What seemed improbable is now a fact. The United Kingdom has voted to move out of the European Union (EU) in a divorce that is bound to have far reaching consequences – within the EU, within the nation that was once called Great Britain and in the emerging economies and powers of Asia, including India and China.
There are ifs and buts ahead, just as they were in the run-up to the vote. But the first clear symptoms of what some call a political earthquake are evident in the plunge in the value of the British pound and stock markets across the world. Markets hate uncertainty and businesses do not like drastic changes in law that hurt their current or future investment plans. In many ways, everybody has to go back to the drawing board in some sense or the other. Indications from Scotland suggest that though it voted to stay with Britain in a referendum, it now is inclined to stay with the EU. This is a time of painful change.
It is clear that concerns over bureaucratic laws made in Brussels did not go well with the average Briton, particularly immigration rules that seemed to make the ordinary citizen uncomfortable even as it provided opportunities to businesses and immigrants. Some amount of xenophobia seems to have grown amid a deep economic crisis across the world. We can call ‘Brexit’ – the British exit from EU – as the deepest scar left by the Great Recession that began with the collapse of Wall Street banks in 2008.
For India, much is at stake. India is one of the largest investors in the UK, thanks to its former colonial association. India was once a jewel in Great Britain’s imperial crown. Now it is a significant economic opportunity as the fastest growing major economy in the world. Britain is bound to try and make the British Commonwealth work in order to make up for the bruises it would suffer in EU, where it may face retaliatory action of one kind or other. At the same time, EU and India have separately congenial relations of a strategic nature. The Modi government has to see opportunities on both sides of the divide and engage carefully. The first priority would be for all nations to calm the markets and make the adverse consequences of the political divorce less messy and as painless as possible. The close vote makes it clear that negotiations are more important than the simple detail of the verdict.