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Why India's Trade Policy Risks Repeating Brexit's Costly Mistakes
A decade on, Brexit has cost the UK up to 8% of GDP. India's trade strategy risks a similar delusion, missing gains from regional integration.
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A decade after the referendum, the bill is coming due. Stanford University estimates Brexit will have cost the UK 6–8% of GDP by the end of 2025. Investment fell 12–13%, productivity dropped 3–4%, and employment ran 3–4% lower than it otherwise would have, according to the study led by Nicholas Bloom. The cause: a cocktail of elevated uncertainty, diverted management time and resources misallocated during the protracted exit process.
For India, the temptation to copy the UK's post‑Brexit trade playbook is real. A decade on, 45% of the UK's trade still goes to the EU. The free‑trade agreements signed with Japan, Australia and New Zealand – combined population 33 million – barely compensate for losing access to the single market of 450 million. India's own recent pacts with Australia and the proposed UK deal follow a similar logic: prioritise distant, politically friendly partners over the neighbours that account for the bulk of potential trade gains.
Dammu Ravi, a former Indian trade negotiator, points out that South Asia is the least trade‑integrated region in the world. Intra‑regional commerce accounts for just 1.5% of total global trade. China, meanwhile, offers nearly zero‑tariff access to India's neighbours and has built infrastructure that locks them into its own supply chains. Bilateral trade between China and South Asia (excluding India) hit $200 billion and grew 16% in the first four months of this year.