What is Brexit and why it happened?
- Europe is a collection of countries. At the time of World War I and II, these countries use to fight against one another. After World War II, many countries felt that rather than these all fight, they all need to integrate and all European countries form a Union called EU. Western Europe has dozens of countries; each with its own trade, immigration, and economic policies.
- The European Union formed by 28 European countries, where citizens can trade and move freely across the borders and negotiates international agreements. The European Union essentially started to make rules and remove the barrier between all European Countries. Almost every western European country joined the group and merges their economic rules in 1993. It’s like states in India work.
- But, as with any union, cooperation needs at the time of downtrend too. During the 2008 financial crisis, the European central bank failed and its effect as unemployment increase and tax revenues fell. Seeing the EU in such crisis increased worry among wealthy countries (like the UK) that they might have to help, and migration of citizens from one county to another is easier under the EU and that increasing population in Brittan. UK was never completely on board with the EU, Brexit came into existence.
- Brexit is an abbreviation for “British exit,” referring to the U.K.’s decision in a June 23, 2016 referendum to leave the European Union (EU). Former Prime Minister David Cameron, who called the referendum and campaigned for the U.K. to remain in the EU, announced his resignation the following day, Boris Johnson, a former Mayor of London, foreign minister, and editor of The Spectator newspaper, was elected prime minister. Johnson, an uncompromising Brexit supporter, campaigned on a platform to leave the EU by the October deadline “do or die” and said he was prepared to leave the EU without a deal.
- On the 23rd of June, the United Kingdom held an ‘in or out EU Referendum’ with 48% against BREXIT – Britain Exit. While some leaders celebrated this win as Britain’s Independence day, Prime Minister David Cameron showed his utter disinterest by stepping down from the office in the wake of the poll results.
- The two main forces driving this Brexit: First, the EU expanded to include post-communist countries, and people in those countries were poorer. Many of their citizens immigrated to wealthier countries — like the UK. The second, 2008 market crash hit hard to some European countries. Their citizens went to find jobs in other countries — like the UK.
Brexit Pros for the UK :
- EU free immigration law allows people to migrate which was the reason for the population increase in the UK. Brexit will help to control that.
- Brittan is working over soft Brexit over hard steps that will help not to lose well-established market and trade.
- This Brexit will help make them free to make their own immigration law, welfare practices, and solve the long-disputed issue of having common euro currency.
- Brexit will increase feeling of ownership over its own country which was somewhat beyond the EU arrangement.
Brexit Cons for the UK :
- Brexit will show a bad example for the rest of EU countries like Greece threatened EU leaders to pull out. While Scotland and Northern Ireland are advocating to leave Britain and want to continue being part of EU Countries and laws.
- People of Britain in EU and people of the EU in Britain having a hard time because of the uncertainty of the future.
- Both the EU and Britain will phase loss regarding trade and economy. And it will affect the world’s economy too. As Uk one of the most powerful trading block in EU while these all create uncertainty in the financial markets, investments.
Brexit Impact on India:
- India and Britain are kinds of the oldest Friends. Majority of the Indians are against of Brexit as we have the active business people and employment seekers. We are trade partners, doctor/nurses/professional suppliers, industrial allies, and cultural buddies. Indians see both UK and EU as opportunities to expand and explore all the options.
- Britain is a very important part of the EU and if it separates the financial hub of London will be separated from the EU. The British pound is among the most expensive currencies in the world. The cheaper UK currency would likely boost exports from India. Indian stock market reacted positively in response to the Brexit deal.
- As Euro will become less valuable and hence it price will fall. That will result all the imports coming from the EU except Britain will become cheaper and hence there will be an increase in imports which is bad for India.
- Indian students could pay less for the rupee conversion and for the Indian tourists UK travel could become much more affordable.
- According to EU rules, EU member countries are not allowed to invite immigrants from non-EU countries. Brexit will provide a new opportunities for Indian professionals and researchers for work options in the UK.
- Uk government will likely look to the countries like India which shares good history, legal framework and business mentality. It will immerse as strong trade partners because of Indian personal and business connection over the years will straighten the bond.
- India is among the strongest, innovative, consistently growing and most stable economies and democracies in the world. India could leap towards great deals for the Indian companies employed in the UK and Europe. If played right, it would be a great advantage for the Indian firms.
- Indian companies or trade also have opportunities with EU as well. Brexit is due to the fact that the EU doesn’t work innovatively. Other than Britain, Germany is a big part of the EU’s economy. After Brexit EU likely split to the more developed North and less proactive south. India will get more competitive advantage competing by traditional outsourcing strength to the remaining EU.
- With or without the EU; the stronger and more economically prosperous Europe is an essential factor for the world’s security and economic stability.
- The UK was 3rd largest investor in India but after leaving the EU, their economy will be unstable and till the time it becomes stable till then there will be a behavioral change in the Indian market too, hence our growth rate can also be affected. Stock investment in the companies which are EU and UK based will result in the downfall of prices and instability to the Indian market.
It will be too early to draw inferences on its implications on India; it may bring marginal benefits for India. The Indian companies based in the UK may face some problems due to new tariffs and complexities.