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Last updated: 18 Feb, 2020  

Trump.9.Thmb.jpg Donald Trump's India visit

Narendra Modi and Donald Trump
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Bikky Khosla | 18 Feb, 2020

The US last week eliminated its special preferences under the Generalized System of Preferences (GSP) for a list of countries including India, which is now classified as a developed country though our Gross National Income (GNI) is way below the threshold of $12,375, and this move puts an end to all chances of India reclaiming its benefits under America's oldest preferential trade scheme. It will be more difficult now for Indian exporters to compete with their low-cost rivals in the US market.

Significantly, the US announcement came ahead of US President Donald Trump's maiden India trip from February 24-26 at the invitation of Prime Minister Modi, and amid industry expectations that the visit would open up an opportunity to reach a limited India-US bilateral trade agreement. There is no doubt that a smooth trade relation with the US is of utmost importance at this moment when the Indian economy is going through a rough phase and the US is still a major developed market which is growing.

Such bilateral engagement is particularly crucial at this juncture also considering the corona-virus outbreak in China. The Chinese economy -- which has already been bearing the brunt of trade war with the US -- contributes about 20 percent to the world's GDP and according to an estimate, this share may come down by one percentage point if prevention of the epidemic gets delayed. Therefore, India and the US coming closer at this moment may not only create a win-win situation but also push the global economy.

Meanwhile, the Indian auto component industry has already started taking the brunt of the corona-virus outbreak in China, with a global rating agency even warning that our vehicle production may contract by 8.3 percent in 2020 due to increasing risk of supply shortage. The impact may spill over to other industries as 43 percent of our imports come from China. This is why the Centre should make no delay in taking some major steps to mitigate the adverse impact of disruption in the supply of Chinese imports.

I invite your opinions.

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