The European Union has made a significant change that will impact India’s exports. Starting January 1, the EU suspended export benefits for major sectors, including textiles. This shift is expected to hurt Indian shipments to Europe as the two sides work on a new trade agreement.
By January 2026, about 87% of India’s exports to the EU will face higher import taxes due to the end of the Generalised Scheme of Preferences (GSP). This scheme previously allowed Indian goods to enter the EU at reduced tariff rates, making them more competitive. For example, a garment that once incurred a tariff of 12% would now cost the full rate without GSP benefits.
A think tank, Global Trade Research Initiative (GTRI), noted that only 13% of exports, such as agricultural products and leather goods, will still enjoy these benefits. Industries like textiles and chemicals, which make up much of India’s exports to the EU, will be particularly affected.
The EU has a history of adjusting these benefits, with reductions occurring in 2013 and 2023 as well. The new suspension, however, is set to last until 2028. As optimistic as the prospects of a Free Trade Agreement (FTA) seem, Indian exporters may soon face significant challenges. The GSP suspension will hit just as the EU introduces its Carbon Border Adjustment Mechanism, which adds another layer of compliance costs.
This situation could squeeze Indian exporters, especially in price-sensitive sectors like garments. Buyers in the EU may shift to countries like Bangladesh and Vietnam, which offer duty-free access. Current data shows that the total trade between India and the EU was valued at around USD 136.5 billion in 2024-25, with the EU being India’s largest trading partner.
Ajay Srivastava, founder of GTRI, emphasized that while legal steps behind the GSP graduation are sound, the economic consequences are significant. As India navigates these changes, maintaining competitiveness in the EU market will be crucial for its exporters.
For more details on trade dynamics and policies, you can read more from trusted sources like the European Commission.
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GTRI, GSP EXPORT BENEFITS, EUROPEAN UNION, EU GSP, EU SUSPENDED EXPORT BENEFITS, EU SUSPENSION OF GSP EXPORT BENEFITS LIKELY TO IMPACT INDIA SHIPMENTS SAYS GTRI
