Prelims level : International Mains level : Governance, Constitution, Polity, Social Justice and International relations
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Why in News:

  • British Prime Minister Theresa May said she would quit after failing to deliver Brexit, setting up a contest that will install a new PM who could pursue a cleaner break with the EU.


  • Brexit is a term used to define United Kingdom coming out of EU. Recently in a referendum conducted in United Kingdom, UK voted by a narrow margin in favour of Brexit. Negotiations are undergoing currently between United Kingdom and European Parliament to negotiate the terms of the exit deal

About EU:

  • EU is currently a block of 28 countries and 19 countries have formed Eurozone.Formation of European Union is an outcome of Single European Act, 1991. Mashtricht Treaty converted the EU into a monetary union. Lisbon Treaty strengthened political, foreign affairs and security integration of policies of countries of European Union

On India / Cons:

  • The immediate impact of Brexit is an increase in risk aversion when it comes to investing, especially in light of the possibility of other countries following suit. This will affect the FPI outflows from foreign portfolio investors.
  • Rupee may depreciate because of the double effect of foreign fund outflow and dollar rise.
  • IANS report says that Britain ranks 12th in terms of India’s bilateral trade with individual countries. It is also among 7 in top 25 countries with which India enjoys a trade surplus. India invests more in UK than the rest of Europe combined, emerging as the 3rd largest FDI investor. Access to European markets, therefore, is a key driver for Indian companies setting shop in UK. Britain coming out of EU is likely to affect the business prospects of these companies.
  • IT and ITeS industry of India will have a negative impact of close to $108bn. The impact can be seen in medium term (2-3 years)


  • While on the positive side, Brexit has driven away fears of a US Fed rate hike and could lead to lower commodity prices.
  • Brexit has become a new worry for commodity producers, coming on top of concerns about China’s slowing economic growth. Brexit’s impact will then be a fateful one for commodity producers and producing nations.
  • Devaluation of rupee might enhance India’s export competitiveness.
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