GSP: Rollback Of U.S.’ Trade Preference Will Have Minimal Impact On India: Nomura

Nomura said the rollback of the U.S.' key trade preferences will have limited economic impact on India even as Asia's third-biggest economy continues to negotiate its trade deal with the Trump administration.

General preferential trade treatment with the U.S. allows duty-free entry of about 2,000 products, including auto components, industrial valves, and textile materials.

The U.S. accounts for 15 percent of India's exports, with goods worth $48 billion shipped to them. India's total export to the U.S. under the special status was worth $5.7 billion in 2017. The rollback, however, will affect only 12 percent of these exports. That translates to just 2 percent of total exports getting impacted, or up to 0.2 percent of India's GDP, according to Nomura.

The report reinforces the comments of India's Commerce Secretary Anup Wadhawan who saw no significant impact of the withdrawal. The duty benefit to India on exports under preferential treatment was “relatively limited” at $190 million, with India exporting 1,900 products to the U.S. under the special status, he had said.

But the small- and medium-sized enterprises may face the headwinds of this move initiated by U.S. President Donald Trump. Nomura said the generalized system of preferences covered exports from sectors, including agricultural products, utensils, items of iron and steel, electronics, auto components and chemicals, among others—most of which serviced by these enterprises.

While India and the U.S. share strong diplomatic ties, the move to end key trade preferences may be due to the U.S.' frustration at making progress on market access issues with India, the financial services company said. The Indian government continues to review the issue but some form of a compromise between the two sides looks more likely than not, it said, adding a resolution, if any, is possible only after the general election in India.