India-US trade deal: What it means for agriculture and dairy

India has safeguarded its core interests in agriculture and dairy under the IndiaUS trade deal while improving market access for Indian goods the government said following the deal announced by the US President Donald Trump earlier this weekCommerce Minister Piyush Goyal said ldquocore sensitivities in food and agriculture have been fully safeguardedrdquo adding the pact will boost export competitiveness and create opportunities for MSMEs entrepreneurs and skilled workersHeres what the trade deal means and how could it benefit the farmersA tariff is a tax a country charges on goods imported from other countries Importers pay this tax to the government and usually companies pass the cost on to consumersImport duties make imported goods more expensive Other factors like the tariffs on competing countries eg Bangladesh 20 pc Vietnam 20 pc Thailand 19 pc and the quality or standards of the goods also affect pricesAgriculture in India A Livelihood IssueAgriculture and allied activities such as animal husbandry form the backbone of Indiarsquos rural economy providing employment to over 700 million people Unlike developed countries where farming is highly mechanised and corporatised agriculture in India is primarily livelihoodbasedAllowing cheap imports from countries that heavily subsidize farmers could harm Indian farmers lower their incomes and threaten food security making agriculture a sensitive issue in trade talks everywhereGlobal Trade Dominated by Big CorporationsThe global food trade is highly concentrated Reports suggest that about 90 per cent of global food trade is controlled by roughly five multinational corporations that have historically used predatory pricing strategiesIf India reduces protection sharply domestic farmers could become vulnerable to global giants leading to longterm dependence and market instability The potential impact on rural employment and incomes makes agriculture a contentious issue in trade talksWhy Developed Nations Seek Access to IndiaFor countries such as the US Australia and the European Union agriculture is a major export industry In 2024 US agricultural exports stood at USD 176 billion accounting for about 10 percent of its total merchandise exports according to PTI With largescale mechanised farming and heavy subsidies the US and other developed nations view India as a lucrative market for expansionUS agricultural exports to India were USD 16 billion in 2024 including almonds pistachios apples and ethanol However Indiarsquos farm sector is structured around livelihoods rather than corporate scale making unrestricted access risky for domestic producersIndiarsquos Protection FrameworkIndia shields its agriculture sector using a mix of tariffs import duties and regulations The tariff structure ranges from zero to 150 per cent depending on the product particularly protecting staple crops dairy and key livelihoodsustaining items Opening agriculture fully would mean reducing these barriers and exposing Indian farmers to subsidised importsOther countries also protect their farmers The US for instance imposes high duties on select products including 350 per cent tariff on tobacco and uses complex nonad valorem tariffs that raise effective import costsSubsidy Imbalance in Global FarmingTrade experts note that the US provides massive subsidies to its farm sector In some years support exceeded production value for certain products mdash Rice 82 per cent Canola 61 per cent Sugar 66 per cent Cotton 74 per cent Mohair 141 per cent and Wool 215 per centSuch subsidy levels allow foreign producers to sell cheaply abroad If these products enter India with low duties Indian farmers mdash who do not receive similar backing mdash would struggle to competeDairy and Staples Are Especially SensitiveIndia treats almost the entire agriculture sector as sensitive because over 50 per cent of the population depends on it for livelihood Dairy is particularly critical supporting millions of small farmers and cooperatives Any surge in imports of milk products or animal feed could destabilise rural incomes and weaken Indiarsquos selfsufficiency in food productionWTO Rules Support Indiarsquos PositionIndiarsquos agricultural tariffs are consistent with World Trade Organisation norms WTO rules allow member countries to protect sensitive sectors especially those linked to food security and rural employment This gives India legal space to safeguard farming even while pursuing trade liberalisation in other sectorsIndiarsquos Expanding Farm ExportsIndia is simultaneously expanding its export footprint In FY25 agricultural exports rose to over USD 51 billion from USD 457 billion in 202324 with around USD 5 billion going to the US Total exports in FY25 stood at USD 437 billionIndia aims to reach USD 100 billion in combined exports of agriculture marine products and food and beverages in the next four years Though it is the worldrsquos secondlargest agricultural producer by value India accounts for only 22 per cent of global farm exports indicating scope for growth without weakening domestic protection Major exports include rice tea coffee spices cashew oil meals oilseeds fruits and vegetablesNonTariff Barriers Still PersistTariffs are only one part of trade Nontariff measures also affect market accessAccording to experts the US has complex sanitary and phytosanitary SPS rules that often act as disguised barriers The Maximum Residue Limits on pesticides are among the strictest globally making compliance difficult for developing countries including India even when tariff rates are reducedWhat the Trade Deal ChangesUS President Donald Trump has announced that Washington will bring down reciprocal tariffs on Indian goods to 18 per cent from 25 per cent after earlier imposing steep duties linked to trade imbalances and purchases of Russian crude and military equipment The reduction makes Indian exports more competitive in the US market At the same time India has ensured that agriculture and dairy are not opened in a way that harms farmersBalancing Exports and Rural StabilityThe IndiaUS trade deal seeks to balance export growth with rural stability While Indian manufacturers and exporters gain improved access to the American market New Delhi has drawn a clear line on agriculture and dairyFor India farming is not merely a trade sector mdash it is a livelihood system a food security pillar and a socioeconomic foundation By safeguarding it the government aims to pursue global integration without compromising the millions who depend on agriculture for survivalWith PTI Inputs