Indian exporters faced another major setback as the European Union (EU) suspended GSP (Generalised Scheme of Preferences) benefits to sectors such as textiles and plastics.
According to the report of Global Trade Research Initiative (GTRI), nearly 87% of the Indian exports would be impacted due to the suspension of GSP.
GSP is a unilateral trade arrangement under which developed economies extend customs duty concessions on select products imported from developing nations. These benefits—ranging from partial duty cuts to full exemption—apply to goods that figure on the eligible product list of beneficiary developing countries. The European Union currently extends GSP benefits to exporters from 67 countries. However, from January 1, 2026, India’s exports to the EU are facing higher tariffs after suspension of GSP benefits and exporters need to pay the full 12% duty.
GSP concessions had enabled Indian exporters to access the European Union market at tariffs lower than the standard most-favoured-nation (MFN) rates. With the withdrawal of these benefits, preferential access has now been suspended for about 87% of the value of Indian goods shipped to the EU. Under the GSP framework, exporters typically enjoyed a margin of preference (MoP)—the extent to which EU tariffs were reduced from MFN levels—which averaged around 20% for key categories such as textiles, garments and a range of industrial products.
With implementation of CBAM from January onwards and removal of GSP, Indian exporters are hoping for a faster conclusion of EU-FTA. However , GTRI report highlights that there will be little respite for Indian exporters in the near future. “ 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,” stated the report.
GSP withdrawal covers almost all major industrial exports—textiles, chemicals, metals, machinery and engineering goods.
And most of these sectors have already been severely affected due to the imposition of 50% US tariff from August onwards.
For textile exporters, US and EU are the top markets. With US tariff in place, textile exporters were aiming to tap a larger and better European markets. In highly price-sensitive sectors such as garments, such challenges can undermine India’s competitiveness and push EU buyers toward duty-free suppliers like Bangladesh and Vietnam.
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.