India Enjoys GSP Benefits From Other Countries

Indian exports to these countries were nearly five times the total exports to the US in 2018:

In 2019, the United States’ goods and services trade with India was anticipated to be worth $146.1 billion. Exports totaled $58.6 billion, while imports came in at $87.4 billion. In 2019, the United States’ goods and services trade deficit with India was $28.8 billion. With $92.0 billion in total (two-way) goods trade in 2019, India is our 9th largest goods trading partner. Exports of goods totaled $34.3 billion, while imports of goods totaled $57.7 billion. In 2019, the United States’ goods trade deficit with India was $23.4 billion. According to the Department of Commerce, in 2015 (the most recent statistics available), U.S. exports of products and services to India generated an estimated 197 thousand jobs.

The impact of GSP withdrawal on India

The US GSP withdrawal took effect in 2019, despite the fact that negotiations had been ongoing since 2018, and our analysis concentrates on the immediate impact. Second, exchange rate variations, an absence of interest, or even price volatility in the receiving or exporting countries (or both) could have an impact on export volume. However, the study’s time frame is limited (approximately 2015 to 2018 based on data accessibility), so none of these factors—in the US or in India—has demonstrated unusual volatility during this time that would harm Indian exports. Taking all of these variables into account, the loss of GSP will undoubtedly have a negative impact on India, and the purpose of this short is to understand only that aspect of the impact.

India must discover ways to trade without such assistance programs in the long run, despite the unexpected nature of the disengagement having an immediate detrimental consequence on the Indian market (particularly on MSMEs). As a result, even if the US withdraws GSP, it should do so gradually so that manufacturing does not suffer an immediate setback.

List of GSP countries 2020

The Generalised System of Preferences (GSP), established in 1971 under UNCTAD’s auspices, has helped developing countries create a more favourable trading climate over time. Armenia, Australia, Belarus, Canada, the European Community, Iceland, Japan, Kazakh, New Zealand, Norway, Russia, Switzerland, Turkey, the United Kingdom, and the United States of America are among the 15 nations that provide GSP preferences. 

GSP, which was established by the 1974 Trade Act, encourages economic growth by removing tariffs on hundreds of products imported from one of 119 selected beneficiary nations and territories.

Conclusion:

The research presented in this paper clearly indicates that the GSP withdrawal will have a major adverse impact on Indian exports to the United States. It also explains the impact on domestic output, exports, and employment in connected sectors. There is reason to be concerned about the loss of the GSP. Given the Trump administration’s recent trade combativeness, the US is doubtful to reverse its decision to revoke India’s GSP benefits. Because the GSP has always been a luxury rather than a right, India must make every effort to persuade the US not to terminate the advantage completely. India’s per-capita income data, as well as many other human development indices, indicate that the country is still classified as a “developing country” with a long way to go before attaining the classification of a “developed country.” In the case of the Indian economy, the primary goal of the GSP is to raise countries with considerably vastly lower income to a higher level.