Impact of US withdrawal of GSP benefits ‘insignificant’

US GSP benefits

The US withdrawal of Generalised System of Preferences (GSP) will have an “insignificant” impact on India’s exports, however, the move has caused anxiety over economic uncertainty as domestic growth has slowed.

The US had earlier announced withdrawal of GSP benefits extended to exports from India from June 5, 2019.

The GSP benefits are envisaged to be non-reciprocal and non-discriminatory export benefits extended by developed countries to developing countries.

While on official level, India said it did offer resolution on significant US requests to find a mutually acceptable way.

The Ministry of Commerce and Industry has termed the move as “unfortunate”, but industry observers cite the benefit of only around $200 million as insignificant to causer major worry.

“Sectors like chemicals and engineering goods have been benefiting under the GSP regime and thus would lose out at the margin, unless the government increases some rebates on these sectors to counter the loss,” Madhavi Arora, Lead Economist, Edelweiss Securities, told IANS.

“That said, the annual benefit that India has been getting under GSP is a tad below $200 million annually. To that extent, the impact is not too significant.”

Similarly, Trade Promotion Council of India’s Chairman Mohit Singla said: “The withdrawal of GSP will not make much difference as Indian exports are all geared to take this challenge.”

“Even the US was benefiting from the GSP regime, since the intermediary inputs provided by India helped keep its industry competitive.”

The GSP withdrawal is only going to inject the estimated, additional burden of $190 million, which is miniscule compared to India’s overall export to US, he added.

As per industry data, India’s exports to the US during 2018 stood at $51.4 billion out of which only $6.35 billion were under the GSP scheme.

On the other hand, Federation of Indian Export Organisations’ President Ganesh Kumar Gupta pointed out that exporters of products having GSP benefits of 3 per cent or more, will find it difficult to absorb the loss.

According to Gupta, most affected sectors will be “imitation jewellery, leather articles other than footwear, pharmaceuticals and surgical products and chemical and plastics”.

He said government should provide supports to products where GSP loss has been significant so that “the market is not lost”.

Earlier in March, the US had given a 60-day withdrawal notice to India on the GSP benefits extended by it.

The US commenced a review in April 2018 on India’s GSP benefits, while both the countries were discussing various trade issues of bilateral interest.


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