , the EURO currency will appreciate quite significantly in the long term which can put the EU in a Recession and as A result the EU recession will affect the entire world GDP bcoz as of today EU is the Biggest Economy in the world in nominal terms of GDP . so thats how Brexit can affect india in the Long term .
this is my personal Opnion , i can be wrong as well . If someone thinks other way around of this situation please share so we can all learrn and earn together …
There are many questions that may arise in everyone’s mind with reference to Brexit, let us answer them one by one:
What is European Economic Community (ECC): ECC is an organization designed to bring economic integration among its member states which was formed after the Treaty of Rome was signed in the year 1957. This community was created to facilitate economic integration among the six founding members, namely, West Germany, Netherlands, Italy, France, Luxembourg and Belgium.
What is European Union (EU): The EU was formed in the year 1993 after the Treaty of Maastricht was signed. Thereafter the ECC became a larger group with 28 member nations and was renamed as THE EUROPEAN UNION. These member nations are sprawled across Europe over an area of 4,324,782 Km2 and an estimated population of 508 million. The United Kingdom is an intrinsic part of this 28 member nation community.
What are the benefits of becoming part of EU: The EU has become the biggest single market with common standardized systems and laws that apply to all member states. EU guidelines help in ensuring the free movement of goods, capital, people and services. This helps in enacting legislation in home affairs, justice and helps maintain common policies on trade, fisheries, regional development as well as agriculture.
What is the economic strength of EU: In 2014 EU generated a nominal GDP (Gross Domestic Product) of 18.495 trillion US dollars, which is approximately 24% of the global nominal GDP. According to the UNDP (United Nations Development programme), 26 of the 28 EU countries have a high Human Development Index which indicates higher life expectancy, education and per capita income. The EU community was awarded The Noble Peace Prize in the year 2012 and is regarded a potential superpower of the modern world.
What is the currency used by EU: Amongst the 28 member states, 19 members use the Euro as their official currency which helps them to trade freely and efficiently across geographical barriers. However Britain has retained the Pound sterling (GBP) as its national currency.
What is Brexit and who can approve the same: This is an abbreviation for Britain’s exit from The European Union. EU members have the power to leave the Euro zone as per their own constitutional requirements.
Whether Brexit poll happened earlier and what was the outcome: "Yes" In 1975 a referendum was held in UK which was backed by the press and major political parties who wanted the United Kingdom to continue its EU membership. Brexit polls in the year 1975 revealed that 67.2% were in favour of the EU membership while 32.8% voted against the motion.
What is a referendum: Referendum is the right to vote in which every legal voter will vote "Yes" or "No" for the United Kingdom to remain or leave the Euro zone. Registered electorates from Ireland and Britain who are above the age of 18 have the right to vote.
When will this referendum take place: The EU referendum is scheduled on the 23rd of June 2016 at Gibraltar as well as The United Kingdom.
How we reached here: During his election campaign back in 2015, Prime Minister David Cameron during said that he will leave the mammoth decision open to Britishers whether Britain would continue to stay in the Euro zone or stand out as an independent nation via a landmark Brexit Referendum.
Why People in Britain want to leave the EU: If Britain leaves The EU they are free from the stringent laws of the European Union leaving them enough room to restructure reforms according to their own requirements. Most British Parliamentarians do not want to leave their borders open to unskilled immigrants who have thus far flooded the nation and caused hourly wages to remain low.
Why others want Britain to be a part of the EU: Mostly traders and business men want Britain to stay in the Euro area as it allows them to trade freely across geographical barriers. Some believe that being a part of the EU adds shine to the country and its global image.
How Global Leaders poised are: British Prime Minister, David Cameron wants Britain to be part of the EU along with US president Barak Obama who has strongly backed UK’s membership of the Euro zone. France and Germany also want Britain to be part of the Euro Zone while the conservative Party remains neutral in this campaign.
Problems Britain might face after leaving EU: Should the UK vote to leave, they would be barred from free trade and investment benefits which EU members enjoy as a privilege for their membership right. Statistics suggest that in the aftermath of Brexit, Britain would stare at a steep 2.2% fall in its GDP numbers. It is also believed that the EU might renegotiate its trade agreements if Britain exits the Euro Area. These negotiations in turn will make Britain’s imports costlier and lead to subsequent fall in the county’s export numbers. In short, the business and service industry might take a beating; however quantifying the loss in monetary terms would be too early to decide.
Benefits Britain may enjoy upon leaving the EU: UK’s net contribution to the Euro Area in the year 2015 stood at a whopping 8.5bn Euros which is around 7% of the country’s total government spending. Therefore Britain leaving the Euro zone, would result in massive savings for the United Kingdom in the long run. Post Brexit, Britain would be free to renegotiate trade agreements according to their own requirements thereby establishing fresh relationships with emerging markets around the world.
16. Impact of Brexit on Global market: The US President as well Fed Chair Janet Yellen has warned of far reaching consequences if Britain votes to leave the Euro Zone. Thus it can be concluded that Brexit has a high probability of disturbing equilibrium of the Global Financial Markets and push multiple nations into recession in the aftermath of the event.
Brexit will have only short term effect as indian macros are strong. Monsoon will be good and chances of gst passing high. In case of anyshort term negative effect,equities will recover very fast .
Market rallied today so you can clearly see it didn’t have much effect on Indian market.Indian market currently is supported by strong fundamentals and macroeconomics.
This is anti Globalization and other countries like Italy and France may seek de merge from EU.
It will affect free movement of goods between EU.
The less economic activities may leads to Deep recession in entire Europe and that may affect the entire globe.
The slide of pound will negatively affect the Indian companies doing business in UK. The companies like Mothersumi , Tatamotors , Tata steel, and many it companies will get affceted.
Positives:
The price of the commodities will slide.Since we are the net importer of most of the commodities it will positive impact on our Trade deficit.
Now indian can negotiate with UK for better deals.
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