Brexit impact: Why India need not worry about Britain's adieu to EU

As I write this on the morning of 24 June, the results of the British poll on whether to exit the EU are still coming in, but it looks like the ‘Leave’ option is winning by a narrow margin (Note: A majority of British voters decided that the UK should leave the European Union, as of Friday). The perceptive S Gurumurthy tweeted that there are three reasons for the anger that seems to have driven that verdict, despite an all-out, full-court press by the ruling Tories: "anger against immigration, against globalisation, and against loss of control over the nation".

 Brexit impact: Why India need not worry about Britains adieu to EU

A trader from BGC, a global brokerage company in London's Canary Wharf financial centre reacts during trading on 24 June 2016 after Britain voted to leave the European Union in the EU referendum. Reuters

Those neo-nationalist sentiments are probably quite closely related to the anger that’s driving the Donald Trump campaign in the US, where the primary issue is economic, including inequality and job loss, and the visible deterioration in public services, including roads and bridges. In a sense, Brexit gives a boost to the Trump campaign. It is the very same faceless deep state that Hillary Clinton represents that was given the boot by the British public. Besides, the Orlando mass killing by a man accused of being close to Islamic State also makes Americans paranoid about immigrants.

Now, a point of fact, Britain would largely have been better off staying in the EU, because of that old saw, “divided we fall, united we stand". As a stand-alone power, Britain’s heft is limited and diminishing; but as part of the European Union, which by some measure is the largest single market in the world, it had a lot more clout in trade negotiations.

There’s always been a certain vanity that can best be termed as “British exceptionalism”, or perhaps precisely “English exceptionalism”, as the English view the Scots and so on with supercilious disdain. God is an Englishman, goes the title of a book about colonial Brits lording over the despised Indians. Well, my response is, “if so, God has a sense of humor”. Because the British are doomed to irrelevance as a smallish economy with no great competitive advantage.

As an inveterate Anglophobe, I am trying to not let schadenfreude get the better of me. In some sense, the collapse of Britain is sad, because then we will find it difficult to extract from them the $10 trillion they stole from us in their 200 years of loot; forgetting for a moment the total extinguishing of Indian small-scale industry, as well as lasting damage to culture and nation. But then, it was always going to be difficult to pry reparations from them anyway, I console myself.

The immediate impact on India is quite small. Britain does sell some $460 billion worth of products, here’s a breakdown of their top 10 exports, but there are very good second sources for all of them: Machines, engines and pumps, gems and precious metals, vehicles, pharmaceuticals, oil, electronic equipment, aircraft and spacecraft, medical and technical equipment, organic chemicals, and plastics

It’s not clear if they have a major competitive advantage in any of these. A culture has developed that disdains engineering and the actual making of goods (odd since it was the very first economy that industrialised, or maybe that is the very reason) as opposed to the creation of theories and ideas (which are respected) and that may be the reason for the rapid de-industrialisation of the UK. The recent efforts by Tata Steel to offload its operations is an example of this lack of advantage.

The one area where Britain has succeeded most notably is financial services centered around the City of London. This is the very area that will, ironically, be most strongly affected by Brexit, as bankers will move operations to continental Europe or maybe even entrepots such as Dubai, Singapore or Hong Kong. Britain’s services exports were over $220 billion in 2015, second only to the US, mostly thanks to the spread of English around the world. British journalism and TV/film do command a premium.

None of this affects India very much, except for those expatriate Indians living in Britain, who may want to rethink their long-term plans. It is almost certain that anti-immigrant sentiment will get worse (especially against brown people, but also against Eastern European whites such as the legendary ‘Polish plumber’).

Therefore the steep drop of over 1,000 points in the Sensex this morning is a short-term phenomenon that should right itself soon. It is based on international cues (and herd instinct) without any major local impact. In the long run, an impoverished Britain, with a sterling hammered down, could potentially be a competitor in some of India’s export markets.

Otherwise, the UK doesn’t matter much to India: it is only number 18 in terms of total trade in the last 15 years, number five as an export market accounting for only 3.4 percent of India’s exports, and not even in the top 10 as an import market. We can well afford to ignore the UK market.

There’s hardly anything Britain produces that the rest of the world needs: If you said single malt Scotch whiskey, that’s true, but there’s a fair chance that the Scots will secede from Britain soon (they almost did in the last referendum, and I think more Scots wanted to remain in the EU in Friday’s polls than they wanted to remain in the UK in the previous poll). Other than that, fabled British brands are no longer theirs: Rolls Royce is owned by BMW of Germany (along with the Cooper Mini); Jaguar Land Rover is owned by Tata of India, and so on.

Just about the only thing they have is that there’s a demand for costume dramas churned out by the BBC (Downton Abbey), journalism, literature music/culture, museums (where they have arranged their global loot nicely), and education. Their biggest cultural export is that lowbrow kitsch, James Bond. I am not sure you can run a country on these things.

General MacArthur said it best about old soldiers: they don’t die, they just fade away. The same is true of old empires. And good riddance, too, to the world’s most destructive imperialists.

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Updated Date: Jun 24, 2016 16:57:48 IST