It's early to write an obit for the EU

Brexit will continue to impact the financial volatility and expects to see outsized movement in asset prices in the short-term. He said it is early to write an obituary for the European Union and expects Western European countries to strengthen the bloc.

Brexit is here and Brexit introduces major institutional uncertainty to global economy that was already facing economic fragility and financial fluidity, so think of a force that amplifies in a significant way, the uncertainties that we are facing global markets and global economy.

The big hope is that this is a wakeup call for politicians not just in Europe, but also in other advanced economies that have not stepped to the responsibility of promoting high inclusive growth. The fear is that this is a reflection of something that will spread, which is the emergence of anti-establishment movements and the lack of trust in the political and business elite. I feared that we will see some additional political disruptions before the wakeup call triggers our politicians to take action.

Do you think this is a big enough punch to tip the EU into recession or even the global market in near recessionary conditions? There will be impact of course on the UK economic growth and there will be impact on EU growth. What happens thereafter and particularly the spill over to rest of the economy depends on how long it takes for financial calm to be restored. Right now, I see this as particularly bad news for the economies of the UK and Europe, but the rest of the world is not necessarily harmed in a major way unless we see a major market accident.

Should we expect the inflows to pause into equity markets now or are we likely to see outflows? See if you certainly expect inflows to pause. There will be home bias to foreign investment as people try to solidify their balance sheets in face of this major uncertainty. There may be some outflows. The sad thing is no matter how well managed you cannot be a good house if the global neighbourhood is deteriorating, so India will not benefit right now from all the reforms it has done in terms of foreign investment, but India is better placed than many other countries to deal with the uncertainties that’s ahead of us.