The Commerce Ministry has said the suspension of export benefits by European Union (EU) under its Generalised Scheme of Preferences (GSP) will impact only 2.66% of India’s exports to the 27-nation bloc.

EU has suspended export benefits under its GSP to sectors like textiles and plastics for India and two other countries from January 1. Interestingly, this development has come at a time when the two sides are expected to announce the closure of negotiations for a free trade agreement (FTA) on January 27.

Earlier, some media reports claimed that the suspension would impact 87% of India’s export value to EU. However, the Federation of Indian Export Organisations (FIEO) clarified it does not imply that 87% of country’s exports will face higher duties.

FIEO, in a statement, outlined that EU notification refers to broad product groupings, within which; several products already attract zero customs duty under the EU’s MFN (Most Favoured Nation) regime, and therefore remain unaffected by the withdrawal of GSP preferences. And, many specific tariff lines within these broad categories continue to be eligible for EU GSP benefits, subject to applicable rules of origin and conditions.

“Secondly, it is important to underline that the withdrawal of GSP benefits is not a new measure. The current notification merely extends the validity of the earlier suspension of preferences, which has been in place for these product groups for the past few years. No additional products have been newly brought under GSP withdrawal through this extension,” FIEO clarified.

The GSP is a unilateral trade preference scheme, under which the EU grants reduced or zero customs duties to imports from developing and least-developed countries.

The EU is India’s largest trading partner, accounting for trade in goods worth €120 billion in 2024, or 11.5% of India’s total trade. India is EU’s 9th largest trading partner, accounting for 2.4% of the EU’s total trade in goods in 2024, well behind the USA (17.3%), China (14.6%) or the UK (10.1%). Trade in goods between the EU and India has increased by almost 90% in the last decade, according to a report by European Commission.

The EU’s imports from India comprise mainly machinery and appliances, chemicals, base metals, mineral products, and textiles. The EU’s main exports to India consist of machinery and appliances, transport equipment, and chemicals. Trade in services amounted to €59.7 billion in 2023 (with EU exports of €26 billion), it added.