The United States is now considering lifting the zero tariff concession on some important from India that adds up to around $5.6 billion worth of product, according to an exclusive report in Reuters. According to persons who are close to the developments, this step is a direct response to some of India’s policies that are being seen as detrimental to investment and trade.
India has been one of the biggest beneficiaries of these concessions under Generalised System of Preferences (GSP), but it seems that the United States is going to take this step that will seriously affect India’s trade balance. If this goes through then, it will be America’s harshest step against India during President Donald Trump’s tenure, and in this regard, it needs to be noted that the President has been pretty vocal about his goal to reduce US trade deficits with large economies. In the past, Trump has spoken about the tariff concessions that are enjoyed by India.
The Indian Prime Minister Narendra Modi has launched a campaign named ‘Make in India’ to not only turn the country into a manufacturing powerhouse but also to bring in foreign investment. According to sources, this American reaction is tied to India’s new e-commerce rules that have completely thrown the businesses of Amazon India and Walmart-owned Flipkart into disarray. The Indian e-commerce market is set to experience exploding growth, and according to analysts, the market could be worth around $200 billion by 2027.
In a set of regulations for e-commerce companies that kicked in in February this year, companies were barred from listing products from vendors in which they have an equity stake, and in addition to that, the exclusive offering of products has also been disallowed.
These regulations have severely affected business operations for both Amazon and Walmart’s Flipkart. Amazon has spent billions of dollars in India, while Walmart acquired Flipkart in a mammoth $16 billion deal last year. That is only one of the big issues. Additionally, India has also directed Visa and MasterCard to move its data storage operations to India. The high taxes on electronic products like smartphones from the US have also been a major sticking point. A source that spoke to Reuters stated, “(The two sides) were trying to sort out the trade package, but were not able to finish the deal. In the meantime, these other things, data localization, and e-commerce have come along. In a sense, it’s like someone has rained on parade.”