India prepared to deal with Brexit consequences: FinMin

The Dollar Business Bureau

As Brexit became a reality on Friday, after 52% of United Kingdom voters voted in favour of Britain exiting the European Union (EU), several global market analysts had predicted that Brexit will result in global market plummeting and extreme currency volatility across the world, thereby raising concerns among the investors for global economic growth.

In India, its impacts were seen early Friday, with Sensex plunging by more than 1,000 points in early trading and knocking off close to Rs. 4 lakh crore from the investors’ wealth in the stock markets.

Indian Finance Minister Arun Jaitely, however, played down concerns following the UK referendum and said India is well prepared to deal with any short term or long term consequences. “Our macro-economic fundamentals are sound with a very comfortable external position, a rock-solid commitment to fiscal discipline, and declining inflation. Our immediate and medium-term firewalls are solid too in the form of a healthy reserve position.”

Jaitely underscored that the Indian government and the RBI as well as other institutions are ready to deal with any short term volatility and minimise its impact on the country’s economy. “For the medium term, we will steadfastly pursue our ambitions reforms agenda - including early passage of the GST- that will help us realise our medium term growth potential of 8-9%, and help achieve our objective of development for all.”

ASSOCHAM Secretary General DS Rawat said, “India is relatively safe thanks to its macroeconomic stability reflected by low current account deficit, comfortable foreign exchange reserves and improved GDP prospects with advancing monsoon.”

He however, cautioned that since India has significant corporate investments in the UK, the Indian manufacturing firms who are based in Britain will have to re-align their plans. “India must also rework its trade and investment strategy for the EU in the changed circumstances and position itself as the best partner to both UK and the rest of Europe, not at the cost of the other,” he said.

The RBI Governor, Raghuram Rajan too, underscored the impact saying that India will be less affected by the Brexit phenomenon owing to its huge domestic demand and supply scenarios. “After the initial worries about the consequences of Brexit, people will look around for places which are relatively less affected. Being a continental economy with a large domestic demand, which hopefully will be strengthening with good prospects of monsoon, we stand out a reasonable prospect. After the initial concerns money should return here.”

In coming months, British and the EU leaders will start negotiating the terms of Britain's exits, which, some say will take years to be put in place.