In this article, we will discuss BREXIT (Imapct on India). So, let’s get started.
Impact on India
• India has had strong historical ties with the UK, and currently, it is one of India’s most important trading partners. In the
last four years alone, the number of Indian companies investing in the UK has quadrupled.
• Similarly, the U.K. is one of the largest investors in India, among the G20 countries. Hence, it is important to see how
India and the U.K. can manoeuvre through Brexit and enter into new trade agreements that are mutually beneficial to both economies.
• Brexit will directly impact not only the Indian stock market but the global market in totality, including the emerging markets in the world. This is because of the high volatility in the pound.
• Both the UK and EU account for 23.7% of Rupee’s effective exchange rate. With Brexit, foreign portfolio investments will outflow and will lead to the weakening of the rupee.
• India’s businesses based in the UK will be hampered as till now they had border-free access to the rest of Europe.
• The investors are concerned as India Invests more in the United Kingdom than the rest of Europe combined.
Real Effective Exchange Rate
• It is the weighted average of a country’s currency in relation to an index or basket of other major currencies. The weights are determined by comparing the relative trade balance of a country’s currency against each country within the index.
• This exchange rate is used to determine an individual country’s currency value relative to the other major currencies in the index.
Foreign Portfolio Investments
• These stands for those investors who invest for a shorter-term in a company as compared to Foreign Direct Investors (FDI)
• These generally participate through the stock markets and gets in and out of a particular stock at much faster frequencies.
