US President Donald Trump finally followed through with the trade threats he made in March this year. Effective 5th June, India’s exports lost all preferential benefits they received under the Generalized System of Preferences (GSP) provided by the US, potentially subjecting almost $5.6 billion worth of trade to additional tariffs. However, the Indian reaction has been possibly quite different from what the US expected. In a meeting held on 6th June, new Commerce and Industry Minister Piyush Goyal revealed a new direction for improving India’s export competitiveness in the future -- self-sufficiency. Goyal, and by extension, the government, are clearly aware of the problems faced by Indian exporters, including limited credit, higher interest and tax rates, etc. However, in a rare admonishment, the Minister said that Indian exporters have become too reliant on subsidies and need to focus on building competitiveness on their own. This is a very different approach from what the industry was expecting, with many exporters hoping for increased sops and subsidies to balance recent losses because of international geopolitical and economic upheaval. However, it appears that the government has decided it’s time India’s exports finally matured and built their own capabilities. The powers-that-be have pledged support for this process, even as India gears up for more fights internationally over trade at the WTO and the upcoming G20 summit. Exporters will be keeping close tabs on the government’s future policy moves, as, likely, will the US.
Trade Update
8th June
# 28
India will try to build up export competitiveness in its own right without depending on the Generalized System of Preferences (GSP) scheme provided by the US, said Commerce and Industry Minister Piyush Goyal on 6th June. Addressing the media for the first time since taking charge, Goyal said India graciously accepts the fact that development assistance hitherto provided by other nations has stopped. The scheme provided India tariff-free access to the US market.
Commerce and Industry Minister Piyush Goyal, on 6th June, said that industry and exporters should not depend on government subsidies and instead focus on becoming competitive. “I do not think that any program or ambitious scheme can run only on subsidies and government help. We have to move out of this continuous effort and demand ... and make our industry truly competitive and self-reliant,” he said. He was addressing members of the Board of Trade and the Council of Trade Development and Promotion.
Indian exporters and manufacturers are facing a cost disadvantage due to higher borrowing costs and tax rates, the trade minister said on 6th June, after economic growth slipped to a more-than-four-year low of 5.8% in the January-March quarter. “We need to address the root cause of problems hurting the exporters and industry,” said Commerce and Industry Minister Piyush Goyal, while speaking at the first meeting of exporters and government officials to discuss plans to promote exports after he took charge last week.
The impact of ending preferential treatment by the US would be offset by new export market opportunities along with financial support and lower crude oil prices, said industry experts. “The withdrawal of GSP benefits to exports will have a one-time impact which will be reflected in the overall trade deficit,” Sunil Kumar Sinha, Director, Public Finance and Principal Economist India Ratings and Research (Fitch Group), told IANS.
India will maintain its stance of not being part of the ecommerce negotiations to frame global rules on digital trade at the upcoming meeting of the G-20 countries on 8th-9th June in Japan. India has opposed global rules on ecommerce and the plurilateral discussions among 77 countries, arguing that these discussions are not consistent with the mandate of the multilateral trading system and strike at its roots. The G-20 would be Piyush Goyal’s first international engagement as commerce and industry minister.
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