How India's removal from developing to 'Developed' nation by US can backfire the country

With US President Donald Trump set to visit India on February 24 for a mini trade deal and promote two-way commerce, there are slight possibilities India can persuade Trump to undo the step taken by the United States.

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The United States removed India along with ten other nations from developing to developed on 10 February 2020. The tag denotes positive scenario for India, however, the meaning snatches away many relaxation India used to have under developing nation. With US President Donald Trump set to visit India on February 24 for a mini trade deal and promote two-way commerce, there are slight possibilities India can persuade Trump to undo the step taken by the United States.

So what are the relaxations given to a 'Developing' nation?

In the trading sector, the developing countries come under the Special and Differential Treatment (SDT) by the World Trade Organization. The purpose of the WTO is to provide the rules that will allow its members, which represent a wide range of different types of economy and level of development, to grow and develop without impeding the progress of others. The purpose of SDT is to give developing countries a greater priority in this.

India was removed from developing category by the United States Trade Representative (USTR). The USTR maintains a list of countries that it categorises as “developing”, “developed”, and “least-developed”. Countries which are in developing or least developed categories can export goods to the United States without facing any kind of tariffs. However, if exported from a developed nation tariffs are imposed. 

Reason for Removal 

The US removed India from the list on account of it being a G-20 member and having a share of 0.5% or more of world trade. The move has cast a shadow on India being able to restore preferential benefits under the Generalised System of Preference (GSP) as part of its trade talks with the US, as only developing countries are eligible for it.

So what are the items exported by India to the US?

Soybean

India is ranked 10 in exporting soybeans, with an export value of $114.8M USD (Report of 2018). The reason of such high amount of export of soybean from India is the people of the United States use soybeans to feed livestock and soybean meals.

Shelled Cashew

India is the biggest importer and exporter of shelled cashew. The processing cost is the lowest in India, making them the largest importer and exporter. Cashew nuts are high in demand in the US, so again, there would be many prospective buyers in the States.

Beef

Ironically India is among the top two exporters of beef around the world. In 2014, India dethroned Brazil from the number 1 slot, according to United States Department of Agriculture data. (Note: In beef, India exports meat of buffaloes not cow). The meat of buffaloes is known as 'Carabeef'. The United States “beef” data includes carabeef.

Spices

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India, known as the home of spices, is the world largest producer, consumer and exporter of spices. Amongst the many spices produced in India, top-ranked are Pepper, Cardamom, Chilli, Ginger, Turmeric, Coriander, Cumin, Celery, Fennel, Fenugreek, Ajwain, Dill seed, Garlic, Tamarind, Clove and nutmeg. Of the many countries, major importers of Indian spices are US, China, Vietnam, UAE, Indonesia, Malaysia, UK, Sri Lanka, Saudi Arabia and Germany.

U.S.A has imported nearly 72905.97 MT of spices worth Rs. 2979.59 Crores from India. U.S.A imports Pepper, Cardamom, Chilli, Ginger, turmeric etc from India

How Much Tariff Will Be Imposed On India?

As per a report of 2014, developed countries impose 8.7% tariffs on agricultural, textiles and clothing. As per a report of 2017, USA imposes a tariff rate of 1.66 % on weightage mean of all products.

Other Countries Removed By USTR

Brazil, Indonesia, Hong Kong, South Africa, Argentina are among other countries which are removed from developing nation by USTR. 


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