The government on Friday clarified that the European Union’s broader suspension of the Generalised Scheme of Preferences (GSP) will affect only about 2.7% of India’s exports. The GSP allows developing countries such as India to export goods to the EU at reduced tariff rates, helping them remain competitive in European markets.
A report by trade policy think tank Global Trade Research Initiative this week claimed that Brussels’ move will hit 87% of Indian shipments to the 27-nation bloc. The move means that a large share of Indian exports will now be charged full Most Favoured Nation (MFN) tariffs, ending years of preferential access under the EU’s unilateral trade arrangement for developing countries.
In 2023, the EU imported goods worth around 62.2 billion euros from India, out of which 12.9 billion euros received GSP benefits. With India graduating from 12 major product categories, approximately 1.66 billion euros of trade will lose these tariff advantages, while 11.24 billion euros will continue to qualify, the Ministry of Commerce said.
The EU periodically reviews the graduation process based on the competitiveness of a country’s exports, and India’s graduation reflects the growing strength of its export sectors. The European Commission has introduced a new regulation that will suspend certain GSP tariff benefits for several countries, including India, from Jan. 1, 2026, to Dec. 31, 2028.
Under the revised GSP structure, agricultural products will not be graduated. In the non-agricultural segment, only leather products have been reinstated. The suspension will apply to 13 specific GSP sections covering a wide range of goods such as mineral products; inorganic and organic chemicals; plastics and rubber; textiles; articles made of stone, plaster, cement, asbestos, or mica; ceramic products; glass items; pearls and precious metals; iron, steel, and related products; other base metals; machinery and mechanical appliances; electrical machinery and equipment; and railway, automotive, aerospace, and marine vehicles and parts.
The EU’s GSP is a unilateral, non-reciprocal trade preference scheme offering reduced or zero customs duties to developing and least-developed countries. It operates as an exception to the WTO’s Most-Favoured-Nation principle under the 1979 Enabling Clause, which permits developed countries to extend favourable treatment to developing nations.
The EU offers three tiers of preferences under the GSP framework. The Standard GSP provides reduced tariffs for low- and lower-middle-income developing countries, such as India. The GSP+ scheme offers enhanced benefits to countries that comply with international conventions on human rights, labour standards, the environment, and governance. The Everything But Arms (EBA) scheme grants least-developed countries duty-free, quota-free access for almost all goods except weapons.
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