Brexit: No immediate impact, but Rupee volatility may hit exports

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SME Times News Bureau | 25 Jun, 2016
Apex exporters body, Federation of Indian Export Organisations (FIEO) sees no immediate impact on exports from India trade with Brexit but said that volatility in currency needs to be watched closely.

Reacting to the Britain exit from EU, S C Ralhan, President, Federation of Indian Export Organisation (FIEO) said that while it has led to political and economic uncertainty, it will not have much impact on India's trade with Britain and EU.

He said, "Much will depend on what kind of negotiation Britain works out with EU within the two years window available to replace the terms of EU membership. If Britain gets the same treatment in terms of Free Tariff and Free Movement of persons, not much will change for India."

However, if Britain gets the treatment as applicable to a non-member country, it may lead to positive impact on India's exports to EU as well as to Britain.

India's exports to EU was USD 35.35 billion while the same was USD 9.35 billion to Britain in 2015-16.

He said, "Indian products may compete with British products in EU and EU products in Britain on MFN basis augmenting our exports. Similarly, any restriction on movement of persons from EU to Britain will open opportunity for Indian service providers in wide range of services."

FIEO observed that in the immediate future, volatility in currency may put pressure on India's exports as both British Pound and Euro will depreciate giving greater competitiveness to their products particularly in third countries.

"With currency depreciation, the domestic manufacturer in EU and Britain may get some competitiveness as imports becoming costlier having its effect on India’s and other countries exports. This may also increase imports from Britain and EU, if their currency remain weaker on medium term basis," he added.

President, FIEO is of the view that we need to watch the development but there is no need to panic as things will settle down soon.

"The real impact of Brexit can be assessed only after the final negotiation between EU and Britain is worked out," he added.

Snapshots of the India-Britain trade relationship

* Britain ranks 12th in terms of India's bilateral trade with individual countries.

* Also among just seven in 25 top countries with which India enjoys trade surplus.

* Bilateral trade was worth $14.02 billion in 2015-16; exports were $8.83 billion and imports $5.19 billion, giving India a positive trade balance of $3.64 billion.

* Britain is third largest investor in India with cumulative inward flow of $22.56 billion between 2000-2015.

* India is also the third largest investor in Britain with an estimated investment of $2.75 billion last year alone.

* Bilateral trade in services in 2014 amounted to around 2.5 billion pounds.

* There are an estimated more than 800 Indian-owned businesses in Britain with over 110,000 employees. Best known is Tata Motors making the Jaguar Land Rover.

* Other Indian firms in Britain include IT, pharmaceutical, creative and financial services majors.

* India invests more in Britain than in the rest of Europe combined, as per the Confederation of Indian Industry