New Delhi: Ahead of commerce and industry minister Piyush Goyal’s visit to Washington, think tank GTRI said on Monday that India should accept the withdrawal of benefits under the US generalised system of preferences (GSP) scheme and avoid pushing for its reinstatement as the benefits for domestic exporters were marginal. “India should not seek the resumption of the scheme in the upcoming India-US commercial dialogue on October 2,” the GTRI suggested.
In the Washington visit, Mr Goyal is visiting Washington and will co-chair the meeting with US Secretary of Commerce Gina Raimondo with participation from industries, startups, and SMEs from both countries. “As a growing economic power, India should focus on broader, more strategic trade discussions rather than seeking concessions on relatively insignificant issues,” it said.
As far as the GSP scheme is concerned, it is primarily designed for low-income countries, with even major economies like China excluded. “The primary aim of the dialogue is to strengthen the bilateral commercial partnership, boost investment opportunities, and enhance supply chain resilience,” GTRI founder Ajay Srivastava said.
“Given these larger objectives, focusing on reinstating GSP benefits, whose economic impact on India has been minimal, would detract from more significant areas of cooperation. Another important reason is the low values of these benefits,” Mr Srivastava said.
The GSP program, initiated by the US in 1974, was designed to grant duty-free access to specific products from developing countries, providing them with a competitive edge in the American market. However, the impact of GSP benefits on India’s overall trade was limited. “In 2019, only about 16 per cent of India's total exports were destined for the US, and less than 2 per cent of these exports benefited from the GSP scheme, he said. “For every $100 worth of Indian goods exported to the US, only 12 per cent entered under the GSP program. Some selected products from leather, footwear, auto components, and chemicals sectors benefitted, but even in these cases, the advantages were minor compared to the broader scope of India's trade relationship with the US,” he added.
At a macro level, he said that the GSP covered less than 1 per cent of the total $2.3 trillion in US imports annually, with the American government foregoing only about $1 billion in customs revenue. “Thus, the GSP's impact on India's export growth was limited,” the GTRI said, adding that as a growing global economy, India should pursue strategic agreements and larger negotiations.
According to the latest government data for January to July 2024, India's merchandise exports to the US grew from $44.1 billion in the same period of 2023 to $48.2 billion in 2024, reflecting a 9.3 per cent increase. “In contrast, India's imports from the US declined from $25.9 billion to $24.6 billion, a 5 per cent decrease,” the data said.
