What Is Brexit? How Does A Brexit Affect India?

The people of Britain would vote in a referendum on June 23, 2016, to decide whether Britain will stay a part of the European Union or not.

The term used for a likely British exit from the EU is called a Brexit. Online polls at the moment suggest that most Britishers prefer leaving the EU, though the Labour government is strongly asking people for a "yes" vote to stay.

Polls on behalf of the Daily Telegraph and the Times have shown a good lead for a "Brexit". Britain's largest newspaper the Sun has also asked people to vote for a "leave" in the referendum.

Should Britain exit the EU, the biggest hit would come from trade. While it will be able to export, the trade terms to it would certainly not be favourable, as they currently are.

In fact, Britain derives a substantial portion of its exports from other EU countries. Of course, it will also likely impact the EU significantly, if an important trading partner does exit.

The one reason that maybe tilting the vote slightly in favour of an exit is jobs. A lot immigration does tend to take place into the UK, resulting in job losses to the people there.

However, critics argue that Britishers have benefited from immigration of skilled workers into the UK. You can argue both ways actually. There could also be a flight of capital, if Britain does exit the Euro.

Briexit impact on India

Indian companies have a significant presence in UK. Tata Motors, which owns the prestigious JLR Brands and companies like Tech Mahindra, Motherson Sumi, Zodiac Clothing, KPR Mills and many other companies get a significant revenue from the country.

The FICCI in Feb had said that the UK is a valued economic partner for India and there could definitely be an impact.

Dr. A. Didar Singh, Secretary General, of FICCI said, "We firmly believe that leaving the EU, would create considerable uncertainty for Indian businesses engaged with UK and would possibly have an adverse impact on investment and movement of professionals to the UK."

Many Indian companies use the UK, to develop the EU markets. This may significantly impact their prospects. Also, if Britain does leave the EU, it could lead to volatility in the Pound, which would increase the risks for Indian businesses.

All the assumptions at the moment are hypothetical. We do not know which was the vote will swing. Often the online polls have got it wrong. It is time to wait and watch until June 23.

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