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.