The US government has decided not to reverse the decision to terminate the Indian designation as a beneficiary developing nation under the Generalised System of Preferences (GSP), while saying that India must address the US’ concerns, particularly regarding the market access and data localisation.
Under the GSP, the US government gives preferences to developing nations through duty-free entry from the designated beneficiary country.
On March 4, 2019, the US administration announced a 60-day notice period, ending on May 3, and after declining any further review into the subject, a formal order was expected anytime soon.
US officials say that the administration under President Donald Trump laid emphasis on ensuring US companies have a level playing field in India. It was this persistent issue that led the US to issue a notice terminating the GSP status of India.
Reacting to the news of the US withdrawal of GSP benefits to India from June 5, 2019, Ganesh Kumar Gupta, president, Federation of Indian Export Organisations (FIEO), said that India’s exports to the US in 2018 were worth $51.4 billion.
“But out of $6.35 billion worth of exports from India to US under the GSP scheme, the net benefit accrued by the Indian exporters was only to the tune of $260 million, and thus, at the macro level, the impact of GSP withdrawal on our exports to the US would be minimal. However, in respect of products having GSP benefits of three per cent or more, exporters may find it difficult to absorb the GSP loss.
“The most affected sectors would be imitation jewellery (average GSP benefit 6.9 percent); leather articles (other than footwear) (average GSP benefit 6.1 percent); pharmaceuticals and surgical (average GSP benefit 5.9 percent), chemical and plastics (average GSP benefit 4.8 percent) and agriculture: basic and processed (average GSP benefit 4.8 percent),” said Gupta.
He added that GSP withdrawal would also affect US manufacturers who benefited from it on imports of parts and components, as well as US consumers.
“It will also indirectly benefit China. In the first two months of 2019, GSP imports from India are up significantly for products on the Section 301 lists, but down for products where China does not face new tariffs. For India, 97 per cent of increased 2019 GSP imports are on the China Section 301 lists. GSP imports on Section 301 lists increased by 18 percent, while imports of everything else increased by just two per cent. This makes a very strong case for extension of GSP benefits for India,” observed the FIEO chief.
Gupta added that the government should provide some supports to products, where GSP loss has been significant so that the market is not lost. He favoured the extension of the Rebate of State & Central Tax Levies (RoSCTL) scheme on such products on exports to the US.
