US Withdrawal of GSP to India may be Set Off with Sops

·      Central and State Tax Rebates Among Proposals

The Commerce Ministry is looking at extending support to the sectors affected most by the US decision to withdraw a special status scheme for India that allowed duty-free exports of more than 3,000 items from the country.

“The loss suffered by India due to the withdrawal of the Generalised System of Preferences (GSP) scheme will not be huge, but there are specific sectors which will take a hit. These sectors need some hand-holding,” a government official told.

Imitation jewellery, leather articles (other than footwear), pharmaceuticals & surgical instruments, chemical & plastics, and agriculture are among sectors that are likely to be worst affected by the withdrawal, according to the Federation of Indian Export Organisations (FIEO).

FIEO has proposed that the sectors worst hit by the GSP withdrawal be extended benefits under the Rebate of State & Central Tax Levies Scheme (RoSCTL) to provide some compensation.

“After assuming charge, Commerce and Industry Minister Piyush Goyal has been holding marathon meetings with officials on crucial issues over the weekend. He is also expected to discuss ways in which the export sector could be assisted following the withdrawal of the GSP scheme,” the official said.

US President Donald Trump signed a proclamation on May 31 stating that the GSP scheme will be withdrawn for India from June 5. The move is in retaliation to the US government’s belief that India is not providing equitable market access to American products.

While GSP withdrawal affects $6.35 billion worth of exports from India, exporters stand to lose net benefits worth $260 million annually.

Late response: Congress

Reacting to the development, Congress spokesperson Randeep Singh Surjewala said that the decision to withdraw the scheme was notified to India on March 4, but the government did nothing to pre-empt it. “The most serious implication would be for sectors like agriculture, auto parts, and pharmaceuticals, which are already facing a serious crisis. In future, we could see many more industries including the services industry, which has more than $28 billion of exports to the US, being affected significantly,” said an official release of the Congress.

In its official reaction to the move, the Commerce Ministry said it was “unfortunate” that the resolution offered by New Delhi on the matter was not acceptable to Washington.

“We have significant development imperatives and concerns and our people also aspire for better standards of living. This will remain the guiding factor in the government’s approach,” the Commerce Ministry stated, indicating that it is not possible for the country to ignore the interest of its people while working on trade deals.

US demands

The Trump regime, which has been miffed with India for running a trade surplus with the country, had made a number of demands including softening of price caps on medical equipment, removal of certain mandatory certifications for dairy product exports, removal of import duties on cellular phones and roll-back of certain changes made in the e-commerce policy that imposed several restrictions on foreign players sourcing goods from vendors.