Brexit to Have Minimal Impact on Indian Economy

World Trade Centre Mumbai organized an interactive panel session on ‘Brexit: Impact on Indian Economy’ at WTC Complex on July 11, 2016 to understand the possible impact of Britain’s exit from the European Union on the Indian businesses in the UK and the Indian economy.

Economists, present in the session, felt that there would not be much adverse impact of Brexit on India because of strong macroeconomic fundamentals. However, they pointed out that the businesses of Indian companies operating from the UK could be affected by the future changes in several business laws in that country.

Mr. Sajjid Chinoy, Chief India Economist, JP Morgan opined that the short-term economic impact of Brexit on the Indian economy would be just an idiosyncratic regional shock (which is negligible). However, Brexit being a political event, it could unleash a wave of de-globalisation across the globe, which may affect the prospect of India’s exports in the long run, Mr. Chinoy remarked.

Therefore, he suggested that Indian policymakers must introduce long term economic reforms to boost domestic consumption instead of relying on exports to support economic growth.

Mr. Dharmakirti Joshi, Chief Economist at the leading credit rating agency - CRISIL - pointed out that CRISIL has maintained its forecast for India’s economic growth at 7.9% in 2016-17. The impact of Brexit on India would be limited to Indian businesses in auto parts, textile and information technology sector, Mr. Joshi pointed out.

“India has a sound macroeconomic background. But our two weak areas are private sector investment (due to weak balance sheet) and the Non-Performing Banking assets,” Mr. Joshi added.

Mr. Ran Chakrabarti, Partner, IndusLaw touched upon the impact of Brexit on Indian companies that have exposure to the UK economy. He suggested that companies dealing with the UK firms must include a termination clause that would enable them to end their business with their UK counterpart in case the terms of the UK’s exit negotiations would make their contracts unviable.

“Legal consequences are going to be critical for companies having business in UK or the EU over the coming years. If no agreement is reached, UK’s trade with the EU would come under the rules of WTO. UK may not have a say in the making of EU laws. Existing consumer protection, financial services, product liability laws of the EU will have bearing on the traders in the UK,” Mr. Chakrabarti pointed out.

Caption: From (L to R): Ms. Rupa Naik, Director-Projects, World Trade Center Mumbai, Mr. Ran Chakrabarti, Partner, IndusLaw, Mr. Sajjid Z. Chinoy, Chief India Economist, JP Morgan