Brexit

WHAT?

  1. It is an abbreviation for “British exit” which refers to the June 23, 2016, referendum whereby British citizens voted to exit the European Union(EU).
  2. This means that Britain is scheduled to leave the EU by March 2019.
  3. This however not yet confirmed by the government whether the UK will leave the EU’s single market or not.

WHY?

  1. British felt that the European Union was remote, arrogant and unaccountable.
  2. They were angered by the EU’s insistence on the free movement of labour, which means that Britain cannot control migration from poorer member countries.
  3. They were aggrieved that the tens of thousands of EU nationals coming to the UK to work were putting pressure on public services and pushing down wage levels.
  4. Britain’s borders are at growing risk of exploitation by people traffickers and terrorists following the “colossal” migrant crisis engulfing the EU.
  5. BREXIT campaigners argue that British taxpayers contribute too much money towards European Union coffers and do not get enough in return. The UK Statistics Authority has said the EU membership fee figure of £19 billion a year, or £350 million a week
  6. BREXIT campaigners argued that European Union laws and regulations threaten British sovereignty.

IMPACT?

  1. After the declaration of the result, the pound fell to its lowest level since 1985 and David Cameron resigned as Prime Minister.
  2. Britain had already opted out of Schengen Area, meaning that it does not share open borders with a number of other European nations. ”
  3. Brexit is likely to mean slower economic growth for the country. A slowdown in investments may also lead to fewer jobs, lower pay and higher unemployment rates.
  4. Britain relies on the EU for export far more than the EU depends on Britain. The absence of seamless access to European markets also may mean fewer exports and foreign investments.
  5. EU could penalize Britain, imposing harsh limitations, to deter other member states from following its example.
  6. Investors may sell pounds (or pound-denominated assets) to purchase those denominated in dollars, euros, or francs.
  7. On the other hand, a weak currency that floats on global markets can be a boon to U.K. producers who export goods. Industries that rely heavily on exports could actually see some benefit.
  8. The Sensex had opened lower by 635 points and went down by 1,091 points before some stability.
  9. The impact of Brexit was an increase in risk aversion when it comes to investing.
  10. This increase in global risk aversion can impact the inflow from foreign portfolio investors (FPIs) to India. Though domestic institutional investors (DIIs) could lend some support.
  11. Rupee weakened due to outflows
  12. Europe is India’s one of most important markets and the negative sentiment is bound to affect India’s GDP.
  13. However impact of Brexit now is coupled with ‘Blackexit’ i.e. exit of black money from the the system due to demonetization, which is expected to boost GDP in the long run after slowing initially.