In Brexit, a diamond for India

No, I don’t mean the Koh-i-Noor diamond that was siphoned away from India by the British during the colonial era. Or as some recent commentators have pointed out, it was not taken but rather given to the British under the Treaty of Lahore after the end of the second Anglo-Sikh war. For the record, I personally don’t see much of a difference between the words “taken” and “given” given the colonial history of those times. And I personally think that this diamond in some ways represents the ugly truths of the European colonialism of the mercantilist era – and therefore it is better left to stay in the crown of the British queen where it currently resides. 

The diamond I am instead talking about is – is the opportunity that would fall at the doorstep of India if Britain decides to leave the European Union (EU). From the 1990s onwards, globalization has drastically changed the global economic landscape. The size of a market matters more today than at any other point in time in history. And sadly, if Britain decides to leave the EU and thereby pull itself out from the larger EU market, then there will be a need for Britain to find larger markets for its goods and services. Britain will undoubtedly try to maintain the same market share in its exports to the EU. But my opinion is that the EU countries will give it a tough time before agreeing to any sort of trade agreement – especially given the fact that Britain wants to limit immigration from the EU countries – which is one of the main reasons why a Brexit referendum is being held in the first place.

In that case, a U.K-India trade agreement of some sort will definitely start to interest policy makers on both sides. From the U.K standpoint, the British will be under pressure to show that even after a Brexit, they can seal important bilateral trade agreements – agreements that will provide British goods and services access to bigger markets like that of India. From the Indian standpoint, it is much easier to seal a deal with a single country in Europe than with the EU bloc as a whole. For example, a free trade agreement is already in the discussion phase between EU and India for almost ten years now. And they are still not able to seal the deal  because of various regulations and restrictions – mainly coming from the EU side. Traditionally, EU governments have stricter regulations and stringent requirements and when one has to negotiate with all those EU countries as a bloc, then the negotiations are tougher for a developing country like India – which desperately needs both the EU market and the EU capital. 

But when it comes to U.K, what India would require more is the U.K capital than the market itself. Not to get me wrong, the British market will still be important for India, but given the size of just 60 million people, India’s immediate preference will be to the British capital and technology more so than their market. And given this fact, India will have an upper hand when it comes to trade negotiations with the British. The whole world is currently desperate for access to the Indian market given its enormous size. U.K. would just be one among them. But for the U.K. itself, a concluded trade agreement with a country like India would be absolutely necessary to keep its economy shining – even after leaving the EU. With this being the case, India would be well suited to pull more British capital into India, along with obtaining guarantees for more high-skilled immigration of Indians into Britain in any trade agreement. And in my opinion, the British will come along for such a deal. 

One of the problems that is currently a hot issue in Britain is the flow of low-skilled immigrants from the EU countries (mainly eastern European countries) into Britain – and the benefits and welfare that is given to them. But in India’s case, India will be looking to boost high-skilled immigration of Indians into Britain and not low-skilled. And these immigrants are generally not welfare recipients. Initially, Britain will try to resist any kind of immigration. But I believe, if a Brexit happens, and if Britain initiates a trade agreement dialogue with India, India should use that opportunity to hold steady in asking for more high skilled immigration from India to Britain. India has the upper hand here and it shouldn’t miss if such an opportunity presents.

Similarly, Britain might resist some flow of capital into India – especially if the trade agreements involve domestic sourcing or setting up of local manufacturing units. But here too, I believe India has the upper hand. While simultaneously negotiating agreements with EU and the U.K., India can successfully leverage the size of the market it has with the priority to U.K vs EU or vice versa by successfully getting a good end of the deal.

And that is why I say that there is a diamond for India in the event of a Brexit scenario. Though from a global economic standpoint, I still would like to see Britain in the EU, if in case the British voters decide to leave the EU, then there could be one country that might benefit immensely from such a scenario if played right. And that country could very well be India.