Finance Minister Arun Jaitley on Friday said India has avoided any adverse impact of Brexit and has emerged as a safe haven for investors around the world.
He informed the Lok Sabha that the government, the Reserve Bank and market regulator Sebi are keeping a constant vigil on the global developments with a view to protecting interest of investors.
“The government has assessed the impact of Brexit on the Indian economy. Thus far, India has not only avoided adverse impacts, but it has in fact emerged as a safe haven for investors around the world,” Jaitley said in a written reply.
He said the rupee depreciated against the US dollar by around 1 per cent for one day post-Brexit referendum while currencies of other emerging markets depreciated for many days. Besides, the Sensex fell only on one day by 2 per cent while the equity index of many other developed and developing countries fell by a higher percentage for many days.
“By virtue of its domestic policies, India is seen as a haven of stability and opportunity in these turbulent times,” Jaitley said.
India’s goods exports to the UK and the EU (including UK) have been around 3 per cent and 17 per cent of our total exports, respectively.
India also exports roughly $10 billion in software to both the UK and EU. Overall though, India’s exports to both the UK and Europe have been on a downtrend in the past two years on account of subdued demand led by a frail and scattered recovery in the region.
Besides, IMF has also revised downward its forecast of global growth from 3.2 per cent to 3.1 per cent in the aftermath of UK’s exit from the European Union, widely known as Brexit.
Jaitley, however, said these potential effect on India’s growth could be offset by the weaker price of oil, which will help maintain macro-stability, and by the likelihood of more policy support in the advanced economies.
“The impact of Brexit on trade, if any, in the medium term, would also depend on bilateral trade negotiations that will determine India’s future market access to these countries,” he said.
Strong macroeconomic fundamentals and forex reserves position provide a buffer against any temporary episodes of volatility in the domestic foreign exchange market, the minister said.
As regards the stock market, the government and the Securities and Exchange Board of India (Sebi) are keeping a constant vigil.
“Sebi has laid down various regulations and guidelines for protecting investors’ interest and ensuring orderly functioning of the stock market,” Jaitley added.