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British Prime Minister Theresa May Eyes Stronger Trade Ties with India Post Brexit

India wants to expand trade ties with Britain, it also wants easier access for its students and skilled workers

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FILE- Britain's Prime Minister Theresa May leaves 10 Downing street in London, July 20, 2016. VOA
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November 6, 2016: British Prime Minister Theresa May arrives in India Sunday on her first bilateral visit outside the European Union to lay the groundwork for stronger trade ties post Brexit with the world’s fastest-growing major economy.

But India will press the British leader on tighter visa rules that have diminished the number of Indian students going to British universities and that could impact Indian professionals in the country.

Ahead of the visit, the British leader said the trip was about “expanding our horizons and forging stronger partnerships with countries around the world” following Britain’s exit from the European Union.

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In India, immigration concerns

In New Delhi, observers say the visit will test how stricter immigration policies will impact Britain’s efforts to build stronger business partnerships.

While India wants to expand trade ties with Britain, it also wants easier access for its students and skilled workers.

Ahead of the visit, India foreign ministry spokesman Vikas Swarup underlined those concerns, saying, “Indian students and people-to-people relations are important pillars of India-UK ties … we expect mobility issues to be raised during this visit.”

He said restrictions have impacted Indian students staying in Britain after graduation.

“In the last year or so, the number of Indian students enrolling in U.K. universities has gone down by almost 50 percent from around 40,000 to around 20,000 now,” he said.

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Those restrictions were introduced into legislation by May when she was interior minister. Changes to visa rules announced last week also will impact Indian professionals in Britain.

“The impression Britain is giving to countries such as India is, we want your business but we don’t want your people,” said London-based political strategist Manoj Ladwa in the Hindu newspaper.

Both sides seek trade deals

However expanding trade ties with Britain is a priority for India, which is the third largest investor in Britain with about 800 Indian companies operating there. Britain is also a major investor in India.

There will be no trade deals on the table during the visit because Britain cannot formally negotiate these until it officially leaves the European Union, but the two countries will explore the possibility of a free trade deal post Brexit.

And while New Delhi has struggled to seal a free trade pact with the European Union for years, it might be easier to do it with Britain, which shares historical ties with India dating back to the colonial era.

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“This is a partnership about our shared security and shared prosperity. It is a partnership of potential. And on this visit I intend to harness that potential, rebooting an age-old relationship,” May said in a statement ahead of the visit.

The British leader is scheduled to address a trade-focused technology seminar in New Delhi, meet Indian Prime Minister Narendra Modi on Monday and visit India’s IT hub of Bengaluru on Tuesday.

May is accompanied by International Trade Secretary Liam Fox, Trade Minister Greg Hands, and business leaders from medium- and small-sized companies. (VOA)

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Latest #IGForexChat Reveals How Brexit Negotiations Are Affecting the Forex Markets

How close is the UK to finalising a deal with the EU? Only Theresa May and Michel Barnier truly know the answer to that.

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French noted that investment in UK assets and stocks is “waiting in the wings” to find out what those barriers will be. Pixabay

With the UK due to formally leave the European Union (EU) in less than six months, Brexit negotiations are reaching a nervous climax.  Hopes remain that the UK government will secure a deal with the EU by the end of the year, but what impact are the Brexit talks having on the forex markets? How far could the pound fall if there is no deal reached? Would the pound be affected by a vote of no-confidence within the Conservative Party and Prime Minister Theresa May being replaced?

The latest #IGForexChat outlined the potential ramifications of Brexit negotiations on forex markets. IG’s Sara Walker interviewed two leading forex experts, chief economist Simon French and market analyst Nicholas Cawley, to help forex traders understand the implications of a hard or soft exit from the EU.

If you don’t have time to watch the entire interview, here are the main talking points as to whether forex traders should buy or sell sterling in the markets in the coming months:

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May’s spokesperson said both the Prime Minister and the Brexit secretary, David Davis, said the government would be robust when the EU withdrawal bill returned to the House of Commons after completing its passage in the House of Lords. Pixabay
What will happen to the pound if we reach 31st March 2019 without a Brexit deal?

Nicholas Cawley insists that it is highly likely that the UK government will know if a Brexit deal can be reached by the end of the year. Cawley said there will undoubtedly be “clear signals” ahead of the EU’s December meeting as to whether a deal is achievable.

According to Simon French, the UK parliament will have an influential role if talks move into the New Year. French believes January will be a crucial month for parliament as the amendments within the UK’s withdrawal bill will need approval. If the majority of MPs cannot agree on the bill, they will have the right to propose a “meaningful vote”. French believes this vote could “ask the government to go back to the negotiating table” and attempt to “extend Article 50”.

French also believes it is unrealistic to expect the price of sterling to be priced on a hard Brexit “until midnight on March 29th”.

In a Tuesday radio interview International Trade Secretary Liam Fox said it was not acceptable for the unelected House of Lords to try to block the democratic will of the British people, who voted by a 52-48 margin in June, 2016 to leave the EU.
The Independent newspaper Tuesday night reported that May was preparing for a Brexit meeting with select cabinet ministers Wednesday at which they will try to come up with a joint position on post-withdrawal customs relations following rejection of Britain’s existing proposals. wikimedia commons
How far could the pound fall against USD and EUR in the event of no deal?

French pointed to historical analysis of previous peaks and troughs of sterling against the US dollar. The IMF bail-out of the UK in the 1970s and Lehman Brothers/Northern Rock in 2008 resulted in “20-25%” declines, leaving the pound in the “high teens” i.e. $1.17-$1.20 to the pound. French believes a hard Brexit is “no more material than those previous events” and, as such, the pound could experience a similar decline next March.

On the subject of whether the pound will end up in parity with the euro, Cawley was quick to dismiss those claims.

How will Brexit affect the pound during the transition period?

Cawley was quick to predict that, if an extension to the UK’s transition period after leaving the EU is agreed, “it will initially weaken sterling”. However, he suggested that an extension may prove useful to some business sectors that may need that time to “get their house in order”.

On the flip side, Simon French is “slightly more bullish” about the transition period. He believes the expected discussions about a free-trade agreement will eventually uncover “the materiality of what trade barriers will look like” between the UK and the EU. French noted that investment in UK assets and stocks is “waiting in the wings” to find out what those barriers will be. He believes that, once clarity is achieved in the “Treaty text”, it will be easier to price things correctly.

Brexit,  Image source: www.catholicherald.co.uk
Representational Image, Brexit.
Will the pound be affected by the replacement of Prime Minister Theresa May?

On the subject of the value of the pound being influenced by the departure of Theresa May as Prime Minister, Nicholas Cawley believes sterling “would take it quite well” and that the price “wouldn’t go down”.

Cawley was quick to temper that by saying it would ultimately depend on the “favourite” candidates to replace her. He said that the prospect of Boris Johnson would be “hated” by many in the markets, yet a more “progressive” candidate such as Sajid Javid would be viewed more positively.

Are further interest rate hikes likely from the Bank of England?

Nicholas Cawley believes there is “no reason to push interest rates up at the moment”, despite inflation reaching 2.4% this year. Furthermore, Cawley finds it hard to believe that the Bank of England would dare consider raising interest rates in the event of a hard Brexit.

Both Cawley and Simon French expect little to happen on the subject of interest rates until May 2019, when the Bank of England “may start giving some signals” based on the first quarterly inflation report after the UK leaves the EU on 31st March.

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Brexit (Representational IMage) Image source: The Street

Interestingly, French suggested that the Bank of England could yet consider a rate hike “as early as February” with the ECB’s rate policy seemingly rigid and President Trump reportedly wanting the Fed to “go at a slower rate”. French believes this would encourage investors to “buy into sterling”.

How close is the UK to finalising a deal with the EU? Only Theresa May and Michel Barnier truly know the answer to that. French noted that “the history of the EU negotiations” would suggest that the Brexit talks will inevitably “go down to the wire”. Whichever way the scales tip, the forex markets are sure to be a fascinating place to be in the coming months.