INSUBCONTINENT EXCLUSIVE:
By DK Aggarwal The International Monetary Fund (IMF) recently downgraded growth projection for the world economy on trade war fears and as
Brexit uncertainty weighed in on Europe
It has downgraded global growth by 0.2 per cent for this year
Now, the global economy is set to expand 3.7 per cent in 2018.
Undoubtedly, the ongoing Brexit negotiations created a sense of ‘pervasive
uncertainty’ about future trade costs
There are also fears that the UK might end up without a final deal in hand
The concern that increase in trade barriers would upset global supply chains and slow the spread of new technologies, eventually lowering
global productivity and welfare
So, it is high time for the UK to reach the deal, because a no-deal outcome is sure to hit the British economy’s capacity to produce goods
and services and to arrest a fall in its currency
Even IMF has suggested the UK and Europe to set up permanent bodies that would work together to make sure regulation is harmonised.
Now, the
question persists over how Brexit would impact the global economy, including the world’s emerging markets
What does Brexit mean for India
India being one of the most lucrative markets for foreign investors, any major change across the globe –
be it political or economic – is bound to have an impact on our economy
India enjoys close economic, trade, political and cultural ties with the United Kingdom
To note the Britain accounts for 18 per cent of the
European Union’s GDP and both the EU and the UK are crucial to the Indian growth story
A good chunk of India’s foreign exchange reserves comes from export earnings and other inflows from the European Union and the
UK.
According to the UK's Department for International Trade (DIT) figures, total trade in goods and services between the UK and India was
18 billion pounds in 2017, a 15 per cent increase from 2016
The remarkable transformation of Indian companies has altered the business equation globally
Indian companies have been making their charisma felt through greenfield investments and landmark acquisitions
Today, Indian companies invest more in the UK than in the rest of the EU countries combined
Some of the giant India companies such as Tata Motors (Jaguar Land Rover), Tata Steel, Tata Consultancy Services, Hindalco, Motherson Sumi,
Bharat Forge, Bharti Airtel, Tech Mahindra, Siemens Pharma, BASF and Aurobindo Pharma will have to redesign their strategies, if Britain
exits the European Union.
Businesses of these companies will depend much on how the UK rebuilds its trade ties with the EU and other
The biggest pan-European employer is Tata Group
If the UK fails to formulate complementarities, the employee base can shrink; in UK alone, the group continues to be the largest industrial
employer.
A Brexit will lead to a time of insecurity among Indian investors
The uncertainties and lingering doubts over possible trade barriers will continue to loom over Indian companies in the UK till full Brexit
negotiations come to light
On the flip side, India enjoys strong trade ties with Britain and this could play out favourably in the years following Brexit
The UK and the EU are losing trading partners in the process
So they will both be looking for replacements
Here, India can play a crucial role
We may see enhanced cooperation in segments like technology, cyber security, defence production and finance
Moreover, Indian may get more attention with regard to investments made by the UK to take part in the Indian growth story.
(DK Aggarwal is
Chairman Managing Director of SMC Investments Advisors)
