India exporters likely to lose benefits of UK import scheme
The UK’s move to scrap the duty benefit from its Generalised Scheme of Preferences (GSP) could impact Indian beneficiaries of the scheme, including exporters from labour-intensive sectors such as leather and textiles.
The UK replaced the GSP with a new Developing Countries Trading Scheme (DCTS) in mid-June. Other labour-intensive sectors, including carpet manufacturers, iron and steel goods and chemicals, are also likely to be impacted, according to industry experts.
Global Trade Research Initiative (GTRI) said the United States, the European Union, Australia, Japan and many other developed countries grant unilateral import duty concessions to developing countries under their GSP schemes.
“As the UK has come out of the EU, it has designed its own GSP scheme. Each country sets a product-wise threshold limit, if a country’s exports cross the limit, the GSP concessions stop. The UK withdrawing GSP concessions on labour-intensive products was expected as the two countries are negotiating a free trade agreement,” GTRI co-founder Ajay Srivastava said.
GSP concessions are available in full to exports from Least Developed Countries (LDCs). Srivastava added that the firms, associations and countries can request for restoration of concessions but he added that this rarely happens.
“Since the concessions are small, India should stop participating in GSP schemes and stand tall like China does. GSPs are vestiges of colonial mindset and should be used by only LDCs,” Srivastava said, adding that India’s exports worth $2.5 billion are entitled for the GSP benefit in the UK. China does not participate in the scheme.
Ajay Sahai, Director General of the Federation of Indian Export Organisations (FIEO), said exports of certain Indian goods to the UK had increased beyond the specified limit, and so would no longer be able to access GSP benefits.
He added that certain sectors such as metals would continue to enjoy the benefits.
“India will get the benefits under standard preferences rather than enhanced preferences. LDCs will get enhanced benefits,” Sahai said.
India and the UK have been negotiating a free trade agreement since January 13, 2021, with both sides saying they want to conclude the negotiations at the earliest opportunity.
Domestic economy continues to grow
Figures from India’s largest commercial lender, the State Bank of India (SBI), show that domestic GDP growth is being maintained, although it expressed concern that rural demand is lagging while urban demand continues to rise.
In light of the latest statistics, SBI has revised its GDP growth forecast marginally upwards, from 6.4% to 6.5% for the current financial year.
Inflation for the current financial year has been pegged by 5.1% by the central bank, the Reserve Bank of India (RBI), although this is above the bank’s own target figure of 4%.
The report said that successive interest rate hikes had resulted in the unemployment rate falling. It also said that “the declining current inflation as well falling inflationary expectations for the next financial year gives a clear signal that the RBI will be able to control the rate of price rise by a series of previous rate hikes having its lagged impact, within the tolerance band”.
It added that the headline inflation trajectory, the measure of the total inflation of an economy, is likely to be shaped by food price fluctuations.
According to the report, the “outlook on the global economy is clouded in sideways movement in most of the indicators even when slowdown in advanced economies, weak external demand, tight financial conditions and elevated debt levels pose risks to growth prospects”.
Recently, the RBI’s Monetary Policy Committee, under the chairmanship of RBI governor Shaktikanta Das, held repo rates for the second time at 6.5%, after doing the same in April. The repo rate is the rate at which the central bank lends money to commercial banks or financial institutions against government securities.
