Generalised system of preferences is a system of preferential treatment against the general principle of Most Favoured Nation of World Trade Organisation (WTO). It aims to exempt WTO members for the purpose of lowering tariffs for developing and Least Developed Countries (LDCs) against developed countries.
Although the exemption was made to help developing countries and LDCs to compete with developed countries in the international markets, the benefits have accrued mainly to richer developing countries like India and Brazil. Recent negotiations of renewal of GSP for Indian gem and jewellery industry in the USA will boost the sector which is facing slowdown owing to low global demand in the international markets. Similar negotiations are also going with countries like Israel and Belgium.
The sector is extremely important for the Indian economy as it is labour intensive and export oriented.
Any system that increases the export of India will have a positive impact by providing employment, bringing in foreign exchange. This has a cascading effect in the economy. So, such steps are welcome and government of the day must engage in constructive negotiations with developed countries for such concessions.
India is in negotiations with the US to renew its GSP that would levy only 1 % import duty on gems and jewellery as compared to previous 6.5%. This had expired in 2013 as a result the export to US decreased from over 40% to less than 30%.
Impact on India:
1. Export revitalization: This would revitalize our gems/jewellery export to US. We might breach the 40% again. Exports would witness an immediate jump of about 20%
2. Reduction in CAD: The increased exports would further improve the CAD and might reduce it even below 2.7%.
3. Credit ratings: A better CAD would ensure better credit ratings and this would ensure better foreign investments.
4. Increase in import of gold: Since gold is a raw material required for manufacturing jewellery, import of gold would increase.
5. Rise in price of gold: more demand and more imports would increase the price of gold and would again become a saving alternative of individuals. It may even result in gold hoarding.
6. Employment: Expansion of jems/jewellery would increase employment opportunities.
7. Forex reserves: GSP would definitely boost our forex reserves which can be used in infrastructure expansion.
Thus a GSP would boost the exports and help in revitalization of our gems and jewellery industry which can then help in strengthening its hold in the rest of the world
Although the exemption was made to help developing countries and LDCs to compete with developed countries in the international markets, the benefits have accrued mainly to richer developing countries like India and Brazil. Recent negotiations of renewal of GSP for Indian gem and jewellery industry in the USA will boost the sector which is facing slowdown owing to low global demand in the international markets. Similar negotiations are also going with countries like Israel and Belgium.
The sector is extremely important for the Indian economy as it is labour intensive and export oriented.
Any system that increases the export of India will have a positive impact by providing employment, bringing in foreign exchange. This has a cascading effect in the economy. So, such steps are welcome and government of the day must engage in constructive negotiations with developed countries for such concessions.
India is in negotiations with the US to renew its GSP that would levy only 1 % import duty on gems and jewellery as compared to previous 6.5%. This had expired in 2013 as a result the export to US decreased from over 40% to less than 30%.
Impact on India:
1. Export revitalization: This would revitalize our gems/jewellery export to US. We might breach the 40% again. Exports would witness an immediate jump of about 20%
2. Reduction in CAD: The increased exports would further improve the CAD and might reduce it even below 2.7%.
3. Credit ratings: A better CAD would ensure better credit ratings and this would ensure better foreign investments.
4. Increase in import of gold: Since gold is a raw material required for manufacturing jewellery, import of gold would increase.
5. Rise in price of gold: more demand and more imports would increase the price of gold and would again become a saving alternative of individuals. It may even result in gold hoarding.
6. Employment: Expansion of jems/jewellery would increase employment opportunities.
7. Forex reserves: GSP would definitely boost our forex reserves which can be used in infrastructure expansion.
Thus a GSP would boost the exports and help in revitalization of our gems and jewellery industry which can then help in strengthening its hold in the rest of the world
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