By Admin 
India-EU Trade Deal: The trade deal between India and the European Union is making a lot of headlines these days. It is expected that by next week on January 27, talks will be finalized on this deal, for which both the countries were waiting for a long time. However, meanwhile another big news is coming out, which is no less than a shock for India.
Actually, the European Union has decided to stop export benefits on some goods of India. According to experts, under this, the tariff on most Indian exports to the European Union (EU) will increase by 20 percent because the EU is withdrawing the exemption given under the Generalized System of Preferences (GSP) which came into effect from January 1.
What is the matter of concern for India?
However, its impact on India is not going to last long as it will replace GSP withdrawal as soon as the FTA is signed with the EU. That means, as soon as the deal is finalized, GSP will be replaced by FTA. The matter of concern here is that it may take several months to get the benefits of FTA, whereas the order for GSP withdrawal came on 25 September. The EU has withdrawn the GSP tariff preference on the import of about 87 percent of Indian goods from January 1 this year, due to which most of the products will now have to enter at the full MFN duty rate.
Ajay Sahay, CEO and Director General of Federation of Indian Export Organizations (FIEO), said that it is obvious that due to GSP withdrawal, Indian goods reaching EU became less competitive compared to suppliers like Bangladesh and Vietnam. He further said, “The biggest impact has been on industrial exports – including minerals, chemicals, plastics, iron and steel, machinery and electrical goods – which form a large part of India’s shipments to the EU and are now fully covered by the MFN tariffs.”
What is GSP?
GSP is a scheme in which developed countries impose low or zero tariffs on selected goods from developing countries of the world to encourage their exports. The Ministry of Commerce and Industry said that since 2016, the EU has been gradually excluding Indian goods from the scope of GSP benefits.
The situation is that now only 13 percent of Indian exports including agricultural products and leather will get benefit under this scheme. About 47 percent ($35.6 billion) of goods sent from India to the EU from FY 2025 are still under the ambit of GSP benefits, while only 53 percent ($40.2 billion) of exports are still under GSP. In the recent GSP review, the EU has also excluded some specific products of Indonesia and Kenya from GSP benefits. GSP benefits are removed from a product category when the products become so successful in that country that they no longer need help to compete in the EU market.
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