India

EU referendum: Will India benefit from Brexit?

David Cameron and Narendra Modi Image copyright AFP
Image caption Narendra Modi visited the UK in November

In November 2015, standing alongside his British counterpart David Cameron in London, India's Prime Minister Narendra Modi shared his views on the EU referendum.

He said, ''As far as India is concerned, if there is an entry point for us to the EU, that is the UK."

The entry point has now voted for Brexit.

Referendum results in full

And India will have to adjust to a changing world order.

Rolling coverage of the referendum results on Indian TV channels were a sign of just how much interest there is in the UK here. The country's colonial past is certainly one reason for that, and jokes about India's former ruler made the rounds on social networking websites and messaging services.

But there is a lot more to the relationship.

Image copyright EPA
Image caption Indians have been following the news about Brexit closely

Will India pull investments?

India is one of the top investors in the UK. There are about 800 Indian-owned companies in the country employing roughly 110,000 people.

Many of these firms made the investments with the wider European market in mind.

The Tata group operates 19 separate companies in the UK, including Jaguar Land Rover, Tetley Tea and Tata Steel UK, which it's recently decided to sell.

Image copyright Reuters
Image caption Jaguar Land Rover is owned by the Tata group

About 20% of Jaguar Land Rover's sales come from Europe, a market that's become even more important in light of the slowdown in China.

Tata reacted to the referendum result by saying that each of its UK-based companies would review their strategies, and "access to markets and to a skilled workforce will remain important considerations".

Several Indian IT firms too have significant interests in the UK, in terms of both investments and exports.

India's software sector makes nearly $30bn (£22bn) each year from Europe.

Now, industry body Nasscom has said the falling value of the pound could render several existing contracts loss making.

But there are others who think a weakening British currency might be good news.

'Shopping mall for India'

"With the lower pound, if there are some hi-tech assets which can be acquired in the UK, suddenly this makes the UK a much better shopping mall for Indian companies," says Anand Mahindra, chairman of one of India's largest conglomerates, the Mahindra Group.

Firms here will now be looking for greater clarity from the UK and the EU on what Brexit really means for their business.

Image copyright EPA
Image caption Indian stock markets were volatile on Friday

And so will Indian financial markets, which, like exchanges around the world, saw volatile trading on Friday. The two major stock market indexes closed more than 2% down.

Indian Finance Minister Arun Jaitley and central bank governor Raghuram Rajan have both assured investors that India's economic fundamentals are strong.

In fact, Mr Jaitley went as far as to suggest that there could be an opportunity in the turmoil. "As investors look around the world for safe havens in these turbulent times, India stands out both in terms of stability and of growth," he said.

Boost for trade?

Some also hope that Brexit might give a boost to trade ties between India and the UK. Exports and imports between the two countries have been growing, but the UK is only India's 12th largest trade partner, well behind other European countries such as Germany and Switzerland.

Image copyright Reuters
Image caption The UK is the third largest source of foreign direct investment in India

India has been holding talks on a free trade agreement with the EU, but negotiations have stalled over several key issues.

Britain's exit from the EU has kindled hopes that it will now be free to discuss a bilateral trade pact with India, which some industry groups here have been demanding.

Those talks though will have to be held with the next occupant of 10 Downing Street.

Mr Modi waited until after UK elections last year to make his first official visit to the country. But it will soon be time to build a new relationship with a new British prime minister.

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