Brexit: Fate of 800 Indian companies hangs in balance

Indian businesses and policymakers are worried over UK’s vote on whether to quit the European Union (EU), as a decision to pull out may mean a realigning of 800companies’ operations, although the exact impact on India’s economy is anybody’s guess, said a report in the Hindustan Times.

Britain is set to take a call on whether it should share common economic objectives as the rest of the 27-member nations of the monetary union and this may force 800-odd Indian companies operating in Britain and employing more than 100,000 people to revamp their investment plans, and export and foreign-exchange strategies.

“Several companies have set up shop in Britain for leveraging not just the local market but also the European markets for which Britain was a base camp. This will mean reworking business plans,” said Madan Sabnavis, chief economist of Care Ratings, a credit rating and research firm.

Minister of state for finance Jayant Sinha said last week the government is keeping a close watch on the Brexit vote outcome. India has been negotiating a free-trade agreement with the EU and a Brexit outcome will have direct bearing on this. If Britain stays put, then India needn’t rework the current line of negotiations. If Britain quits, then this will create an additional need for India to set up a similar pact separately with the UK.

According to a report in The Economic Times, finance secretary Ashok Lavasa said, "We are living in times where all countries which are globalised have to bear the impact,"  while admitting the situation is dynamic. Most polls from the UK showed a very close race, with the 'remain' camp marginally ahead of the 'exit' group and a sizeable proportion undecided. The results of the vote are likely to be available only late Thursday night. "We will take whatever measures are required. We need not be duly alarmed. If it happens we must learn to deal with it," Lavasa said. Economic Affairs Secretary Shaktikanta Das said indications are that Brexit won't happen, but said that in the event of Brexit happening India is well prepared to deal with eventualities. 

India exported $8.8 billion worth of goods to the UK last fiscal while its imports from the country added up to $5.2 billion. British companies have been a big investor in India but in recent years the inflows have slowed down. In 2015­16 less than $1 billion investment came from the UK. The Reserve Bank of India said it is keeping a close watch. "In the run­up to the referendum in the United Kingdom on its continuing in the European Union (Brexit), uncertainty about the poll outcome has resulted in some amount of turbulence in global financial markets, including in India," the central bank said in a statement. "The RBI is maintaining a close vigil on developments, and will take all necessary steps, including liquidity support, to ensure orderly conditions in financial markets," it said.