Bikky Khosla | 04 Jun, 2019
terminated India's designation as a beneficiary developing nation under the
Generalised System of Preference (GSP) trade programme, with effect from June
5. While the Centre has termed the move as "unfortunate", according
to some industry observers, the US decision will hardly have any major impact
on India's exports. No doubt, with US duty concessions to India under GSP
amounting to around $260 million, our exporters need not to worry, but the
development has some other dimensions as well.
As far as
export is concerned, India shipped goods worth $51.4 billion to the US in 2018.
Of this amount, exports drawing GST benefit amounted to $6.35 billion while net
duty benefit amounted only to $260 million. So, overall the impact of GSP
benefit withdrawal will not be much although some sectors like chemicals,
engineering goods, imitation jewellery, leather articles, pharmaceuticals, etc.
will suffer to some extent, unless the government provides some support to
these sectors to mitigate the effect.
seems, however, more significant is the warning signal the Trump administration
has sent. The US claimed that India had not assured the US that it would
provide "equitable and reasonable access" to its markets, but the
fact cannot be denied that US has a history of using the GSP privilege as a
pressure tactic and in India's case the objective could be to pressurize India
in a range of issues, such as to stay away from buying Iranian crude oil or to
tone down the rhetoric around data sovereignty.
Indian economy is not in a good shape currently: investment is not picking up,
consumption is faltering, bank and company balance sheets are stressed,
unemployment rate is at all-time high and overall economic growth is slowing.
So, at this moment any knee jerk retaliatory actions against the US will harm
rather than helping us. Instead, the new government should act in a cool head
to arrive at a 'balanced' package that would address the US's concerns without
jeopardizing our larger economic interests.