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India to face post-Brexit scenario

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UK's exit from UK shocks the world

The voting has dealt a serious blow to the unity and integrity of the EU. Britain is divided, EU is weakened and Brussels is broken. RBI Governor Raghuram Rajan on Friday said though Britain’s decision to quit the European Union (EU) was a shock, India’s apex bank was ready to act when necessary. Reaction from FICCI and EICC

UK's exit from UK shocks the world
UK’s exit from UK shocks the world

As Britain voted to exit the European Union, India on Friday said it valued its ties with both the United Kingdom and the EU and will strive to strengthen them.

“We have seen the results of the British referendum on EU membership reflecting the choice made by the British people,” said External Affairs Ministry spokesperson Vikas Swarup.

“We value our multifaceted relationships with both the UK and the EU and will strive to further strengthen these ties in the years ahead,” he said.

Meanwhile, RBI Governor Raghuram Rajan said though Britain’s decision to quit the European Union (EU) was a shock, India’s apex bank was ready to act when necessary.

“RBI is watching the markets. It is very ready to act where there is disorderly conduct of the markets. And we are prepared to act,” Rajan told CNBC TV18.

The Governor said the Reserve Bank of India had prepared for this outcome too though polls had suggested confidence in the ‘Remain’ vote on Brexit.

“In any kind of market volatility, there is opportunity also. Some movement in currency is warranted. We are watching all the markets and prices though it is not an immediate shock for liquidity in the system.”

Asked if he would reconsider his decision to quit as the RBI chief in September, he said: “I think I can’t answer that question, I don’t want to go into those areas. I don’t think you should ask me that question.”

FICCI Take on Brexit

Federation of Indian Chambers of Commerce and Industry (FICCI), the largest business organisation in India, said UK will soon back on track after a short period of uncertainty. The forum issued a statement:

“The UK has voted in a historic referendum, for only the third time in history with a high 72% turnout. This vote saw high engagement from Indian diaspora across the UK in the referendum process, with strong turnouts in regions with significant Indian populations.

“We respect the British public’s choice to leave the EU. At the same time, the world is an increasingly globalized one and this is an important result not just for the UK, but for world markets also. It is important for business to have certainty and stability, both in a political and economic context. We expect a greater period of volatility in the days ahead while the trade and investment implications for India and the rest of the world become evident. We expect this to stabilise soon.

“We would like to reiterate our strong commitment to work with UK business as the UK remains an important economic partner for India, and with 1.5million Indian diaspora, strong links between the two countries will continue.

“In this period of uncertainty, as investors look for safe havens globally, we would like to emphasise the Indian growth potential and reforms that have resulted in a stable policy and economic environment, and FDI policies that have made India more attractive for foreign investors.

EU India Forum

With Britain voting to leave the European Union, it will have unexpected and unpredictable implications for the bloc, warned Sunil Prasad, Secretary General of the Brussels-based Europe India Chamber of Commerce.

“The voting has dealt a serious blow to the unity and integrity of the EU. Britain is divided, EU is weakened and Brussels is broken,” he said.

Prasad said the vote will “definitely be a temporary setback for Indian companies with operations in the UK” but he asserted that this also opens new pathways for India to open bilateral trade negotiations with individual countries.

Indian companies will continue to command sizeable market share in the EU and there is no risk for trade barriers increasing, he opined.

Prasad added that it is hard to believe if this is the end of the saga of the difficult times for the European Union.

“With Europe’s economic fortunes worsening and prospects for a rapid turnaround remaining elusive besides lack of coherent policies on migration and social malaise increasing, it was widely expected that Britain will say Goodbye to the European Union,” he said.

Prasad further said that in his view Britain was never a part of the EU in spirit or in letter as ever since it joined EU it always had a “negative” attitude and approach towards a united Europe, its policies and programmes.

“I fear that many European countries who are dissatisfied or are concerned with EU’s economic and migration policies will have the tendency to seek referendum on one pretext or the other. This poses a constant threat hanging over the unity and integrity of EU. There is also no guarantee that many other members of the EU will not apply force on EU to have their way,” the Indian economist added.