EU’s suspension of GSP export benefits likely to impact India’s shipments: GTRI

The European Union has suspended export benefits to sectors such as textiles under a preferential scheme for some countries, including India, from January 1, a move that is expected to impact the country’s shipment to the 27-nation bloc, even as the two sides are finalising a trade agreement, think tank GTRI said on Thursday.From January 1, 2026, India faces a “major setback” in the EU market, as 87 per cent of its exports begin paying higher import tariffs following the European Union’s (EU) suspension of GSP (Generalised Scheme of Preferences) benefits, the Global Trade Research Initiative (GTRI) said.

Only about 13 per cent of exports, including agriculture and leather, retain the benefits under this scheme, it said.GSP concessions allowed Indian exporters to ship at less than MFN (most favoured nation) tariffs to EU markets. Now concessions are suspended for 87 per cent value of Indian goods to the EU.

In simple terms, an apparel product facing a 12 per cent tariff paid only 9.6 per cent under the GSP. From January 1 this year, this benefit ends, and exporters must pay the full 12 per cent duty.

The EU has removed GSP benefits across almost all major industrial sectors — minerals, chemicals, plastics and rubber, textiles and garments, stone and ceramics, precious metals, iron and steel, base metals, machinery, electrical goods and transport equipment - which together form the backbone of India’s exports to Europe.The EU periodically reduces these benefits, as it did earlier in 2013 and 2023. This time, the concessions have been completely withdrawn for three years from 2026 to 2028.

The development is important as the two sides are likely to announce the closure of negotiations for a free tarde agreement (FTA) on January 27.“While there is optimism over the conclusion of the India—EU Free Trade Agreement, Indian exporters will, in reality, confront higher trade barriers in the near term, as the loss of GSP preferences coincides with the start of tax phase of the EU’s Carbon Border Adjustment Mechanism (CBAM),” GTRI Founder Ajay Srivastava said.With the FTA’s implementation likely to take at least a year, if not longer, India’s exports to the EU will face a difficult period marked by higher tariffs, rising compliance costs and weakened competitiveness, hitting exporters just as global trade conditions remain fragile, he said.

He also said that in highly price-sensitive sectors such as garments, this increase is enough to undermine India’s competitiveness and push EU buyers toward duty-free suppliers like Bangladesh and Vietnam.

The EU’s GSP is a unilateral trade arrangement that allows developing countries to export to the EU at lower-than-MFN tariffs.Countries are grouped by income and export competitiveness, and benefits are withdrawn through ‘graduation’ once exports in a product group become large over time.

The EU’s move follows its GSP graduation rules, under which preferences are withdrawn once exports in a product group cross a threshold for three consecutive years.

“Accordingly, India has been graduated for 2026—2028 under Commission Implementing Regulation (EU) 2025/1909, adopted in September 2025. While legally justified, the economic impact is sharp,” Srivastava said.India’s bilateral trade in goods with the EU was $136.53 billion in 2024-25 (exports worth $75.85 billion and imports worth $60.68 billion), making it the largest trading partner for goods.

The EU market accounts for about 17 per cent of India’s total exports, and the bloc’s exports to India constitute 9 per cent of its total overseas shipments.