ECAS Business : Impact of 'Brexit' on Industrial Sectors in India - Every Corner A Story

ECAS Business : Impact of 'Brexit' on Industrial Sectors in India

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It was too soon and almost impossible for chief economists to comment on long-termer effects of Brexit on India during 2016. With the ongoing series of events unfolding one by one in this game of uncertainties, no matter how precisely they are monitored, the short & medium term dynamics can be explored for some of the important sectors in a trade with UK & EU based on India’s export to them as: 

Apparel Industry: Negative Impact

Britain makes up for roughly 1/3rd of India's apparel exports to the European Union which is 37% of total India's Apparel export share. With the present situation, the market had already shown the bit of reluctant towards the sector.

Apparel Industry: Negative Impact

Indian $ 150 Billion IT Industry is going to deal with short-term pains, as UK accounts for India's 2nd biggest market for large Indian IT Companies, an average of 25% of market share. The immediate impact for Indian IT Companies would be from BFSI (Banking Financial Services & Insurance) segment as London is the financial hub and the current uncertainty will delay the new contracts and may put on hold to some ongoing projects due to the low-profit scenario.

Auto Component Manuracturers : Negative Impact

Motherson Sumi, Mahindra CIE, Bharat Forge like auto components manufacturers are going to be badly affected as the EU's economy is expected to slow down which will lead to the decrease in auto industry sales and hence will be a huge blow to these companies. The UK itself is one of the highest contributors in the Union.

Tata Motors (Jaguar and Land Rover): Negative Impact


TaMo registered a sharp decline in its revenue on the day of the verdict, as Pound's depreciating value proved to be a huge blow. Take this Case- In FY15, when the average value of British Pound was 98.59 against Indian Rupee, TaMo had earned Rs. 35,129.2 crores as its revenue from the UK. With British Pound shutting at 93.29 against INR on 23rd, fall in its revenue is estimated to be Rs. 1,692 crores for FY17.Also, in the anticipation of rigid trade barriers that EU may impose on the UK, the cost of luxurious beauties of JLR may go very high in EU market which will face very tough competition from German automobile companies; that'll cause investments in JLR to go on hold


Steel Industry: Neutral

According to WSA (World Steel Association), the steel industry will remain insulated as the UK is neither a big importer of steel nor a big exporter.
Pharmaceutical Industry: Lower Negative Impact

A marginal impact can be seen on Indian Pharmacy Firms, as only 10-15% of overall sales revenue of Indian companies like Dr. Reddy's, Biocon, Aurobindo Pharma comes from EU including the UK. Moreover, the rules and regulations for these firms in the UK & EU are already different. Hence, Brexit will hardly impact on this sector's trade.
Tea Industry: Lower Negative Impact

Last Year, India exported 42 million Kg tea to EU, including 20 million Kg of tea to the UK, which constitutes 15% of India's export. India being the world's 2nd largest tea producer is a big consumer as well. Tea exports realization may be impacted marginally.

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