Morgan Stanley says India will be one of the least affected countries in Asia after Britain’s decision to depart from the European Union. The immediate impact in the country will be seen through volatility in exchange rate and capital-market flows, the financial services company added.
“Increased uncertainty in the external environment due to UK’s vote should add to downward pressures on growth and inflation in the region,” economists reported. They expect Hong Kong, Singapore, and Malaysia to be most exposed, while the economies of Thailand, Indonesia, Taiwan, Korea and China will be moderately exposed and India and Philippines the least exposed on a relative basis.
Only 3.4% of India’s total exports are to the UK, which is why the country will not significantly impacted by Brexit. The report says, “The UK’s vote to leave the EU is likely to have an adverse impact on India’s growth through trade and financial channels. However, given the lower direct exposure in terms of exports to UK, we expect the impact to be less on India as compared to other more open economies in the region.”
Separately, UK’s Prime Minister David Cameron, who resigned on Friday following the referendum result, hailed India has an “important partner” while speaking in Parliament. In his first official statement on the outcome of the vote, Cameron advised Britain not turn its back on Europe or the rest of the world.
“The nature of the relationship we secure with the EU will be determined by the next government but I think everyone agrees that we all want the strongest possible economic link with our European neighbours as well as with our close friends in North America, the Commonwealth and important partners like India and China,” he said. “These people have come here and made a wonderful contribution.”