Brexit will boost India’s economy: Experts (Sunday Guardian)
By MADHAV NALAPAT | WASHINGTON | 26 June, 2016
Brexit represents an opportunity for India to attract fresh investment as well as open pathways to Europe for its trained pool of professionals.
Prime Minister Narendra Modi refused to follow the example set by US President Barack Obama and German Chancellor Angela Merkel and loudly endorse the “Remain in EU” campaign in the UK, while the referendum on Brexit (a breaking away by Britain from the European Union) was going on. The decision by voters to reject membership in the EU has vindicated Modi’s cautious stance. Financial interests with a monetary interest in the “Remain” movement (as opposed to the “Leave” campaign) launched a coordinated media drive to convince UK voters and others that a breaking away from the EU would be a disaster for Britain, rather than the opportunity it actually is. This is reminiscent of a previous disinformation campaign by speculative interests that targeted India. Soon after the 1998 nuclear tests by the NDA government, a well-funded publicity effort was undertaken to convince the people of India that the A.B. Vajpayee government had committed a grave error in going ahead with the testing of the country’s nuclear deterrent. TheEconomic Times, in particular, was vociferous in warning of an “economic meltdown” consequent on the Pokhran II tests. The Times of India, however, carried a front page report by this correspondent that the sanctions put in place by President Bill Clinton of the United States would have a negligible effect on the Indian economy, a forecast that turned out to be accurate.
Unfortunately for India, the country’s top economic policy agencies are clogged with those filled with theories and opinions designed in foreign countries to serve their own interests, rather than that of this country. Indeed, this is a country which rewarded with a high position even an individual who called for sanctions on the Indian pharmaceutical industry and who acted transparently on behalf of global pharma giants who seek to emasculate India’s generic drug manufacturers. Its opinion builders recently rallied behind an individual who as RBI Governor has starved small scale and medium industry of credit and who has (along with his immediate predecessor) overseen the transformation of the banking system into a piggybank for giant corporates controlled by individuals who make themselves rich (almost entirely in foreign countries), while the entities they manage are effectively insolvent. Now that the majority of British voters have opted to leave the European Union, the same global speculators who sought to spread panic after Pokhran II are rallying their friends in the media and elsewhere to warn of another “meltdown in India”, this time caused by Brexit.
In a process similar to that done in 1998, while writing the report debunking the shrill warnings of an economic catastrophe after Pokhran II, policymakers dealing with economic and commercial matters in key economies were contacted. As they have without exception been tasked by their superiors with delivering a doomsday message following Brexit, anonymity has been requested. However, the message is the same: that Brexit will be to the advantage of India and not to its disadvantage. This is contrary to what speculative forces are seeking to do in equity markets in India, where market manipulators based in Mumbai, Dubai and Singapore are seeking to drive down share prices and bring down the value of the Indian rupee so as to raise the value of their illegal overseas holdings. Ironically, the policies followed by the RBI recently have assisted in keeping the value of the rupee far below the Rs 30-35 band that fundamentals dictate, and yet an adoring commentariat has praised RBI Governor Raghuram Rajan for “stabilising” the value of the rupee! Rajan is a long-time acquaintance of former Finance Minister Palaniappan Chidambaram, and has been backed in his career in India by the Congress leader and therefore by the former Finance Minister’s friends in the NDA and in the media.
Those who have been tasked with “generating panic” in the Indian economy over the coming weeks “so as to prevent a rush of funds into India at the expense of other markets” claim privately that Brexit will be “highly beneficial” for the Indian economy, contrary to the reports of doom appearing in the media and in presentations by “experts” tutored to reflect views favourable to speculative interests. The reasons cited for this include:
(a) A further fall in global commodity prices, especially oil, as a consequence of Brexit. Oil prices had been edging up in recent months because of the efforts of speculators in New York, Singapore and Zurich to “talk up” prices, especially through use of the media to conflate minor situations into severe threats to petro-product output. Lower prices will hugely benefit the Indian economy.
(b) Speculators invested in real assets in Europe have been trying to lure investment into the bloc using the argument that the EU in general is a much more stable location than India. Brexit has demolished this argument. And as for the past favourite, China, because of the increasing divergence by Beijing from the Deng Xiaoping line of avoiding confrontation, investors have been pushing upwards their estimates of the probability of a conflict in the China Seas or the Taiwan Straits, that could have a killing effect on the investment climate in East Asia. At the same time, Pakistan is proving itself to be unable to check India’s rise, thereby increasing investor interest in the world’s largest democracy, a situation several international speculators seek to thwart, as several have thus far not invested substantially within India, except in occasional situations involving entry and exit of hot money flows and speculative profit. Brexit has hit such calculations hard, and has ensured that India has emerged as among the most stable and attractive destinations for investment.
(c) While the EU has in effect created a racial wall around itself, sharply reducing the opportunity for qualified individuals not of European ethnicity to migrate to the continent, the withdrawal of the UK from that union will increase the possibility of a Points Based System of immigration, in which those of high value in terms of capital and talent, especially from India, will get the welcome mat previously reserved only for those of European ethnicity. Now that it is leaving the EU, the UK is much more likely to enter into a Services Agreement with India that would facilitate the flow of professionals across both borders, to the mutual advantage of both, but to the disadvantage of the less qualified individuals from the EU who flock to the UK.
(d) The EU has in effect become a trade union where the interests of its least deserving members are promoted through blackmailing outside countries into accepting terms harmful to their own industries. Such considerations as the effect on entry of talented professionals from India on the flow to more advanced EU states of manpower from Poland, Romania and other EU states have thus far inhibited the EU from going ahead with a balanced trade and services agreement with India. Brussels has sought unreasonable terms on key industries such as Information Technology and Services through holding up agreement until the specific sectional, interests of its weakest and least deserving members get accommodated, at huge cost to the other side.
Should India begin negotiations with the UK, resisting the influence of officials and others influenced by international speculators intent on protecting their profits at the expense of the people of India, and should Services and other agreements get signed with London that are evenly balanced rather than the unequal treaties that Brussels is seeking to force the Commerce Ministry and the Health Ministry (among others) to agree to, the bargaining power of the EU will be significantly affected, thereby raising the prospect of more balanced agreements than has been on offer by the EU this far. This is apart from agreements that can be reached with the UK, now that it is free of the EU bureaucracy and constraints.
(e) China has, through its NSG stance against India, rejected the option of closer ties with this country because of its obsession with pleasing the Pakistan military. Unless President Xi Jinping is able to rein in the PLA hawks who are tied to Rawalpindi GHQ and do the latter’s bidding, the omens for close commercial and other ties between Delhi and Beijing have turned negative after Seoul. In such a situation, post-Brexit Europe has emerged as a major region of interest in the geopolitical calculations of Delhi. Thus far, Germany in particular, with France not far behind, has blocked initiatives with India to ensure that investment flows, as much as possible, to East Europe rather than to India. Because of the British vote to leave the EU, populations in Germany and France will be more assertive when seeing their leaders place the interests of other EU countries above their own. This would give India an opportunity to go ahead with more bilateral negotiations, including on investment, in a context where a weakened European Union will find it more difficult to block agreements by countries such as Germany or Italy that serve domestic interests in such countries more than they do the countries in Eastern Europe that speculators are focusing on favourably. Such flexibility would increase the chances for balanced trade agreements with EU members.
Overall, the experts spoken to say that Brexit represents an opportunity for India to attract fresh investment as well as open pathways to Europe for its trained pool of professionals. British voters have declared their rebellion against sacrificing their own interests for that of a chimerical “Greater European Dream”, and this represents a plus for India rather than the minus that tutored commentators are warning. These are assisting those who hope to keep the rupee weak and to maintain a policy of restricting credit in the name of fighting inflation, rather than the economic expansion the youth of this country need. Those studying the trajectory of Prime Minister Modi are confident that he will focus on the opportunity now open, rather than follow the advice of some policymakers and “wait and watch”. Experts say that Brexit is an opportunity that should not be missed out on, and given proper responses by Government of India, can help this country to move to the double digit growth trajectory that has eluded it for too long.