On June 23, 2016, in one of the most epochal referendums in European history if not modern history, Britain the 5th largest economy in the world voted to quit the European Union (EU) by a margin of around 1.3 million votes, defying predictions from all economic, political & academic quarters. The impact of Britain\u2019s Exit from the EU is already being felt by financial markets across the EU and the globe.<\/p>\n
Brexit- A snapshot:
\n\u2018Brexit\u2019 is a combination of the words \u201c British\u201d and \u201cExit\u201d and referred ( when it was coined- by the Economist magazine in June 2012- \u201c A Brixit Looms\u201d- http:\/\/www.economist.com\/blogs\/bagehot\/2012\/06\/britain-and-eu-0 ) to the departure of Britain from the EU. The origins of the EU dates back to 1957 as a six nation economic and political alliance. Britain joined the alliance only in 1973 but has faced a lot of opposition and skepticism against its continuation within the EU ever since. In 1975, in the first referendum on the same issue (whether Britain should continue with EU), 67% of those who voted preferred to \u2018Remain\u2019. Meanwhile, EU has today grown into a \u201cgigantic transnational entity of 28 countries, with most countries moving into a common currency \u2018Euro\u2019. However, Britain still uses pound as its currency and does not participate in the Schengen border-free zone, which allows passport- free travel within the EU.
\nWhy Brexit?
\nAs part of his 2015 re-election campaign, British Prime Minister David Cameron had promised to hold a referendum on Brexit. Many from the ruling Conservative Party and the U.K. Independence Party believe that the EU infringes on British sovereignty and its national interests on issues such as trade, immigration, financial and labor regulation, social spending and a host of related issues .
\n\u2022According to Brexit supporters, increased migration from other European countries into UK using the \u2018freedom of movement clause\u2019 has put a heavy burden on natural resources and increased welfare expenditure. The \u2018Remain\u2019 supporters argue to the contrary saying that the addition to the national economy from the migrants is more than they take out. <\/p>\n
\u202245% of UK trade is with the EU, therefore, the \u2018Remain\u2019 side says, access to the single European market, free of tariffs and border controls, is critical for the U.K. However, the Brexit supporters are confident that since the the EU needs British markets, individual trade deals with European countries can be easily negotiated.<\/p>\n
\u2022While Brexit supporters claim that there will be a jobs boom without the restrictions that EU regulations impose, the opposers argue that as three million jobs in the UK are tied to the EU there could be a jobs crisis if the U.K. leaves the EU. <\/p>\n
\u2022One side is of the opinion that cooperating with the EU will make the UK safer, while the other side believes that the security risk will in fact increase if the U.K. does not have control over its borders. <\/p>\n
\u2022Another argument in support of the Remain campaign was that leaving the EU will jeopardize the dominance of London, the Europe\u2019s financial centre, as banks will move out. Whereas, the Brexiteers argue that London\u2019s status is unassailable as it is already a global power base!<\/p>\n
Possible Impact of Brexit on UK and EU:<\/p>\n
A major impact could be on UK laws ( a 2010 study attributes 17% of UK laws to its EU membership), especially relating to fishing, agriculture, trade and environmental policies, criminal justice, data protection, immigration and broadcasting, and human rights . For example, in agriculture British farmers would be deprived of EU subsidies. \u201cBritish farmers have to meet the EU standards of quality control to export to member countries. EU\u2019s agriculture policy lays down the law on GM crops, animal husbandry and even how much of his field a farmer must leave fallow to get subsidies\u201d . With Brexit, it remains to be seen how Britain negotiates with EU on these issues on a case- by- case basis. On the economy front, it has been pointed out that since prices in the EU are 20% higher than global market prices, exiting the EU will enable Britain to reduce prices by 8% . The political fallouts of Brexit are yet to take shape, the only major indication so far being the declaration of David Cameron that he will step down as the Prime Minister with effect from October this year.
\nUK is one of the largest contributors to the EU\u2019s monetary resources spent on administration of the EU in member countries, aid activities outside the EU, grants for asylum, education and culture, on preserving and managing natural resources (this includes, agriculture, fishing, mining and so on), helping poorer countries in Europe and in grants to research in science and technology and in helping small businesses. The Brexit, it\u2019s strongly believed, would rock the EU \u2014 already shaken by differences over migration and the future of the eurozone \u2014 by ripping away its second-largest economy, one of its top two military powers and by far its richest financial centre. Moreover, as Dr. Jonathan Portes of the National Institute of Economic and Social Research points out, \u201c If Brexit wins we can account on a lot more referendums\u201d !!
\nPossible Impact on India
\nIndia\u2019s concerns over Brexit are multi-dimensional. Listed below are some of them.
\n\u2022The welfare of a nearly 3 million strong diaspora of Indian-origin UK citizens.<\/p>\n
\u2022The interests of a large moving population of Indians who come to Britain ever year as tourists, business people, professionals, students, spouses, parents and relatives.<\/p>\n
\u2022Many Indian companies (around 800 companies- more than the combined number in Europe) are listed on the London Stock Exchange and many have European headquarters in London- Brexit could reduce the advantage.
\n\u2022\u201cBrexit can affect India\u2019s flagship IT sector given that the UK accounts for 17% or one-sixth of the sector\u2019s global exports that topped $100 billion (approximately Rs.6.70 lakh crore). For one, Brexit will increase overhead costs, setting up new headquarters, perhaps in both Europe and Britain\u201d .<\/p>\n
It may be noted that there is a tone of optimism in Indian circles as evidenced by statements by industry heads, policy practitioners including the RBI Governor and the Union Finance Minister.
\nThe rise in uncertainty brings both risks and opportunities for India. \u201cBrexit is neither good nor bad for India. It\u2019s mostly how the country responds to the new situation\u201d <\/p>\n","protected":false},"excerpt":{"rendered":"
On June 23, 2016, in one of the most epochal referendums in European history if not modern history, Britain the 5th largest economy in the world voted to quit the European Union (EU) by a margin of around 1.3 million votes, defying predictions from all economic, political & academic quarters. The impact of Britain\u2019s Exit […]<\/p>\n","protected":false},"author":201,"featured_media":1901,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[24],"tags":[200],"class_list":["post-1900","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-faculty","tag-brexit"],"yoast_head":"\n