Brexit and Opportunities for India in UK’s Difficult Days

On the 1st of Feb, 2020, the UK officially left the European Union (EU), and caused a ripple effect around the world, resulting in market volatility. Economies tied to the British economy suffered a setback while economies trading with the EU, like India, have a golden opportunity to redefine relations and capitalize on the void left by the UK.

BREXIT did have an impact on the Indian economy. On the negative side, there was an outflow of foreign funds that strengthened the dollar and weakened the rupee. There was also a short-term impact on India’s IT sector as many UK-based companies outsource to India. Exports from the UK also took a minor hit. The biggest impact happened in 2015 when the UK first decided to leave the EU. The timing of the decision coincided with the devaluation of the YUAN, resulting in a -6% drop in the Sensex. However, no such drastic fall did not happen in 2020 when the UK officially exited the EU.

On the positive side, the UK’s difficult days bring many opportunities for India to grow and establish itself as an economic powerhouse.

Enhanced Trade Partnership Between India and the UK

Leaders of both countries came together in April 2022 and put out a joint statement, stating that both countries will be collaborating for a strategic partnership for trade, defense, democracy, and diplomacy. This partnership was a roadmap for 2030, outlining a long-term commitment to trade and diplomatic relations. This also included proper FTA negotiations that would be beneficial for both countries. These negotiations were completed in October 2022.  The partnership targets the strong private sector of both countries and how to ease and boost trade between them. This created shared prosperity and benefited the UK, but mainly India in gaining a reputation as a strong and responsible economic powerhouse.

Growth in Trade

Statistics point out that from the year 2007 to the year 2019, trade between India and the UK had doubled.  And now that the UK is out of the EU, it has more autonomous powers to negotiate an FTA that will increase trade, boosting economic growth for both countries. India is now the UK’s 12th largest trading partner, and this rank will only improve as trade grows between both countries.

Trade Boost with the EU

Another opportunity for India created by the BREXIT was its relationship with the EU. The EU-India 1994 Cooperation Agreement evolved into the 2004 ‘strategic partnership’. In 2007, both parties further tried to enhance the relationship by boosting investment and trade, but after a staggering 15 negotiations, the deal fell apart in 2013, creating a rift and free trade between the EU and India. However, post BREXIT 2020, on the 8th of May, 2021, talks resumed between India and the EU to create a “balanced, ambitious, comprehensive and mutually beneficial” trade agreement.

Since then, relations have improved with goods trade between India and the EU reaching a total value of $115.3 billion. And this number has been steadily growing despite India signing FTAs with ASEAN, Korea, and Japan. India has managed to fill the trade deficit left by the UK and has strengthened its relationship with both parties. The future looks great for India thanks to the strong, new FTAs and there will be more opportunities as India’s alliance improves with both the UK and the EU.