=Brexit, its impact on Indian economy: in the light of available published material in this regard====
Brexit is composite address(acronym) for ‘British Exit’ from European Union.
What is EUROPEAN UNION?
The prototype of EU was ECSC (European Coal and Steel community) which came into existence in the year 1951. French and Germans had fought three wars between 1870 and 1945. In an effort to avoid any more eventualities like Second World War in future, French and Germans decided to establish a link between their Coal and Steel industries. A French economist Jean Monnet was the person who took initiative in this direction, and hence came to be designated as its first President. In 1957 under the treaty of Rome, ECSC evolved into wider European Economic Community (EEC) for establishing link between all possible trades among the members. It consisted of 6 members namely-(France, Germany, Italy, Belgium, Luxemburg and the Netherlands). Ten years later in order to have cooperation in all walks of life it evolved into European Community (EC). In 1991 EC leaders signed Maastricht treaty. It was an effort towards a full economic and monetary union among all member countries of Europe. Treaty came into force in the year 1993, and the EC came to be known as European Union. Initially it was a loose federation of 12 members. It was an arrangement under which the signatories would be member of Union governed by certain common rules and regulations. The border was opened for free transit across each other border without requiring any passport/ visa, and without paying any tariffs to the country receiving others goods (specially farm produce) for sale. But Competition policy, Agriculture, Copyright, and Patent law of EU override the domestic laws. A tax is paid to EU by the citizen of the member countries which is spent back on the respective countries. Presently EU has many roles covering economic, financial, commercial, agricultural, industrial and political matters. Much of the EU aid is spent in improving transport links (railway and roads) in Europe so that all can share the benefit of single market. It also provides subsidies for the development of backward regions of Europe. In 2002, 12 of the members of EU adopted a common currency which came to be known as Euro dollar. In fact work in this direction has started in the year 1979.
British decided to join EU in the year 1973. A referendum held in the year 1975 which upheld the decision in favor of stay within EU but with certain reservations. As said EU members use a common currency called Euro dollar but British did not agree to change their currency.
In 2004, 10 more countries joined EU and its strength rose to 22. Presently it has 28 members.
EU consists of 4 wings.
1.European Commission- Based at Brussels (Belgium), it consists of 1 commissioner from each of the members, presently 28 commissioners. It administers the money spent and also formulates new laws. It is civil services wing of EU.
2. European Parliament– Based at Brussels (Belgium), there are 751 members in the parliament, their function is to discuss and vote all the laws that have been proposed by EC. After every 5 years adults go to the poll to elect the members. It advises the E.Commission and decides its budget. Its power, however, falls below the power of local parliaments of member nations.
3. Council of European Union– Based at Brussels (Belgium), It is where the government of each member country will have their say and hold discussions as to in what political direction should the EU be moving.
4. European Court of Justice- based at Luxembourg. The function is to make sure that all the member states abide by the rules and regulations. It also plays role in avoiding any conflict among the above mentioned three wings.
But since a long time back after joining EU, British were feeling that the norms of Union goes against much of their political and economic interest. British wanted some upper hand in the decision making process which was not acceptable to other countries. As said, even as a member of EU, British have retained Pound as their currency as it is. This was a very awkward situation for other members of EU to successfully implement the concept of single market. (On the other hand Euro is said to be responsible for certain anomalies whereby some of the countries like Greece and Spain are said to be suffering from hardship while some other countries like Germany were having much higher growth.) In the year 2016 amidst lots of heat and debate in parliament British decided to call for referendum on the issue as to whether Brexit or Rejoin. Though it is not binding on Parliament to go by the referendum however PM decided to respect people’s opinion. The referendum came in favor of Brexit with 52 percent vote. Britain was declared to be again an independent democracy. But still there were lots of irking trade issues.
Negotiations on a trade deal with the EU have been proceeding for several months. The UK wants as much access as possible for its goods and services to the EU. But the government has made clear that the UK must leave the customs union and single market and end the overall jurisdiction of the European Court of Justice. Both sides say there a still significant areas of disagreement – for example, on EU proposals for a so-called “level playing field”, which would see the UK and EU maintain similar minimum standards on things like workers’ rights and environmental protection.
Finally 1 year ago on 31 Jan British finally decided to go by referendum in favor of Brexit, and started the process of leaving EU formally.
There are 4 primary reasons as suggested for Brexit.
- British’s interest and dominance/suzerainty at stake
- Regulations a Burden- Some of the regulations regarding limits on the power of vacuum cleaners, non-recycling of tea bags, etc have cost Britain to the tune of £3 billion per year.
- Euro the Disaster – although the Euro is the common currency for the EU, Britain still uses the pound as its currency. Now in this situation, the ECB (European Central Bank) comes in a dilemma whether or not to provide fiscal stimulus to a country like Britain.
- Unwanted Immigration- Britain is not a signatory of the Schengen Border free zone (allows easy travel across Europe).However over the last ten years there has been a quite an opposition towards migration into the Britain from within the EU and its effects on wages and public services especially post 2008 recession wherein the workers from Lithuania, Poland, Italy, Romania, etc have moved to Britain. There is need for point based immigration system as per which an immigrant is assigned points on the basis of certain eligibility criteria. But EU does not have any such provision.
Meanwhile there were certain trade deals which British wanted to strike with the EU. It pertained to fisheries primarily. British wanted exclusive right over fisheries in the sea(English channel). But they could not arrive at any agreement. December 31st 2020 was the deadline for the parting away process. So finally British are out of EU and no progress could be made in certain trade deal. British want to leave EU but still want to retain certain trade regulations but with an upper hand in the say. However PM Boris Johnson had a parliamentary landslide of 521 votes to 73. The U.K. House of Commons voted to ratify the new Trade and Cooperation Agreement (TCA) between the European Union and the United Kingdom that was agreed to on Christmas Eve and came into effect at midnight on December 31
IMPACT ON INDIAN ECONOMY?
Habitually there are lots of speculation/guesstimates regarding impact of this complete divorce of UK with EU on India-UK relation and business. I don’t think India is going to be effected by it. Because India’s prospect is concerned with the EXIM policies and rules & regulation for FDI in each other country which is as it is in place. ‘Brexit’ is primarily concerned with the rules governing the thrust-upon loose federation of interest among the European countries affecting their interstate trade and other migration issues.