The Trump administration’s decision to withdraw trade concessions to India under the Generalised System of Preferences (GSP) could have significant impact on individual sectors, even though the overall impact will amount to less than 0.4% of India’s exports to the U.S., Federation of Indian Export Organisations (FIEO) has said.
“India’s exports to the U.S. stood at $50.57 billion in 2017 with a GSP tariff advantage of only $190 million, which was less than 0.4% of our exports,” Ajay Sahai, director general and CEO of FIEO told The Hindu . “So, the withdrawal will have marginal impact.”
The export body said India was getting a tariff preference on 5,111 tariff lines out of a total 18,770 tariff lines, in the U.S. Within this, the tariff advantage was more than 4% in 2,165 tariff lines.
Absorbing duty loss
“While exporters should be able to absorb the duty loss where it is 2-3%, the government should look into providing fiscal support to those products where GSP tariff advantage was significant, particularly in the labour-intensive sectors,” Mr. Sahai added. “This will allow them to maintain their landed prices at more or less the same level as under the GSP regime.”
According to FIEO, the sectors that will likely be significantly impacted will include processed foods, leather products other than footwear, plastic products such as vinyl floor covering and non-adhesive tapes, building material and tiles, hand tools such as spanners, wrenches, and drilling equipment, and engineering goods such as spark ignition, turbines and pipes, parts of generators and cycles, and made-ups such as pillow and cushion covers, and woven women’s dresses.
The export body also pointed out that the withdrawal of GSP benefits to Indian exporters will also impact the downstream industries in the U.S. that were using the cheaper inputs from India to maintain their cost- and price-competitiveness.
“The GSP withdrawal will also impact the competitiveness of many manufacturing sectors[in the US] and will hit the consumers at the same time,” Mr Sahai said. “The import price of most of the chemicals products, which constituted a large chunk of India’s exports, is expected to increase by about 5%.”
The U.S.’ move would have significant impact on leather travel goods, said P.R. Aqeel Ahmed, chairman, Council for Leather Exports. The $800-million travel goods sector till now enjoyed 0% duty.
Asked how they would face it, he said it would not take effect for at least two months after notification to the Congress and the Indian Government. “We will take it up with the Centre to request the U.S. not to withdraw the GSP,” he said.
The textiles sector may not see significant impact as only a few products are covered under the GSP, though close to 40% of total cotton textile fabric and made-ups exports from India are to the U.SWithdrawal of Generalised System of Preference (GSP) for Indian products by the U.S. may not see significant impact on the textile sector much. However, it will have an impact on exports of some products.
A. Sakthivel, vice-chairman, Apparel Export Promotion Council, said there are 15 ready-made garment products under the GSP that account for $17 million of annual imports by the U.S. from India.
“We are taking up the issue with Ministry of Commerce to continue to provide the GSP benefit to India. This will raise the product cost for buyers by almost 7%. China is the main competitor in these categories and India will not be able to match the cost.”
(With inputs from Preetha Soundariya, N. Anand)
