India Says Only 2.66% of Exports Affected by EU's New GSP Regulation
India's Commerce Ministry reports that the EU's new GSP Regulation 2025, effective January 1, 2026, will impact only 2.66% of India's exports to the bloc. The regulation suspends tariff preferences for thirteen product categories including textiles, machinery, and chemicals, affecting €1.66 billion of trade based on 2023 data. Agricultural products remain unaffected while leather has been reinstated for preferential treatment. The ministry attributes the graduation to India's growing export competitiveness in global markets.
*this image is generated using AI for illustrative purposes only.
India's Commerce Ministry has clarified that the European Union's new Generalised System of Preferences (GSP) Regulation 2025 will have a limited impact on the country's export trade, affecting only 2.66% of India's total exports to the 27-member bloc. The regulation, which became effective on January 1, 2026, introduces changes to the preferential trading arrangement that has historically benefited developing nations.
Understanding the EU's GSP Framework
The EU's GSP operates as a unilateral trade preference scheme that grants reduced or zero customs duties on imports from developing and least-developed countries. This non-reciprocal system functions as an exception to the World Trade Organization's Most-Favoured-Nation (MFN) principle, with its legal foundation rooted in the 1979 Enabling Clause that permits developed countries to provide differential treatment to developing nations.
The GSP framework comprises three distinct tiers:
| Tier | Description | Beneficiaries |
|---|---|---|
| Standard GSP | For low and lower-middle-income developing countries meeting specific conditions | India (current beneficiary) |
| GSP+ | Enhanced incentive scheme requiring ratification of international conventions | Countries implementing labour, human rights, environmental, and governance standards |
| Everything But Arms (EBA) | Duty-free, quota-free access for all goods except arms | Least-developed countries |
New Regulation Details and Impact
The European Commission has adopted Implementing Regulation (EU) 2025/1909, which establishes rules for suspending specific tariff preferences for certain GSP beneficiary countries, including India, for the period 2026-2028. The regulation will remain in effect until December 31, 2028.
Under the updated GSP treatment, agricultural tariff lines maintain their preferential status without graduation. In the non-agricultural sector, only leather products have been reinstated for preferential treatment.
Affected Product Categories
The suspension encompasses thirteen GSP sections covering a broad range of products:
- Mineral products
- Inorganic and organic chemicals
- Plastics and related articles
- Rubber and rubber products
- Textiles
- Stone, plaster, cement, and similar materials
- Ceramic products and glassware
- Pearls and precious metals
- Iron, steel, and base metals with related articles
- Machinery and mechanical appliances
- Electrical machinery and equipment
- Transportation equipment (railway, motor vehicles, aircraft, spacecraft)
- Ships and boats
Trade Volume Analysis
The financial impact of the new regulation can be quantified through 2023 trade data:
| Trade Parameter | Value (2023) |
|---|---|
| Total EU imports from India | €62.20 billion |
| GSP-eligible imports | €12.90 billion |
| Expected graduation under new regulation | €1.66 billion |
| Remaining eligible GSP trade | €11.24 billion |
India has already graduated from 12 major product categories under previous GSP reviews. The Commerce Ministry attributes this graduation process to India's growing export competitiveness, which the EU periodically assesses as part of its standard review mechanism.
Strategic Implications
The Commerce Ministry emphasized that the graduation process reflects the increasing competitiveness of India's exports in global markets. While the new regulation removes preferential treatment for certain product categories, the overall impact remains relatively modest given that the affected trade represents only 2.66% of India's total exports to the European Union.
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