Engineering sector in a tight spot after US withdraws GSP benefits, says expert

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Published: June 2, 2019 1:37:35 PM

While high-end engineering exporters will have to take a hit of 2-3 per cent margin, the low-value products, which constitute 40 per cent of the sectors' total value, may find it difficult to survive, if the matter is not sorted in the next two-four months.

Under the GSP programme, nearly 2,000 products including auto components and textile materials can enter the US duty-free if the beneficiary countries meet the eligibility criteria established by Congress.

With the US withdrawing GSP benefits, the engineering sector in India seems to be in a tight spot as its exports to the western country under the programme account for about 44 per cent of the total annual duty benefits of USD 5.6 billion, an expert has said.

In 2018-19 fiscal, the engineering exports to the Land of Liberty stood at USD 331 billion.

Of the total annual benefit of USD 5.6 billion India had been receiving from the US, the value of GSP benefit for engineering exports account for USD 2.5 billion, Rakesh Shah, the former chairman of Engineering Export Promotion Council of India (EEPC India), told PTI on Sunday.

While high-end engineering exporters will have to take a hit of 2-3 per cent margin, the low-value products, which constitute 40 per cent of the sectors’ total value, may find it difficult to survive, if the matter is not sorted in the next two-four months, he maintained.

The exporters’ fraternity is pinning hopes on the newly sworn-in Union Commerce Minister, Piyush Goyal, to find an amicable solution to the trade hurdle, at a time when Indian exporters were gearing up to get a share of Chinese exports in wake of mounting trade tension between the US and the dragon country, Shah said.

“It won’t be a major problem if the matter gets sorted out in the next 2-4 months as the exporting units will get to fulfill the existing orders,” the former EEPC chairman said.

The Generalized System of Preference (GSP) is the largest and oldest US trade preference programme, designed to promote economic development by allowing duty-free entry for thousands of products from designated beneficiary countries.

Under the programme, nearly 2,000 products including auto components and textile materials can enter the US duty-free if the beneficiary countries meet the eligibility criteria established by Congress.

The Centre on Saturday called the development “unfortunate” and said, “India, like the US and other nations, shall always uphold its national interest in these matters.”

A statement released by EEPC India Chairman Ravi Sehgal said the organization supports the government’s response to the issue.

“EEPC India fully supports the Indian government’s response to the US withdrawal of the GSP benefits and are hopeful that the two nations would stay gainfully engaged to resolve all the trade issues to their mutual interests. The US would continue to remain our important trading partner,” Sehgal said in the statement.

Shah said the new government will be under pressure for a stimulus to offset the impact from the US move.

The job market, which is already under pressure, will have to face additional blows in sectors hit by the US decision, he added.

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