India's exports to EU to take a hit: Indian think-tank
The EU has suspended export benefits to sectors such as textiles under a preferential scheme for some countries, including India, from 1 January this year
India's exports to the European Union are likely to be hit even as the two sides are finalising a Free Trade Agreement, a New Delhi-based leading economic think-tank said today (22 January).
The EU has suspended export benefits to sectors such as textiles under a preferential scheme for some countries, including India, from 1 January this year.
This was a move by the 27-nation grouping that follows its GSP graduation rules under which preferences are withdrawn once exports in a product group cross a threshold for three consecutive years.
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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, according to chairman of Global Trade Research Initiative (GTRI) Ajay Srivastava.
India's bilateral trade in goods with the EU stood at $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% of India's total exports and the bloc's exports to India constitute 9% of its total overseas shipments.
From 1 January, the European Union has suspended the Generalised Scheme of Preferences benefits, the GTRI said.
Only about 13% of exports, including agriculture and leather, retain the benefits under this scheme, it said.
The GSP concessions allowed Indian exporters to ship at less than MFN (most favoured nation) tariffs to EU markets. Now concessions are suspended for 87% value of Indian goods to the EU.
An apparel product facing a 12% tariff paid only 9.6% under GSP. From 1 January this year, this benefit ends and exporters must pay the full 12% duty.
The EU cuts these benefits from time to time, as it had done in 2013 and 2023. This time, the concessions have been completely withdrawn for three years from 2026 to 2028.
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.
India and the EU are likely to announce the closure of negotiations for a FTA on 27 January.
"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]," Srivastava said.
With the India-EU 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 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.
