The government is actively considering to go ahead with a clutch of retaliatory tariffs on US imports that have been deferred by New Delhi but have emerged as an effective tool against the US following the withdrawal of duty-free access to Indian exports under the Generalised System of Preferences (GSP) by the Donald Trump-administration.

“Discussions are on whether we should go ahead with the retaliatory tariff from April 1 or put it off till early May when the US decision on GSP withdrawal would come into effect. We have to weigh our options as talks on other issues relating to the extension of Iran oil waiver and greater market access to Indian goods are going on,” a senior commerce ministry official said.

So far, the government has tried to downplay the impact of the US decision to withdraw duty-free access to about 3,500 items from India into the American market.

“India exported goods worth $5.6 billion under GSP last year, but our total GSP duty reduction benefits were worth only $190 million,” commerce secretary Anup Wadhawan said.

However, analysts said the US was a major export destination, and the impact would be felt mostly by small and medium enterprises, which could result in job losses.

“The government should consider additional MEIS benefit to offset GSP loss to enable exporters to reduce their prices, so that the landed price is more or less at the same level as under GSP,” Ajay Sahai, director-general of the Federation of Indian Export Organisations (Fieo), said.

Under the Merchandise Exports from India Scheme (MEIS), the government issues duty credit scrips to exporters. The scrips are freely transferable and used to pay customs duty.

Levy impact

Exporters said many labour-intensive products would be impacted by the withdrawal of the GSP benefits.

New Delhi announced its decision to impose retaliatory duties on 29 American products in June 2018 but has been postponing the move. The new date for the retaliatory duties is April 1.