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The Centre may engage with the industry to assess the impact of the European Union’s decision to withdraw preferential tariff benefits for certain products from India, including electrical machinery, plastics, articles of stones and articles of leather, from January 2023.
“A number of items are graduating out of the Generalised System of Preferences (GSP) scheme from next year and there is little that anyone can do about it. The main issue now is to look into whether exporters will lose their market share and if there is a case for extending some support to such sectors,” a person tracking the matter told BusinessLine.
Under the scheme, the EU allows preferential access to identified products originating in certain developing countries, in its markets in the form of reduced or zero rates of customs duties. According to EU rules, GSP beneficiaries can lose preferences for specific product categories that are deemed to have become sufficiently competitive.
The scheme was first envisaged by the UN over 50 years ago to help developing countries integrate with the world economy. Today, there are more than a dozen countries that offer GSP benefits including the US, Canada, Australia, New Zealand, Norway and the UK.
Affecting exports
“The government is taking heart from the fact that even after withdrawal of GSP scheme by the US for several Indian products in 2019, exports of most items actually increased and their market share was not adversely affected. One has to see if the same would happen in case of the withdrawal by the EU,” the source said
The Federation of Indian Export Organisations (FIEO) has already done a rough analysis of how the move could affect Indian producers and flagged the matter with the government. India exports machinery worth about $5.1 billion and plastic items worth about $1.7 billion to the EU annually, pointed out Ajay Sahai, Director General, FIEO.
FTA possibility
Articles of leather (excluding footwear) and articles of stones — the other two categories set to lose GSP benefit — are not critical as exports there are not significant. “In the first two product sector, the government has to look into whether or not the industry is competitive enough to survive this kind of withdrawal. If not, then what could be done to help them,” Sahai said.
As India is negotiating a Free Trade Agreement (FTA) with the EU, there also exists a scope of getting preferential tariff benefits for the affected sectors through the trade pact.
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