Lets make the most of Brexit

'India Global Business' calls out for government hand-holding to make the most of opportunities arising out of this seismic shift in the global order.

A lot has been written on how Brexit will affect the Indian economy. But a disproportionate amount of attention has been paid on the impact on India's domestic economy and its export prospects. Not enough has been spoken about how it could affect India Inc's appetite for acquiring British and EU assets - both production facilities and brands - that could help domestic Indian companies ramp up their global presence.

A few days before the Brexit vote, the International Monetary Fund (IMF) warned that a “Yes” vote could hit British living standards, fuel inflation and lead to a 5.5 per cent reduction in GDP. In July, the National Institute of Economic and Social Research, one of Britain's most respected think tanks, warned that there was a 50 per cent possibility of recession in the British economy over the next 18 months. It also warned that more than 300,000 jobs could be lost in the UK by the third quarter of next year. That's a pretty grim prognosis for a country that is still the EU's second-largest economy and the largest recipient of foreign direct investment (FDI) in that bloc. During 2010-2014, it received an average of $56 billion in FDI each year, about half of it coming from other EU countries.A 2015 study by EY found that 72 per cent of foreign investors were attracted by UK's status as a bridge to the EU market. Some studies point out that Brexit could reduce FDI flows into the UK by half.

This is where Indian investors can step in and help. Unlike the UK, India's economy is on the cusp of a take-off. According to most experts, many Indian companies have already bottomed out and are now on a slow but steady upswing in fortunes. If Britain slips into recession, many of its prized industrial assets could slip into losses. In the absence of deep pocketed buyers, they could shut down, taking with them their proprietary technology and institutional knowledge. In such a situation, cash rich or low-debt Indian companies (contrary to perception, there are quite a few such companies around) could step in as white knights to rescue them and acquire technology, brands or production facilities that would otherwise remain out of reach.

It would also signal a new era in bilateral cooperation as Indian entrepreneurs, having mastered the art and science of frugal management at home, would be using their expertise to save jobs and help keep the wheels of the slowing British economy spinning.Global commodity prices and the crude cycle are at historic lows, so the risks of such acquisitions will, by and large, be capped. But the potential benefits of nursing these assets through troubled times could be exponential when the economic cycle turns - as it must at some point in future. The Tata Group's purchase of Jaguar Land Rover and the AV Birla Group's acquisition of Novelis - both loss-making, sick companies when they were taken over by their current Indian owners - show how such bold and visionary moves can pay rich dividends. It would also establish the reputation of Indian businesses as non-predatory competitors.

'India Global Business' would like to urge the governments of the two countries to facilitate and hand hold any opportunities that arise in this area and calls upon Indian businessmen to grab the once in a lifetime chance that is likely to land on their laps over the next year or two.