The Associated Chambers of Commerce of India (Assocham) is warning the risks Brexit will have on the global economy are much larger than initially perceived.

It is imperative for the Indian government to carefully monitor the unfolding political-economic scenario in Europe, the organization says.

One way to do this is to set up a high level monitoring group comprising inter-ministerial and agency representatives. Assocham is urging this group should be organized as quickly as possible.

Assocham has prepared a status paper following the results of the U.K. referendum last week and the immediate fallout following the Brexit announcement.

It urges a 'much greater watch on the situation' over being 'complacent'.

"The damage is not limited to the global economy and the stock market sentiment. The trouble lies in a widening political divide between Britain and the rest of the EU leadership on the one hand, and then within the U.K., on the other hand," says the paper.

"With this kind of charged up political environment, the damage to the world economy would be much more than just a few sectoral gains or losses."

The paper analyzed the situation beyond the currency movement of the pound sterling and euro against the U.S. dollar, and the impact on Indian companies trading in Europe.

"There are clearly two big takeaways, as assessed by the Assocham top policy making leadership, from the Brexit," the paper said.

"First, there would certainly be a damage to the market sentiment, leading to disruption in the investment flows alongside an impact on the currency valuations.

"Secondly, the way political relations evolve between the EU and the British leaders would be the key, because those would determine the terms of the divorce. Any harsh and bitter outcome would be disastrous for the world trade and investment."

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