What is the impact of Brexit on Indian Economy ........

English language (insurance) Reading comprehension (P)

Directions : Read the following passage and answer the given questions according to the passage:

Brexit is an abbreviation of "British exit" which is used to explain a possibility of UK coming out of EU. It is a word that used as a shorthand way of saying the UK leaving the EU - merging the words Britain and exit to get Brexit. So basically, It's the issue of whether Britain should exit the European Union or not — a question that will be decided in a historic referendum on June 23.

A referendum is basically a legal mechanism for voters in which everyone (or nearly everyone) of voting age can take part, normally giving a “Yes” or “No” answer to a question. Whichever side gets more than half of all votes cast is considered to have won. So we can say that here in the case of Brexit the referendum which is going to happen on 23rd of June will be the decision maker for the future of Britain. Britain could have a new prime minister by early September as David Cameron started laying the groundwork for his successor to trigger the country’s exit from the European Union. The government is under pressure to fill a vacuum left when Cameron announced he would resign by October after Britain ignored his advice and voted to leave the 28-member bloc in last week’s referendum. Presently EU is a block of 28 countries and 19 countries have formed EURO ZONE. We can say that the European Union is an economic and political union of 28 countries where each of the countries within the Union is independent but they agree to trade under the agreements made between the nations. If the global financial markets are affected by the Brexit, Indian markets are unlikely to be insulated. Indian companies will have to address two markets separately adding to costs.

Indian companies having the base in Britain will have a smaller domestic market, rest of EU will become an unprotected export market. The Money will move out of Britain and will affect currencies including INR (Euro will weaken and Dollar will strengthen) and in turn, affect the global economy.

What is the impact of Brexit on Indian Economy?

Brexit could open up new trading opportunities with Britain. India and UK can sign Bilateral as well as Free Trade Agreement.

Brexit may create recession risks that could dent IT demand further, hurting revenue growth forecast for the UK business of the Indian IT companies in FY17.

Indian companies intending to leverage the UK as a base to gain access into EU markets might face some hurdles by imposition of trade barriers, scrapping of preferential rates and higher taxes between UK and rest of the EU.

It would cause a fall in euro, which would impact on currencies like renminbi. Although the rupee and dollar as its primary anchor, some element of volatility can be expected.

All of the above.

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Explanation:

A free Trade Agreement between India and the UK could be easier to accomplish at a bilateral level following Britain’s exit from the EU. So, (i) may be an impact. The five large Indian IT companies have 8-15% revenue exposure to the British Pound. And Indian companies having the base in Britain will have a smaller domestic market; rest of EU will become an unprotected export market. So, (ii) and (iii) may also be the impact. It can also be concluded from the last line of the passage that it will affect currencies, so (iv) may also be an impact of Brexit