EU Suspends GSP Benefits: A Major Setback for India's Exports

The European Union will suspend Generalised Scheme of Preferences (GSP) benefits for Indian exports starting January 1, 2026, affecting 87% of the nation's exports. This move is expected to hit industrial sectors such as textiles and garments, raising tariffs and posing challenges amid FTA negotiations.

The European Union has announced the suspension of its Generalised Scheme of Preferences (GSP) benefits to several sectors, including textiles, starting January 1, 2026. This change will impact Indian exports as 87% of them will face higher tariffs in the 27-nation bloc, according to the Global Trade Research Initiative (GTRI).

Previously, GSP concessions allowed shipments at lower tariffs than the most-favored-nation (MFN) rates. However, the EU has now removed these benefits for key sectors like minerals, chemicals, and textiles, which form a significant part of India's exports to Europe. The suspension aligns with the EU's GSP graduation rules that are triggered when exports exceed a threshold for three consecutive years.

Despite ongoing negotiations for a Free Trade Agreement expected to conclude soon, Indian exporters are likely to face increased trade barriers in the near term. Alongside the introduction of the EU's Carbon Border Adjustment Mechanism, the additional tariffs increase challenges for Indian exporters, potentially benefiting duty-free suppliers like Bangladesh.

(With inputs from agencies.)