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Last Updated : Feb 12, 2020 10:59 AM IST | Source: Moneycontrol.com

India 'developed economy', US justifies GSP removal

The Generalized System of Preferences (GSP) scheme is given to countries with lower than 0.5 percent share (as per US government estimates) in global trade

Representative Image: Reuters
Representative Image: Reuters

The United States has classified India as a ‘developed economy’ to justify the country’s removal from its Generalized System of Preferences (GSP) scheme. The scheme gives developing economies tariff-free access to the US, Business Standard reported.

The United States Trade Representatives’ (USTR’s) office suspended India’s GSP benefits in June 2019. It calculates a country’s level of economic development based on its gross national income (GNI) and its share in global trade.

GSP is given to countries with lower than 0.5 percent share (as per US government estimates) in global trade. But, India’s share by 2017 was 2.1 percent for exports and 2.6 percent for imports, per which it has long been ineligible for the scheme, the office said.

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The USTR’s office further posited that, since India is part of the G20 alongside Argentina, Brazil, Indonesia and South Africa, these can all be classified as developed economies. This despite the fact that World Bank data showed GNI for these countries below $12,375, the paper noted.

Commerce and Industry Minister Piyush Goyal dismissed the need for ‘development assistance’, but bilateral trade talk between the US and India has included the issue. Increased competition from low price rivals has become a pain point and GSP secures some market share.

India is the largest GSP beneficiary with tariff exemptions in 2018 amounting to $260 million as goods worth $6.35 billion were covered by the scheme in FY18-19, the USTR’s office said. This, however, pales against India’s overall exports to the US, which were $51.4 billion, the report noted.
First Published on Feb 12, 2020 10:59 am
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