Daily Answer Writing
01 January 2021

Q-2) Since, in an interconnected world of today, each and every economic shock has ripple effect over the world, Does BREXIT too has an impact over India? Give arguments to support your answer.

Approach Answer:

Introduction: In today's interconnected economy, due to the level of globalization achieved economic decisions impact the global networks and thus sends a shockwaves around the world. It not only impacts global supply chains, but also money flows and immigration patterns. Such long lasting change has  been brought by BREXIT too.

Reasons of its Impact on India:

    • Indian Diaspora in Britain: Many Indians  reside in Britain, who also have trade links with India, restrictions on them means restrictions on Indian traders to access European markets.
    • India's agreements with Britain: It is India's major trade partner in the EU. Its separation from EU means that our favourable trade terms would be impacted.
    • Further, India and Europe are linked through complex supply chains. Impact on these is certain due to changed tariff structure

Terms of Brexit and its economic fall back:

Immigration system: There would be a "points-based" immigration system, instead of free-flow of people.

It would reduce access to Indians to the markets of EU.

Tariff structure: Although most of the products would be duty free, but there would be an increased compliance burden on the traders. Traders in England, Scotland and Wales must complete more paperwork when dealing with EU countries.


British firms exporting goods to the continent will have to fill out customs declarations straight away.


Indian traders would have to find direct supply chains to EU, as Border compliance would increase.

Northern Ireland: Unlike the rest of the UK, Northern Ireland will continue to follow many of the EU's rules, as its border with the Republic of Ireland remains all but invisible.

It would not impact India.


However, since the consultations and discussions were underway for a long time, businesses have got a lot of time to adjust and prepare for the new system. Thus, it is unlikely that it would come out as a shock to the global economy. Nonetheless, India must prepare for the future.

What India can do:

    • Negotiate Free Trade Agreement(FTA) with the EU: India had negotiated a bilateral trade agreement(BTIA) in 2007, since then not much progress have been made after talks for an FTA failed in 2013. The main issue is that EU wants issues such as market access for automobiles, wines, and govt procurement issues resolved first.
    • India must Open its economy for European investments further through the instruments of eased FDI norms. Such a step can certainly enhance private partnership between Indi a and EU. This can not only help India to gather easy investments, but also secure Intellectual property rights(IPR).
    • Leverage the negative opinion about China: China had multiple partners such as Italy and Germany in the EU. However, COVID-19 has damaged a lot of trust in China as Europe was worst affected by the disease. This can act an opportunity to enter Indian markets.
    • Diaspora reconnect: Substantial Indian diaspora  lives also in countries like France, Italy and Germany. India should reconnect in order to strengthen the economic links.
    • Diversify relationship: In security, Economy, technology such as 5G, artificial intellegence and Green Technologies.

Conclusion: Recently Honourable Prime Minister Narendra Modi said that “India and the EU are natural partners”. It is because we have shared “universal values” of democracy, pluralism, respect for international institutions and multilateralism between India and the EU. Thus, it should not be a difficult task to forge a long lasting alliance based on such values, which should be our focus for the future.

Source: The Hindu World: Britain leaves Europe’s single market, https://www.bbc.com/news/uk-politics-55502781

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