Brexit: Mixed bag for the Indian IT industry

With a small margin of victory, Britain has decided to leave the EU for good. So what does this mean for the Indian IT industry?

So it has happened. Britain will no longer be a part of the European Union. The news of Brexit has created quite an effect in the stock markets—a knee-jerk reaction was expected. David Cameron has resigned. The Sensex fell over a 1000 points after the first hour of trading. Now there is uncertainty. In the long run, trade might become easier, and India Inc. might be impacted negatively. But what does this historic referendum mean for the Indian IT industry?

The immediate impact of Brexit on the IT industry will be negative and mostly will depend on how the stock markets and currency values play themselves.

“In the short term, this uncertainty is not good for industry and it will be negative for IT industry too, because of the uncertainty,” former CEO of Infosys S Gopalakrishnan told PTI.

Nasscom, India’s IT lobbying body, feels that the likely decline in the value of the British Pound could render many existing contracts losing propositions, unless they are renegotiated.

However, Vineet Nayyar, CEO of Tech Mahindra, seemed unfazed about this.

“There will be a fall in sterling, which is obvious. However, we see currencies going up and down all the time. Dollar also keeps fluctuating but Indian IT companies seem to manage fine,” he said in an interview with CNBC-TV18. “So, really I think Indian IT will adjust to Brexit as well,” Nayyar added.

Moreover, traditionally, most Indian IT companies conduct their EU operations from their headquarters in London.

“A negative implication of Brexit is that Indian IT companies may need to establish separate headquarters/operations for EU, leading to disinvestment from UK and diversion of activity from UK to EU. From an Indian tech industry perspective, an exit could thus create scenarios wherein companies will need to establish separate European headquarters. Skilled labour mobility across EU and UK would be impacted,” R Chandrashekar, president of Nasscom, said in a blogpost.

Even though, the long-term implication of this decision is unpredictable, the IT industry can just wait and watch.

“NASSCOM urges policy makers in Brussels and London to provide greater clarity and guidance on the next steps as soon as possible, so that our businesses have the certainty they need to continue to invest in UK and Europe,” Chandrashekhar said in a statement.