Queen Elizabeth has on Thursday, signed the BREXIT bill and now Britain can commence their final discussions with the European Union to exit the block by January 31st. The entire process, though is expected to last a year. Let us study this in detail,
1. What is BREXIT and a brief history of the European Union (EU).
It is terminology used to describe Britain’s possible exit from the European Union (EU). The nation joined the European Economic Community, as the European Union was known as back in 1973. After the signing of the Maastricht treaty in 1992, the organization was rechristened as the European Union. It is a political and economical union. It offers a joint European economic, foreign, social and other policies. It consists of 28 nations.
Some of the advantages include a common market for the members, free movement of natural persons and common standards (related to Human rights and data protection and others), Banking policy etc. The smaller Eurozone consisting of 19 out of the 28 nations have adopted a common currency called the EURO.
Britain isn’t part of the Eurozone and in June 2016 in a hotly contested referendum voted in favour of leaving the EU. The results of the referendum were 52% in favour and 48% against of leaving the EU.
2. What are the pros and cons for Britain leaving the EU?
Let us look at some of the issues and study them briefly,
Membership- According to supporters of the motion, Britain spent UK 13.1 billion pounds in 2016 while it received UK 4.5 billion pounds in benefits. They believe that this money can be saved and invested domestically to make the economy competent.
Trade- According to one survey, 50% of British goods are exported to members of the EU. Exiting the EU may impact their external trade. Whereas it may allow them more space to freely negotiate trade deals with other countries including India and the US.
Investments- Many Indian companies had invested in the UK taking advantage of its relationship with EU and it served as base for Indian companies wanting to conduct business with Europe. India was the 4th largest investor in UK. Leaving the EU may impact investments into UK.
Immigration- Europe has been in the midst of a refugee crisis and the UK fears for its security. Leaving EU will ensure more control over its borders.
Jobs- Anti Brexit supporters warn that more than 3 million jobs could be lost due to this. However, pro Brexiters argue that British jobs will stay in Britain.
3. What is the impact on India?
The immediate cons are the following:
As there will be an outflow of foreign currency, the Rupee may depreciate in the immediate term. This can impact India’s Balance of Payment situation. This is also possible as there will be a risk aversion as far as investments into India are concerned.
A trade deal has to be negotiated with Britain and in the immediate scenario, trade may suffer and so will migration of Indian workers. The latter issue has been a cause for concern between the two countries.
NASSCOM has reported that Indian IT and ITes may suffer upto US %108 billion.
What are the pros?
A depreciating Indian rupee may lead to Indian products becoming competitive and this many increase the quantity of exports. However, India needs to do more in this regard.
Lower commodity prices will be beneficial for India.
4. Background of the process in Britain
Former Prime Minister Theresa May operationalized Article 50 of the EU Charter seeking the process to exit the union. The two blocs haven’t been able to reach a deal yet. May reached a deal which was rejected by the Parliament in January 2019. She stepped down in May 2019.
Prime Minister Boris Johnson took over and secured a deal with EU, but however, the Parliament rejected the deal.
The December 2019 elections were fought on this very issue and Boris Johnson and the conservatives won a whopping 350+ out of the 650 seats.
The Parliament passed the BREXIT bill last week.