UK's withdrawal of GSP benefits may spell trouble for Indian exporters

The UK implemented the DCTS in place of the GSP on June 19. Previously, as a member of the European Union, the UK offered GSP benefits to Least Developed Countries (LDC). Following Brexit, the UK has established the separate DCTS scheme. The decision to withdraw the duty benefit scheme could impact Indian exporters from labour-intensive sectors such as textiles and leather. 

An official from the Apparel Export Promotion Council (AEPC) noted that a country cannot avail of double benefits. As India and the UK are negotiating an FTA, Indian textile exporters are expected to receive duty benefits under this agreement. As such, it is considered reasonable to remove India from the LDC list. 

India and the UK have been negotiating a free trade agreement since January 13, 2021, and have completed ten rounds of talks by June of this year, with both sides aiming to conclude the negotiations as soon as possible. 

Ajay Sahai, director general of the Federation of Indian Export Organisations (FIEO), clarified to the media that the share of certain Indian exports in the UK market had increased beyond a specified limit, hence those sectors would no longer be eligible for GSP benefits. However, he added, some sectors, such as metals, would continue to receive these benefits. 

Nonetheless, the timing of the benefits' withdrawal from Indian exporters is significant. Developed countries, particularly those in Europe and the US, are currently facing high inflation due to supply chain disruptions in the wake of the Russia-Ukraine war. Consumers, as a result, have less discretionary spending power, particularly for goods like garments and textiles, leading to reduced demand in export markets. 

An exporter from Ludhiana said that global brands are already cautious about making new purchases. With the UK's withdrawal of duty benefits occurring amid slow international demand, exporters face a challenging period until the India-UK FTA is signed. Although ten rounds of FTA negotiations have already taken place, the timeline for signing and implementing the agreement remains unclear. 

ALCHEMPro News Desk (KUL)