After Brexit

Britain’s vote to ‘leave’ the EU — which implies opting out of common market and being entirely independent in framing its immigration laws and fiscal policy — is nothing short of a huge political and economic earthquake. Though it will take at least two years for an ‘independent UK’ to take effect, Britain’s exit — it’s the world’s fifth largest economy — could once again rock the stability of the EU, perhaps more so than when the debt-ridden PIIGS (Portugal, Ireland, Italy, Greece and Spain) turned against the Brussels bureaucracy after being driven to imposing harsh austerity measures. These weaker economies could not ‘leave’ precisely because of their financial precariousness, but Britain’s walk-out could rekindle anti-EU fires. If Britain is in for a period of political, economic and financial uncertainty — with the EU likely to erect a tariff wall and investments being affected — so is the EU, and by extension, the rest of the globalised world.

World markets are struggling to come to grips with the ramifications. They took a pounding on June 24, and India was not spared. However, the Centre is right in asserting that our economy is not in the immediate line of fire, even though some 800 Indian companies have operations in the UK. For Indian companies invested in the UK, the loss of easy access to the European market will be a heavy blow. The rupee will also feel the impact of the pound’s freefall. On the trade front, India will have to negotiate pacts with both the EU and the UK. However, Britain is likely to go out of its way to keep Indian investors interested to offset a fall in trade and investment from the EU. Besides, India’s trade with the UK has remained stable over the last decade, even as the share of EU in its imports and exports has dropped over this period. Our historical ties with the UK have kept the economic alliance going — and that may actually improve with Brexit. That said, Brexit calls for a rethink on India’s Europe policy, especially since Britain is no more the gateway to Europe.

Many see Brexit as an anti-immigration vote against East Europeans — but it goes beyond that. It expresses a general mistrust of transnational arrangements which impose a common set of economic, legal and cultural rules. What is truly disturbing is that, like the politics of Donald Trump, Britain’s choice forms part of a rising tide of intolerance against free trade and movement of people. In that sense, Brexit is not just a British or European problem. At stake is the very idea of globalisation itself, and the economic and cultural benefits associated with it.

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