In the run-up to the proposed visit to India by UK Prime Minister Theresa May from November 6 to 8, India is mulling ways to rewrite its diplomacy. The diplomacy India had worked out to deal with Britain in 2015 is, however, no longer relevant to the present situation in UK. UK has not only undergone a leadership change over the year but it has upset India’s strategic move to play a key role in the European market too.
During his visit to the UK in November, 2015, Prime Minister Narendra Modi had eyes on UK’s potential to ensure India’s entry to European Union markets. It was evident from Modi’s unequivocal statement about reasons behind strengthening relations with Britain. While addressing the UK Parliament, Modi unequivocally said that a strong relationship with Britain was meant to open a gateway to the European Union: “India viewed UK as its entry point to the European Union. Yes we are going to other European countries as well, but we will continue to consider the UK as our entry point to the EU as far as possible,” Modi had said.
Incidentally, Britain’s links with the EU ended after the people voted in favour of ‘Brexit’ (as referendum for British exit from European Union is referred to). UK Prime Minister David Cameron -- who strongly wanted to remain with the EU -- had to resign and was succeeded by Home Secretary Teresa May.
This quirk of fate in British history, however, has affected India’s aspiration to reap benefits from the European Union market that was dominated by Britain for decades. Well-placed sources in the PMO and External Affairs Ministry claimed that India has no reason to go ahead with its policy formulated ahead of Prime Minister Narendra Modi’s visit to Britain in 2015 to explore its major role in European markets through Britain when the latter had lost its clout in EU.
Sources observed that there were three factors behind Brexit: First, UK had to contribute billions of pounds every week to the EU budget; second, British exporters were not treated well by the extremely bureaucratic setup of the EU Parliament; and, third, increasing migration from EU nations into Britain. Indeed, with the implementation of the Brexit decision -- that is due by the end of next March -- Britain may be absolved of the financial burden it had to incur every week to support the EU budget but it would lose its clout in the EU market too.
As per experts in the PMO, Britain received a major blow when the European Council made it clear that it would not compromise with principals of the bloc while negotiating on Britain’s role after its exit. The President of the European Council, Donald Tusk, said that London was heading for a hard exit and it could not hope both to stay in Europe’s single market and restrict the movement of EU migrants as well, sources claimed.
In the backdrop of the implicit denial by EU, Prime Minister May is claimed to have been left with no option except to mull ways for alternative measures to retain a sustainable market. The desperate move to ward off the possible threat of an eventual crisis on the part of Britain’s kitty is evident from the recent overture displayed by Teresa May. She not only stepped up efforts to explore new trade partners such as India, but also tried to convey an explicit message to the EU that Britain would remain a trusted constituent to the EU even after its exit.
While India is viewed as a potential source to salvage Britain from a possible economic struggle after its exit from EU, with its separation from the 27-nation bloc of the EU, Britain has lost its opportunity to woo India. It is believed that Britain gained much more from the EU than it contributed to and it is likely to land in a soup if it failed to explore potential market urgently to prop up its financial structure.
Experts opine that in a last-ditch effort to cope with eventual loss, Britain has resolved to rope in India that is believed to be a major source of FDI for Britain. However, the power wielded by Britain to dictate terms with India while dealing with FDI proposals is now likely to turn the other way round. As of now, traders from India having their manufacturing units in Britain could sell their products across Europe as per the European free market system. But contrary to present regulations, India would be denied free access to the European markets with the support of Britain after Brexit.
At this juncture, India is reluctant to continue trade relations with Britain and contemplating a decision to forge tie-ups with another country within the EU to avail of options to access a gateway to Europe instead. It preferred to keep its options open to negotiate with Netherlands, France and Germany. Netherlands tops the list of India’s priorities in terms of FDI. Britain is, as such, faced with the worst ever challenges to stop India to go with other EU countries. But India has no reason to stay back unless it is provided with a major relaxation in trade regulations.
Cashing-in on the situation, India is expected to negotiate with Britain during May’s visit on more relaxation in terms of tax regulations, financial incentives, deregulated and free market in Britain.
Further, the banking sector has served an ultimatum to move out of the UK for want of clarity in post-Brexit business operations in EU. While small banks are expected to start relocating by Christmas this year, major banks are planning to move out in the first quarter of next year. In a press statement, British Bankers’ Association Chief Anthony Browne claimed ‘many smaller banks plan to start relocations before Christmas; bigger banks are expected to start in the first quarter of next year’. He further said that banking was the worst affected by Brexit than any other sector. In fact, banks that had strongly stood by the referendum to remain with EU are now groping in the dark to get answers whether they would be allowed to operate across EU with their present license after Brexit.
Addressing the EU summit recently, May was articulate enough in getting her views across that Britain could not afford to part ways with EU for obvious reasons. She said that Britain would be playing a ‘full role’ until it would leave 28-nation bloc of the EU in the end of March next and would remain a strong and dependable partner even after its exit.
The implications of Brexit have indeed put Britain’s economic fate at stake, but India is all set to cash-in on the situation during the visit of Theresa May by rephrasing its diplomacy.
BW Reporters
D.P. Sharan has been a journalist for the past 30 years and has served many national dailies, magazines and channels. He has also been a member at the Central Board of Film Certification, Mumbai under I&B Ministry, Government of India
