An Indian industrialist delves into where the European Union stands in its dealings with India and how future ties will shape up as the economic bloc undergoes a major structural change following Brexit. The referendum which took place in Britain on June 23 this year led to an outcome which resulted in economic uncertainty and a political tsunami in the country. A political party which had won such a big mandate would face a leadership change in such a short period of time was incomprehensible. Even after months, it is obvious with the absence of a clear road map that the Conservatives, the party in power in the UK, were not at all prepared for a Brexit outcome.
Before we discuss the impact on India, we need to take a quick look into the history of the European Union (EU). In the interest its core industry of steel and coal, six countries - France, Germany, Italy, Belgium, Luxembourg and the Netherlands - formed the European Steel and Coal Community in 1952. And in 1957 the same six formed the European Economic Community. Later, this became the European Union (EU) and grew to 13 countries by the year 1994 and 28 in 2004. Even today the original six contribute 60 per cent of the GDP and with the UK added on, seven countries accounted for 80 per cent. This reflects the disproportionate economic share within the EU. Post the referendum, both the UK and EU have moved into uncertain times due to an apprehension of the unknown. There are a lot of assumptions and speculations, on how and when the UK will finally decide which way to go. Unlike the popular assumption that the UK voted to leave, I believe it is not so. The referendum, however strange it may sound, is not the will of the people. In a Titular Monarchy, the Parliament represents the will of the people, ascertaining which should be necessary before invoking Article 50 of the Lisbon Treaty to trigger the formal Brexit procedure. On the economic front, the entire European region, including the UK, has been witnessing a frail economic recovery. This kind of uncertainty, which raises questions on the shape and form of the Union does not help in providing stability and growth. The EU 28 growth saw a smart recovery from 0.4 per cent in 2013 to 0.8 per cent in 2015, but slipped back to 0.4 per cent in the second quarter of 2016. The UK, on the other hand, was more stable with 0.8 per cent, 0.9 per cent and 0.7 per cent in 2013, 2015 and the second quarter of 2016 respectively. But following the referendum, the Pound Sterling lost 20 per cent of its value, sending all foreign investment, including from India, into a tail spin. Furthermore, the UK being a net importing country, the sharp drop in currency value will have an inflationary impact on the economy. Despite the uncertain times, India has reached the No. 1 slot, with a 7.6 per cent GDP growth surpassing China's 6.7 per cent. The European Union - EU 28 - is India′s second-largest trading bloc, accounting for around 20 per cent of Indian trade, just behind the Gulf Cooperation Countries (GCC). On the other hand, India is the ninth-largest trading partner for EU 28. Leaving the Single Market will bring its own problems for the UK and also make the remaining countries lose 20 per cent of their GDP. So from a trade point of view I feel it will be a disadvantage on both sides of the English Channel. From an Indian trade perspective, the effect of Brexit will be neutral. Despite the unending FTA negotiations between EU and India, trade has grown both ways. It makes me wonder if we do in fact even need an FTA Indian trade with the UK, which is independent of the EU, will continue to move on its own steam. Shishir Bajoria is the chairman of IFGL Refractories Ltd, manufacturing in India, UK, US, China and Germany. He is also the Bharatiya Janata Party's (BJP) state executive member for West Bengal.