Prelims level : International Relations - Bilateral Relations Mains level : GS II – Effect of policies and politics of developed and developing countries on India’s interests, Indian Diaspora
No Set Found with this ID
  • The move by the United States (U.S.) to terminate India’s designation as beneficiary developing country under the Generalized System of Preferences (GSP) programme because it no longer complied with the statutory eligibility criteria, is likely to affect plastic exports from India

Trade surplus for India

  • In 2018, India and the U.S. reported a bilateral trade (only merchandise goods) worth $84.9 billion, up 20% from the previous year.
  • The trade was in favour of India, which reported a surplus of $17.9 billion during 2018, down 15.1% from $21.1 billion a year earlier.

Generalized System of Preferences (GSP)

  • GSP is largest and oldest US trade preference programme introduced in 1976.
  • It is designed to promote economic development by allowing duty-free entry for thousands of products from designated beneficiary countries both developing and developed countries.
  • Under it, a wide range of industrial and agricultural products originating from certain developing countries are given preferential access to US markets.
  • India’s case, GSP enables duty-free entry of 3,500 product lines in US markets, which benefits exporters of textiles, engineering, gems and jewellery and chemical products.
  • The total US imports under GSP in 2017 was $21.2 billion, of which India was biggest beneficiary with $5.6 billion, followed by Thailand ($4.2 billion) and Brazil ($2.5 billion).
  • The US Congress in March 2018 had voted to renew GSP through 2020.

Impact on Trade with India

  • The withdrawal of the Generalised System of Preferences from India would result in the elimination of duty-free access for about 2,000 Indian product lines.
  • This will hurt small businesses such as jewellery. This will adversely affect Indian exports to the US.
  • After the withdrawal of the Generalised System of Preferences number of goods qualifying for preferential treatment could be reduced, or the whole programme could be withdrawn.
Share Socially