Brexit an opportunity to negotiate favourable Generalised System of Preferences

The almost imminent exit of the United Kingdom from the 28-member European Union, commonly referred to as Brexit, provides an opportunity for India to negotiate a favourable Generalised System of Preferences (GSP) with the United Kingdom, feel experts from the Indian textile industry.

“This development (Brexit) is positive for the Indian textile industry. The EU currently provides duty free or concessional GSP benefits to Bangladesh, Pakistan and Sri Lanka for textile and apparel products, which is seriously affecting Indian exports of textile goods,” B Sriramulu, managing director at KG Denim, told Fibre2Fashion.

“With UK leaving the EU, the country will renegotiate trade pacts within the WTO ambit with all nations including India. India can take this opportunity to negotiate a favourable GSP similar to our neighbours without offering the same benefit as demanded by EU on behalf of Germany,” he explained.

Speaking on the same subject, Sanjay Jain, managing director of TT Limited, said “We anyway had no advantage with EU while our competitors had. UK is a big market for us and after Brexit we all shall be on equal footing and chances of an Indo-UK trade agreement are much higher than an India-EU trade deal.”

In fact, UK’s business minister and now communities secretary, Sajid Javid, has already expressed a desire to start informal talks on a trade treaty, so that, as and when UK completes the EU exit process, both countries would be ready with a trade treaty.

Manish Mandhana, joint managing director at Mandhana Industries Ltd said, “UK has been more of an importer than exporter. With a big economy and low resources it is dependent on Europe, China and India for its imports.”

“The pound rate might fall against the dollar and thus, the rupee and the companies which have income from UK and Europe are going to be hit, at least for shorter term and if we look at indirect impact, foreign investors may exit Indian investments to rush back to the dollar,” he added.

“While this may impact financial markets in the short term there will not be major effects on India as India’s economic fundamentals are strong,” Mandhana observed.

Even Moody's Investors Service, in its latest report said UK’s decision to exit the European Union will not have any significant credit impact on India and other countries in the Asia Pacific region.

“While the fiscal and monetary policy space is constrained in India its exposure to external financing is limited,” the ratings agency added in the report.