TOPIC: General Studies 2:
- Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests
- Effect of policies and politics of developed and developing countries on India’s interests, Indian Diaspora
Brexit :Withdrawal Agreement Bill (WAB)
- Armed with its new majority, the Britain government has published a revised version of its Withdrawal Agreement Bill (WAB) to ensure that it can take the UK out of the EU on 31 January.
- The House of Commons voted 358-234 for the Withdrawal Agreement Bill.
Key changes :
- First, a new clause outlaws an extension to the standstill transition period that would expire on December 31, 2020. Following the announcement, the pound slid 1.1% against the dollar relative to the gains after the election results, reviving market anxiety. Besides the £33 billion settlement contained in the withdrawal deal, any extension after next December would entail additionally about €10 billion a year.
- The bill dispenses with the need for parliamentary approval, for the government’s negotiating mandate as well as the final agreement on the country’s future relationship with the bloc .The provision risks sidestepping normal democratic channels for industries and trade unions to influence the shape of their future trading relations with the EU, worth an estimated £90 billion.
- Bill guarantees on labour rights previously included in the withdrawal bill have been removed. This vindicates sceptics’ fears about a drift to a low-tax low-regulation U.K. economy after Brexit. Brussels is wary of granting these concessions to a major economy such as Britain.
Challenges ahead :
- Northern Ireland will continue to remain within the EU jurisdiction after Brexit.
- The government will enforce customs checks for goods traded across the Irish Sea to the rest of the U.K., increasing costs for the bulk of small enterprises.
- The regulatory divergence within U.K. territory is the compromise London has conceded to protect the EU’s single market.
- The arrangement would maintain the existing soft border between Northern Ireland and the Republic of Ireland, which has underpinned the region’s tenuous peace since the 1998 Good Friday Agreement
Impact on India:
- Direct impact on currency as it will weaken against dollar
- Indian-based companies and investments in UK will suffer direct negative impact.
- Gateway to Europe being closed, huge trade costs to be occurred in dealing with EU separately.
- Lower commodity prices, crude oil prices may help narrowing CAD
- More investments done in safe options like gold. This has increased cash outflow and surged prices of gold
- Decrease in FIIs
- Not much impact on pharma industry as US is the bigger market
However, India is not expected to be too much impacted due to its deep foreign exchange reserves, a high growth rate, somewhat restrained inflation, a not significant current account deficit and fiscal discipline maintenance.
Connecting the dots:
- Has Brexit affected India ?
- How should India view Brexit?