EU Suspends India GSP Benefits

The European Union has suspended Generalised Scheme of Preferences (GSP) benefits for 87% of India's exports, effective January 1, 2026. This means Indian products, including textiles, chemicals, plastics, iron, and steel, will now face full Most Favoured Nation (MFN) tariffs, ending preferential access. The Global Trade Research Initiative (GTRI) reported that this move, while legally justified under the European Union's 'graduation' rules, will have a sharp economic impact on India. The situation is further complicated by the simultaneous start of the tax phase of the European Union's Carbon Border Adjustment Mechanism (CBAM), which imposes additional carbon reporting and compliance costs on Indian steel and aluminium exporters. This 'double hit' of higher tariffs and non-tariff costs is expected to squeeze margins, weaken India's competitiveness, and potentially divert European Union buyers to other duty-free suppliers such as Bangladesh and Vietnam. The implementation of the India-European Union Free Trade Agreement (FTA) is expected to take at least a year, leaving Indian exporters to absorb these increased costs in the interim, making 2026 a challenging year for India's exports to Europe.