Bengaluru, June 24 (IANS) Britain exiting the European Union (Brexit) would impact the Indian IT industry in the short-term owing to volatility in the exchange rate, uncertainty and terms of exit, a top industry representative said on Friday.
“The impact of Brexit will certainly be negative in the short-term on account of volatility in the exchange rates, uncertainty in the markets and the terms on which Britain will leave the EU,” Nasscom President R. Chandrashekhar told IANS from New Delhi over phone.
Britons voted 51.9 per cent for Brexit against 48.1 per cent of ‘Remain’ vote in a historic referendum on Thursday.
The referendum turnout was 71.8 per cent — with more than 30 million people voting. This was the highest turnout at a British poll since 1992.
Terming the Brexit as a phase of uncertainty in the near term, the National Association of Software and Services Companies (Nasscom) executive said the historic move was also a mix of challenges and opportunities in the longer term.
“Europe is of prime importance for India, as it is not only the second largest market for our industry, but also contributes nearly 30 per cent of software export revenue, which is equivalent to $100 billion,” Chandrashekhar asserted.
Noting that Britain had been a gateway for the Indian industry’s investment across the EU over the decades, Chandrashekhar said a decline in value of British currency (pound sterling) would render contracts losing propositions unless they were renegotiated.
“The uncertainty surrounding protracted negotiations on the terms of exit and/or future engagement with EU could impact decision-making for large projects,” the Nasscom president pointed out.
The exit may also lead to Indian outsourcing firms setting up separate offices or operations for EU and divestment from Britain.
Mobility of skilled labour between Britain and the EU will also be affected, while changes in the financial system and banks would have a bearing due to currency impact.
“Hence we urge policy makers in Brussels and London to provide greater clarity and guidance on the next steps so as to ensure our businesses have the clarity to stay invested in Britain,” said Chandrashekhar.
According to indications, British policy makers are committed to minimise the possible negative impact of the referendum to quit the EU.
The historic development will also unleash opportunities as about 800 Indian firms, employing 110,000 people across the country, have a deeper partnership with Britain.
“In the long term, however, Brexit could lead to strengthening of Indo-British economic relationship, as Britain seeks to compensate for loss of preferential access to EU markets,” Chandrashekhar affirmed.
With Britain less dependent on intra-EU immigration into its country, it could become more open to high-skilled immigration from other non-EU countries, including India.
“Britain will be under no obligation to adopt restrictive EU data localisation norms, which it does not subscribe to in their entirety. All these factors could benefit our bilateral economic relations,” the former telecom secretary added.