A recent US presidential decree mandates cutting down Inda’s tariff-free access to the US market under the Generalised System of Preference (GSP) scheme.
In a public announcement, US president declared “I have determined that India has not assured the United States that India will provide equitable and reasonable access to its markets.”
The new government in a contained reaction stated that the move was unfortunate. In an official press release the commerce department said “In any relationship, especially in the area of economic ties, there are ongoing issues which get resolved mutually from time to time. We view this issue as part of this regular process and will continue to build on our strong ties with the US, both economic and people to people.”
Whether India plans to pursue this issue further would be decided Piyush Goyal, the newly stated commerce minister.
Under the GSP, US oldest preferential trade scheme, India is the largest beneficiary. The goods exported under this scheme amounted to $6.35 billion. New Delhi was quick to point out that the GSP benefits “were unilateral and non-reciprocal.
While this announcement impacts India’s overall outbound trade minimally, some exporters may find it challenging to adapt to the changes, said the Federation of Indian Export Organisations (FIEO).
Certain exports such as jewellery, leather, pharmaceuticals chemicals, and agriculture products will face higher costs and competition, FIEO added.
According to the Office of the United States Trade Representative, in 2018, India’s total benefits from the GSP exemptions amounted to $260 million, whereas the cumulative exports to the US in the same period stood at $51.4 billion.
In light of these facts, government policymakers have adviced against pursuing the GSP matter further with the US.
However, it is going cause of concern for traders as they very rightly have pointed out that Indian exports currently are under extreme pressure due to the increasing competition from low-cost rivals. At this juncture surrendering the GSP claims would mean giving away market share and space.