Amidst speculation that the US is considering the withdrawal of Generalized System of Preference (GSP) to Indian exporters, which would end the duty-free regime for some Indian exports to America, the Confederation of Indian Industries (CII) on Wednesday said that continuation of this preferential duty-free scheme is beneficial to both countries.
“GSP boosts the competitiveness of American manufacturers by lowering their costs. Approximately two-thirds of US imports under GSP are raw materials, components, or machinery and equipment used by US companies to manufacture goods in the United States for domestic consumption or for export. GSP also helps American consumers by eliminating duties on a variety of usually inexpensive consumer goods”, Sanjay Budhia, chairman of the CII National Committee on Exports & Imports said.
GSP is a preferential tariff system extended by 29 developed countries, including the US, Russia, UK and others to India which involves reduced Most Favoured Nation tariffs (MFN tariffs) or duty-free entry of eligible products exported by India to these developed nations.
According to Budhia, who is also the managing director of the Patton Group, US importers enjoyed nearly $ 730 million in savings on import duties under the GSP program in 2016. In 2017, GSP saved American companies $ 894 million in saved taxes.
Under the GSP regime, India enjoys zero tariffs on around $ 5.6 billion of exports to the US. However, in November last year, the US had partly withdrawn GSP on 50 items, including agricultural produce, leather, textiles, chemicals and others, worth around $ 70 million to limit duty-free access for Indian made goods to that country.
Back in April 2018, the US had put India’s continued eligibility for GSP under review.
Although the monetary impact on the volume of Indian exports to the US is yet to be ascertained if the North American country decides to remove India completely from the GSP list, a large number of businesses particularly from the textiles, agricultural and chemicals sector is likely to be hit.