BREXIT Decoded

24th june,16

Shiva Sharma

Before we were done discussing the word which had it that Britain is going to withdraw itself from the EU and its impact on India, the Referendum of the UK’s membership of the EU was out on Thursday with a 51.9% votes in favour of The United Kingdom.

Brexit stands for British Exit from the European Union or commonly called as EU. The UK held an in/out referendrum this week on whether there should be a British Exit from the EU or not.

The leave campaign believes that the Brexit will give Britain the freedom to manage its own affairs. And yesterday, the leave campaign took  a sigh of relief as Britain has voted to leave the EU.

Apparently, when various opinions of economists and experts have come in regards to the positive and negative effects of Brexit, the value of the pound was seen at its lowest since 1985. However, supporters of Brexit argue that EU countries rather had an advantage in keep trading with UK as it’s a large importer of goods and services. Some amount of uncertainty still revolves around UK, as it chooses to leave the EU, that the new trade agreements will have to be made with the rest  of the world.

Impacts of Brexit on UK                                                                           (source:TheEconomic Times)

Positive impacts:

• It would allow Britain to regain the control of its border.
• Britain, will no longer have to contribute billions of pounds a year towards the EU’s budget.
• Brexit would be able to facilitate Britain’s public’s ability to elect politicians to pass laws that matter to them.

Negative impacts:

• Leaving the EU would cause a £100billion “shock” to the UK economy.
• Brexit would cost households £4,300 a year by 3030, leaving Britain worse off for decades.
• UK’s ability to fight cross-border crime and terrorism would be compromised.

(Prime Minister David Cameron even said he suspects that ISIS leader Abu Bakr al-Baghdadi “would be happy” if Britain leaves the EU.)

• The long-term consequences of Brexit are “dangerous” and “completely unpredictable” warned Donald Tusk, European Council President.
• Citizens of a member country get the right to live and work in the other 27 member states from the membership of the EU. Now when the UK has voted to leave the EU, there would be no requirement under EU law for these rights to be maintained. This would mean Three million EU citizens in Britain to be KICKED OUT.

Impacts on Indian Financial Markets

Brexit happened yesterday and news of Rexit (RaghuRam Rajan’s Exit) just a week prior to that have made a drastic impact on the Indian financial market. Sensex crashing 1087 points and Nifty trading below 8080 leaves no doubt to it. It will be pretty obvious to say that some of the India-based companies and sectors that have investment and exposure to Britain will suffer. All this seems to further improve the uncertainty and volatility in the Indian market for the time being.

According to sources, India is presently the second biggest source of FDI for Great Britain. If Britain exits the EU, it will not be as attractive a destination for Indian FDI as before. Having said that, Britain would not want to lose out on capital coming in from India. Thus, one can expect Britain to try extra hard to woo Indian companies to invest there. All this concludes that it can be a bit of conundrum for the Indian Financial Markets as well.