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Indian exporters are apprehensive of losing their competitive edge in the US market, especially in labour-intensive products, if Washington decides to withdraw the popular generalised system of preferences (GSP) scheme, and have asked the Centre for support.
“In the recent Board of Trade meeting, several exporting sectors raised concerns over the imminent withdrawal of the GSP benefit by the US. While some suggested that the government should lobby further with the US government with the help of American industry for its continuation, most wanted some alternative schemes devised by the Centre to support exporters in case the benefits are revoked,” a government official told BusinessLine .
India is the largest beneficiary of the US government’s GSP scheme, devised to promote exports of developing countries, which allows duty-free access to about 3,500 items from the country. In 2017, Indian exports to the US benefiting from GSP were worth $5.7 billion, of its total exports to the country worth $49 billion.
New Delhi’s eligibility for the scheme, however, came under cloud last year when the US Trade Representative’s (USTR) office started a review process for India, Indonesia and Kazakhstan. The eligibility review was initiated on the basis of complaints against perceived trade barriers made by the US dairy industry and the medical equipment industry.
Although there has been no official communication from the USTR on withdrawal of GSP benefit to India, there are speculations based on media reports that the move could be soon as Washington is unhappy with the recent tightening of Foreign Direct Investment (FDI) rules on e-commerce by India.
“We have proposed to the government that in case the GSP benefits are withdrawn, losses to exporters could be offset by giving some additional incentives to certain labour-intensive sectors,” said FIEO Director-General Ajay Sahai.
According to industry body CII, continuation of GSP benefits will also help boost the competitiveness of American manufacturers by lowering their costs. “Approximately two-thirds of the US imports under GSP are raw materials, components, or machinery and equipment used for manufacturing goods for domestic consumption or for exports,” pointed out Sanjay Budhia, Chairman, CII National Committee on EXIM.
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