India, its Colonial Mate Ireland & How Brexit will Prove its Effect on the Countries

By Didhiti Ghosh, Bureau Chief (Kolkata), IOP

Kolkata, June 24, 2019: There are more than 800 Indian companies in the UK which employ over 110,000 people. Together, the UK and Europe account for over-a-quarter of the country's IT exports, worth around $30bn. A no-deal Brexit will directly hit these companies forcing thousands out of jobs. 

In the words of former Ambassador Bhaswati Mukherjee, today the Indo-Irish connection is vibrant with Ireland's Prime Minister Leo Varadkar being of Indian origin. India has long links with Ireland, a shared history of colonialism by the same coloniser, deep links between the national movements of both countries and similar movements to build national pride and identity, according to an article by South Asia Monitor.

The irony of the Brexit issue is the economic windfall as a result of companies and business shifting out of London to either Ireland or Netherlands. While Ireland does not have the advantage of Rotterdam which is the Gateway to Europe, it offers hugely competitive business alternatives in a friendly English-speaking environment so close to the UK.

Coming out of the Eurozone crisis, the Irish economy is booming with GDP growth at 4.1%, notes the article. Ireland is ranked among the top countries in the world to do business. Inflation remains consistently below the EU average and is supported by a weak pound sterling since the Brexit process. 

The issue of the ‘Backstop' in the context of Brexit starkly demonstrates that colonial attitudes do not change that quickly. A key element of the Good Friday Agreement in 1998 was an open border between the British-imposed partition lines between the Republic of Ireland and Northern Ireland, which is part of the United Kingdom, remarks Mukherjee. Any attempt to re-impose a customs and immigration regime along Britain's only land border with the European Union was always likely to be resisted with violence. The European Union (EU) has been steadfast in its support to the ‘Backstop'. Their chief negotiator Michel Barnier had consistently stated: "Backstop is the only operational solution to address Irish border issue." 

Amb Mukherjee notes that the complex state of domestic politics in the UK with the stepping down of Prime Minister Theresa May and multiple Tory candidates to replace her has resulted in a further polarisation of the ‘Backstop' issue.  The leading contender, Boris Johnson has threatened a no-deal Brexit with no ‘Backstop'. This has caused a sharp reaction from Irish Prime Minister Varadkar who underlined: "To me, no Backstop is effectively the same as no-deal because what the backstop is a legally operable guarantee that we will never see a hard border emerge again. If we don't have that, then that is no deal." He expressed confidence that the EU would not allow the Backstop to go. 

Ireland is relying on continued EU support for the ‘Backstop' as expressed by the Irish Prime Minister. There is also indirect pressure on the UK to accept the ‘Backstop' from the US which is the guarantor of the Good Friday Agreement. The huge Irish-American lobby has successfully galvanised public opinion in the US among both Democrats and Republicans in favour of the ‘Backstop'. 

Preoccupation with the European Parliament elections in May 2019 had resulted in Brussels remaining a mute spectator to the different statements emanating from London on Brexit as a result of the Tory contest. There is however great unease at what an EU official terms as the redefinition of Brexit noting: "They've turned Brexit into ‘No Deal'. However, these candidates have ignored its impact on Northern Ireland." 

In an analysis made by the PHD Chamber of Commerce & Industry, Britain's exit from European Union would result in several economic and financial implications not only for European Union or advanced economies, emerging and developing economies but for the entire world economy. The Brexit has already resulted in financial markets volatility across the world and could also spur a number of other risks through various trade, finance and confidence channels. The weakness in the European economy could also hurt world exports as weakening European currencies might put renewed downward pressure on major exporting countries. Therefore, at this juncture, the present World situation will largely depend on the kind of trade deal Britain negotiates with the EU along with no big reductions in its access to the single market.

Though, lot of diversification has taken place in India's exports from advanced economies of Europe and America towards emerging and developing economies of Asia, Africa and the Middle East, EU is still India's significant trade partner and UK and Germany are among the top ten export destinations of India and Germany is also in India's top ten sources of imports.

The Economic Times notes that in the past few years, many Indian companies have flourished in Britain like Rolta, Bharti Airtel and Aegis Outsourcing. These firms operating in the UK have up to 13 per cent exposure to revenues earned in the British currency, although from EU the number is as high as 30 per cent. The pharma sector is another area where Indian businesses have a lot of exposure to the UK. Brexit is obviously bad news for them. Their revenues will be hit because of the likely weakening of the pound sterling.

Many Indians are also worried about the socio-political consequences of Brexit. A sizable number of Indians and other South Asians voted in favour of Brexit because politicians from the Leave side promised them easy migration of talent from the former Commonwealth countries. The EU is India's largest trading partner at 85 billion Euros or Rs 8,500 crore in FY 2017. However, from the EU's perspective, India is only the ninth biggest trading partner, much behind China. So India has a lot of potentials to fill this gap after Brexit.

In November 2015, Indian Prime Minister Narendra Modi had said, "As far as India is concerned, if there is an entry point for us to the EU that is the UK." Interestingly, the UK is also among just seven in 25 top countries with which India enjoys a trade surplus.

Some advantages of the Brexit deal for India will be that fact of UK losing a huge preferential market in the EU & India being one of the fastest growing economies being rightly poised to gain from this development. The migration of EU skilled labour would decrease and English speaking Indian talent pool is definitely going to benefit out of it.

On the other hand, Indian students should be able to secure more financing for their college degree, as preferential scholarships to EU countries will reduce. This would mean India could be seen exporting more talent than present levels.

European leaders, particularly from Germany and France, have been wooing the Indian government in recent months. Unlike Britain, their countries have no colonial baggage with India. In the past few years, tourism has also grown rapidly between India and countries in the EU's Schengen. Britain has been losing many Indian tourists because of its stricter visa regime, notes the ET.

Some negative effects for India will include reworking the 10-year free-trade agreement with the EU, where a separate pact might need to be negotiated with the UK.

On the other hand, the advantages for Ireland include an allowance for companies' barrier-free access to Europe's 500 million consumers. The EU's free trade agreements and the ability to attract multinational/multilingual staff allow companies to trade across Europe from a single location. Ireland's time zone makes it the perfect location as an interface to Europe and the US for Indian companies. 

What are the implications for India as a result of these developments? There are approximately 34,000 Indian-origin populations in Ireland, of whom about 20,500 are people of Indian origin (PIO) and around 13,500 are non-resident Indians (NRIs), notes Mukherjee. The bulk of the community is into healthcare, IT, engineering and senior management positions. The community is well regarded locally and has integrated well into Irish society. Many Indian companies are expected to shift to Ireland in the remaining time-frame leading up to October 31, 2019, which is the final deadline for Brexit to be completed. 

In conclusion, notes Mukherjee, that while the toxicity of the Brexit debate has far-reaching implications for peace in Northern Ireland, its immediate economic repercussion lies in the opportunities that it offers to Ireland as well as to Indian companies to shift and do business with Europe through Ireland rather than the UK. There can be no greater historical irony for Britain as it continues to navigate the treacherous route to Brexit.

Image Courtesy: The Telegraph, Sky News, CNN Español

(DIDHITI GHOSH is an India Columnist at La Agencia Mundial de Prensa, USA, and is the Bureau Chief of Indian Observer Post based in Kolkata. E-mail: didhiti.24@gmail.com | LinkedIn: https://bit.ly/2H6gNAv).