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Day 89 – Q 5.How is Brexit going to affect India? Do you see an emerging trend of isolationism in the world? Examine.

5. How is Brexit going to affect India? Do you see an emerging trend of isolationism in the world? Examine.  

ब्रेक्सिट भारत को कैसे प्रभावित करेगा? क्या आप दुनिया में अलगाववाद की एक उभरती हुई प्रवृत्ति देखते हैं? जांच करें।


Brexit deal was signed recently after 4 yrs negotiations between UK and EU which happened due to the reasons like migration policies of EU, funding and so on. With the 11-month transition period in place India and UK has to come up with plan to utilize the opportunities opened up because of it.


Impact on India due to Brexit:

  • India is the third largest source of FDI for UK. There are more than 800 Indian companies in Britain. With BREXIT, the business of these companies will be affected. With the fluctuation in exchange rates, the bottom line of these companies will suffer.
  • The key sectors including IT sector, metals, oil, aviation, pharmaceuticals, healthcare, agritech, food, and drink which will take a hit.
  • Movement of skilled labour from India will be impacted as Brexit was fought mainly on argument of tighter immigration policies.
  • Rupee may depreciate because of the double effect of foreign fund outflow and dollar rise.
  • The impact on stock market for short term is a possibility.
  • Brexit has resulted in depreciation of Euro and Pounds. India’s Forex (currently a record 363 billion dollars) may diminish, particular if the currency is stored in Euros or Pound (this comes around 20% of total forex). 
  • Many Indian companies are listed on the London Stock Exchange and many have European headquarters in London. Brexit will take away this advantage.
  • However, Britain can sign bilateral agreements free of restrictions imposed by EU. India can sign a new trade agreement with Britain which can happen sooner than EU included.

Rise of isolationism:

  • Protectionist policies of USA are showing the rising trend of isolationism. 
    • trade war with China, 
    • imposition of taxes on Iron and steel industries, Taxing automobile exports from India
    • exit from TPP 
    • Withdrawal from Paris deal etc., 
  • Brexit has triggered similar moves in countries like Germany which are calling for strict laws on immigration and movement of people.
  • WTO as an institution is being diluted E.g. delay in appointment of appellate bodies. The same is happening for other multilateral institutions as well E.g. China defying the rule of UNCLOS, USA defying UN resolution on Israel and Iran etc.,
  • Exit of countries from multilateral organizations following adverse ruling. E.g Russia leaving ICC after issue regarding Ukraine.

However, multilateralism and integration is still in play and can be seen in many instances like

  • Negotiations of new multilateral trade agreements like RCEP, African continental free trade area and so on.
  • Calls from developing countries like India, South Africa to strengthen united nations, improve representation to make the institution more representative.
  • coordination to improve global commons and issues like climate change (paris deal), terrorism (SCO) and so on.
  • Even the perceived protectionist USA is coming up with in negotiations and regional groupings like Quad, has increased defence ties with India and so on.


Thus, there is clearly a rising trend of isolationism. The need is to strengthen regional cooperation and integrating with the global value chain through trade deals. Countries have to realize that only an integrated approach to deal with the rising issues of security, trade uncertainties and climate change to have a sustainable development.

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