July 27, 2020
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Hearts In Galleons

Close trade ties bind India with EU and UK. A ‘Brexit’ is seen through a commercial lens.

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Hearts In Galleons
Anti-EU Labour MP Kate Hoey with UKIP chief Nigel Farage in a ‘Leave’ show
Hearts In Galleons


  • Impact on Indians living in Britain since most of them are immigrants like those the ‘Leave’ camp wants to keep out
  • UK is India’s third largest investor. Concerns about investments, current and future, from UK and EU into India. Indian investors fret about loss of single market.
  • India is the third largest source of FDI in UK. Tatas are the largest private sector employer. Indian investments in UK more than combined investment in rest of EU


A secession crisis is looming large over Europe, threatening to destroy not only the European Union and a united European dream but also, what some obs­ervers dread, the destruction of the “Western civilisation in its entirety”. For the past seven years, Eur­ope has been lurching so from one crisis to another that many experts now feel that crisis management has become its ‘new normal’. Since 2009, it has fought a financial crisis, been embroiled in a Greek crisis, and then in a Ukraine crisis and, from last summer, inundated by a refugee crisis that may yet get a fresh lease of life in the coming months.

But, with the Brexit campaign gathering steam and opinion polls predicting a lead for those favouring an exit from the EU in the UK’s June 23 referendum, similar dem­ands emerging from other parts of Europe seem a distinct possibility. If that happens, it can grind the EU to disintegration.

“Indeed, a crisis of trust vis-a-vis Europe and its institutions has developed in most EU member-states, fuelling a revival of nationalist political parties and ideas and a slackening of European solidarity,” says former German foreign minister Joschka Fischer. “The re-nationalisation of Eur­ope,” he says, “is accelerating, making this crisis the most dangerous of all, as it threatens disintegration from within,” he wri­tes in Project Syndicate.

Some, like the European Council pre­si­­dent Donald Tusk, goes even further as he warns, “As a historian, I fear Brexit could be the beginning of the destruction of not only the EU but also Western political civilisation in its entirety.”

That might sound alarmist, but the Brexit momentum and UK’s tilt to the right if it does quit EU might unleash a similar process, with Scotland and Northern Ire­­land seeking to revisit its ties with London.

But how does India look at these fast-paced developments? And what are their implications for India?

The scene after pro-‘Remain’ Labour MP Jo Cox (inset) was killed after being shot in Birstall, UK, on June 16. Her attacker was heard shouting, ‘Britain First!’—a war cry for some Brexiters.

Photograph by AFP

India, too, is watching the unfolding scenario with a weather-eye. Senior Indian diplomats in Europe say there may still be hope that the UK will not relinquish its EU membership. Though opinion polls favour the Leave camp, they can be wildly inaccurate—in last year’s UK parliamentary elections, most polls had predicted a hung house. Diplomats, however, are preparing to deal with a phase of uncertainty.

“Everything is still very tentative,” says former foreign secretary Ranjan Mathai, who also served as India’s high commissio­ner in London. “The worry,” he points out, “stems mainly from commercial interests and has more to do with future trade, inv­estment and economic cooperation.” Even if the UK exits the EU, it may still remain as part of the European single market, so a lot depends of what the British leadership manages to negotiate.

The EU is one of India’s largest trading partners. But the UK is the third largest inv­­estor in India; India is also the third lar­­gest source of FDI for the UK. Indian inv­estment in the UK is more than its com­­­­bined investment in the rest of the EU. The Tatas are also Britain’s largest private sector employer. All these give an indication of the delicate balance India may have to strike in its investment plans in Europe.

Indian officials point out that much of the global stature of the London stock exchange and the UK’s success as an attractive investment destination rests on the fact that the UK is part of the European single market and has access to buyers in the 28 EU member countries. It is not clear if the UK would retain all this if it goes alone. Also, the UK is home to a large community of NRIs as well as Indian nationals. Their access to jobs and freedom of movement in Europe in a post-separation scenario are issues that demand inspection by New Delhi.

Today’s EU started its journey after WWII with a tentative commercial alliance between six ‘inner’ European countries, including Germany and France (the two arch-rivals) in 1951 as the European Coal and Steel Commission. Seven years later, it morphed into the EEC. Later, many neighbours joined in. But an always sceptical UK’s application was vetoed out by French president Charles de Gaulle in the ’60s on the charge that London was more interes­ted in an alliance with the US. The UK, however, was let in the EEC in 1973 and remained its member when after 1993 Maastricht Treaty the EU was formed. But though a key pillar of the EU, being the second largest economy and an important military power, its marriage with the EU has often been rocky.

Former Indian ambassador to the EU R.M. Abhyankar rec­alls the tough negotiations with European officials to safeguard special privileges that India enjoyed with the UK when it joined the EU. “A situation is fast emerging when we may have to renegotiate fresh treaties with both UK and the EU to safeguard our interests,” says he. Diplomats also point out how Germany and France’s joining hands in the EU INS­pired the formation of the SAARC—with rivaals India and Pakistan as important members—in the 1980s.

For India, the looming possibility of a Brexit holds out the prospect of a negotiatory tightrope walk. Since the EU is mostly regarded as a trade bloc, the areas of concern are mainly around future investments and the future of the single European market. There is another matter of delicacy: the very method chosen to elicit popular opinion. Support for any decision through a referendum, for India, inevitably brings forth the connotation of Kashmir and the foreign policy complications it has engendered for the leadership in New Delhi.

Diplomatically, there may not be significant changes. India’s main engagement on global issues in Europe has mainly been with Germany, the UK and France. Those bilateral engagements are set to continue.

For now, the murky waters of the imp­ending Brexit referendum don’t afford a clear picture—whether a messy divorce between the EU and the UK will leave us with room for more economic heft or a rueful yearning for the integrated market.

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