US action stokes job cut fear

Job losses during the general elections could have serious political implications for the ruling BJP

By R. Suryamurthy in New Delhi
  • Published 15.03.19, 12:38 AM
  • Updated 15.03.19, 1:01 AM
  • a min read
  •  
Labour intensive sectors, benefiting from duty free exports to the US under the GSP, could witness heavy job losses of over two lakh workers if the government does not come out with measures to make their products competitive. (Shutterstock)

The withdrawal of duty benefits by the US could lead to a loss of as many as two lakh jobs, Indian exporters fear.

Labour intensive sectors, benefiting from duty free exports to the US under the Generalised System of Preferences (GSP), could witness heavy job losses of over two lakh workers if the government does not come out with some measures to make their products competitive.

“Most of the beneficiaries of duty free export under GSP were small and medium enterprises and they work on a narrow profit margin.

“If duties are levied on their products, they would not be competitive in the US market and suffer losses. This could result in job losses and at least two lakh persons in those units would have to suffer,” G.K. Gupta, president of the Federation of Indian Export Organisations (Fieo), said.

The government needs to come out with alternative measures to keep the exports competitive. Sectors where the duty would be more than 3 per cent would be hit the most, Gupta said.

“There is a need to provide 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 prevalent when GSP benefit was available,” Gupta said.

Under the Merchandise Exports from India Scheme (MEIS), exporters get duty credit scrips that are freely transferable and can be used to pay customs duty.

Analysts said the government needed to come out with an alternative measure soon as the new duty regime with the withdrawal of GSP would be effective from May. Job losses during the general elections could have serious political implications for the ruling BJP.

Under fire

The Modi government has been under criticism from the Opposition for its failure to generate adequate jobs.

Recent data indicate the number of unemployed in the country have shot up considerably. The unemployment rate rose to 7.2 per cent in February, the highest since September 2016, up from 5.9 per cent in February 2018, according to data compiled by the Centre for Monitoring Indian Economy.