“By virtue of its domestic policies, India is seen as a haven of stability and opportunity in these turbulent times,” Jaitley told the Lok Sabha in reply to a question.
“Rupee depreciated against dollar by around 1 per cent for one day post-Brexit referendum, while currencies of other emerging markets depreciated for many days. Similarly, the Sensex fell only on one day by around 2 per cent while the equity index of many other developed and developing countries fell by a higher percentage for many days after Brexit referendum,” he said.
As a part of the global economy, India will obviously be affected if there is slowdown in growth in Britain and EU following Brexit, he added.
India’s exports in goods to Britain and EU (including Britain) have been around 3 per cent and 17 per cent of the total, while it also exports roughly $10 billion in software to both.
Overall though, India’s exports to both Britain 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. The forecast of global growth for 2016 has also been revised downward by the IMF from 3.2 per cent to 3.1 per cent in the aftermath of Brexit.
However, these potential effects 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. Moreover, 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.
Jaitley said that the government, Sebi and the Reserve Bank of India (RBI) are closely monitoring the situation.
“India’s macroeconomic fundamentals are strong. Besides, the strong forex reserves position can provide a buffer against any temporary episodes of volatility in the domestic foreign exchange market,” he said.
Further, RBI’s proactive liquidity management could ensure stability and calm in money markets, he added.