India’s Agricultural Protectionism, A Necessary Evil or a Long-Term Liability?

India’s Agricultural Protectionism, A Necessary Evil or a Long-Term Liability?

Introduction: The Unyielding Dilemma of Trade and Agriculture

India stands at a crucial crossroads in its economic journey. As the world’s fifth-largest economy and a burgeoning global power, it seeks to cement its position through expanded trade and deeper international integration. The benefits of such a path are clear: access to new markets, accelerated growth, technological infusion, and enhanced geopolitical influence. Yet, for over seven decades since Independence, one sector has consistently acted as an anchor, tempering ambitions and complicating negotiations—agriculture. The recent flurry of trade deal discussions—with the United Kingdom, New Zealand, the European Union, and the United States—has once again brought this tension into sharp relief. In every negotiation, agriculture and dairy emerge as the most contentious “sticking points,” forcing the Indian government into a defensive, protectionist stance. Commerce Minister Piyush Goyal’s unequivocal declaration, “India is never going to open up dairy,” underscores the political sacredness of the sector. This protective posture is rooted in the sheer scale of India’s agrarian base, the world’s largest farmer population of nearly 150 million (approximately 15 crore), a figure that dwarfs France’s entire farming community of under 400,000. However, while politically and socially justified in the short term, this stance raises profound questions about India’s long-term economic strategy, the productivity of its vast workforce, and the optimal utilization of its demographic dividend.

The Weight of Numbers: Why Agriculture Holds India’s Trade Policy Hostage

The core of India’s agricultural protectionism is demographic and economic precarity. Unlike Western economies where agriculture is a highly mechanized, capital-intensive, and minor component of employment and GDP, in India, it remains the lifeline for a massive population. The statistics are stark:

• Employment: Over 45% of India’s workforce is engaged in agriculture.

• Economic Contribution: The sector contributes about 16.3% to India’s GDP.

• Farm Size: The average landholding is small and often unviable, with a majority of farmers practicing subsistence farming.

This creates a lopsided economic equation. In the US, agriculture employs a mere 1.2% of the workforce and contributes 1% to GDP. In the EU, it’s 1.6% of GDP. This means their farm sectors are productive, scalable, and globally competitive. Their trade negotiations can afford to treat agriculture as one sector among many. For India, agriculture is not just a sector; it is a vast social security net. Opening the floodgates to cheaper, subsidized foreign agricultural produce—be it dairy from New Zealand or grains from the US—could devastate the livelihoods of tens of millions of small and marginal farmers who lack the economies of scale to compete.

The political compulsions are unignorable. As the article notes, the potential trade deal with the Trump administration in the US “would have dried early last year, but for India’s political compulsions based on its vast farmer population.” The adage “Jawan and kisan together win wars” speaks to the deep-seated belief that food security, managed domestically, is integral to national security. The recent farmer protests against now-repealed farm laws were a potent reminder of the sector’s political volatility. France’s resistance to the EU-Mercosur deal, despite its small farm population, shows that such sensitivities are universal, but in India, they are magnified by orders of magnitude.

The Historical Context: Progress in Other Sectors vs. Agricultural Stasis

The article provides poignant contrasts that highlight the paradoxical stagnation of Indian agriculture relative to other achievements:

1. The White Revolution (Operation Flood): In just 28 years, India transformed from a milk-deficient nation to the world’s largest milk producer. This demonstrates that targeted, mission-mode interventions in the agrarian economy can yield spectacular results.

2. Space Exploration: NASA reached the moon in 11 years. India’s own space program, ISRO, has achieved remarkable feats with modest budgets, showcasing technological prowess and efficient execution.

3. Industrial Competitiveness: Japan, within two decades of post-war rebuilding, was “running rings around the US car industry,” proving that rapid industrial catch-up is possible.

4. Sports: The rise of a young Carlos Alcaraz to dethrone a legend like Novak Djokovic symbolizes that paradigm shifts need not take forever.

These examples underscore a critical point: India has demonstrated the capacity for rapid, transformative change in diverse fields. Yet, “almost 80 years after Independence, our millennia-old agriculture and dairy are considered incapable of standing up to foreign competition.” This perception, while rooted in current realities, also hints at a failure to engineer a similar transformation in the agrarian structure. The sector’s growth rate of 4.4% lags behind the overall economy’s 7.4%, meaning farmers’ incomes are growing slower than the national average, exacerbating rural-urban inequality.

The Cost of Protection: Wasting the Demographic Dividend

The justified protection comes at a significant and growing opportunity cost. The article frames this brilliantly: “keeping 45% of the population in an unproductive sector is like parking money in a low-interest savings account. It’s a waste of India’s demographic dividend.”

• Low Productivity Trap: A disproportionate share of the workforce produces a relatively small share of output. This depresses average incomes and limits the growth of the domestic market.

• Delayed Structural Transformation: Economic development historically involves a shift of labor and resources from low-productivity agriculture to higher-productivity industry and services. India’s transition is stalled. The industrial and service sectors, which drive growth, face labor shortages and wage pressures partly because the necessary movement of people out of agriculture is not happening at the required pace.

• Hindered Global Integration: Every trade deal delayed or diluted due to agricultural concerns means missed opportunities in manufacturing (like textiles, electronics) and services (IT, professional services) where India holds competitive advantages. It allows competitors like Vietnam, Bangladesh, and Mexico to cement trade advantages.

Thus, the protectionist wall, while shielding farmers today, also walls them—and the nation—into a low-growth trajectory. It treats the symptom (vulnerability to imports) but not the underlying disease (low farm productivity and surplus labor).

The Path Forward: Beyond Tariffs Towards a Strategic Overhaul

The central question posed is the “Rome question”: How long can this continue? The goal cannot be permanent protection. The strategic objective must be to reduce the agricultural workforce to more sustainable levels—say 20% or even 10%—over the coming decades. This requires a multi-pronged national mission with unprecedented urgency:

1. Boost Farm Productivity: Double down on investment in irrigation, climate-resilient seeds, post-harvest logistics, and precision farming. Encourage consolidation through cooperative models (like the successful Amul) and land leasing frameworks that allow for scale without outright sale.

2. Diversify Rural Incomes: Promote animal husbandry, horticulture, fisheries, and food processing within the rural ecosystem. The “Food Park” initiative needs scaling up to add value to agricultural produce locally and create non-farm jobs in rural areas.

3. Facilitate Exit and Absorption: This is the most critical pillar. India needs to generate massive, labor-intensive manufacturing jobs. Initiatives like the Production-Linked Incentive (PLI) scheme must be evaluated through the lens of job creation, not just production value. Simultaneously, large-scale skilling and reskilling programs tailored for transitioning rural youth are essential.

4. Create a Social Security Bridge: Develop a robust social security system—including assured minimum income support (like PM-KISAN), health insurance, and pension schemes—that decouples farmer welfare from crop prices and provides a safety net for those wishing to exit farming.

5. Negotiate from a Position of Strength, Not Fear: Use trade deals strategically. Instead of a blanket “no” on agriculture, identify niche areas for export (e.g., specific fruits, spices, organic produce) and seek concessions in return. Trade policy should be used to secure better market access for India’s competitive sectors, which in turn will create the jobs to absorb the agricultural workforce.

Conclusion: The Imperative of Urgent Transition

India’s protectionist stand on agriculture in trade deals is a reflection of a profound developmental challenge, not merely a negotiating tactic. It is justified by the imperative of social stability and food security in the present. However, it is unsustainable for the future. The world is moving fast, and trade architectures are being rewritten. India cannot afford to let its vast human potential remain locked in low-productivity agriculture.

The mission for the next 10-15 years must be to engineer a deliberate and compassionate structural shift. The aim should be that future FTAs are negotiated not from a point of vulnerability, fearing for the livelihood of half the population, but from a position of strength, where a modernized, productive agricultural sector employs fewer people more profitably, and a vibrant industrial economy offers better alternatives. Only then can India truly harness its demographic dividend and secure its place as a resilient, high-growth economic power. The clock is ticking, and the need for urgency has never been greater.

Q&A Section

Q1: Why is agriculture such a major sticking point in India’s recent trade negotiations, such as with the EU and UK?
A1: Agriculture is a sticking point due to the socio-economic and political weight of India’s farming community—the world’s largest at ~150 million people. The sector employs over 45% of the workforce but contributes only about 16.3% to GDP, indicating low productivity and widespread vulnerability. Opening the sector to cheap, subsidized imports from efficient producers like the EU (dairy) or the US (grains) could cripple the incomes of millions of smallholder farmers. Given the political sensitivity and the primacy of food security, the government treats agricultural tariffs as a non-negotiable defensive line to prevent social unrest, making it the most contentious chapter in any FTA discussion.

Q2: The article compares India’s agricultural stagnation to rapid successes like Operation Flood and Japan’s auto industry. What does this contrast imply?
A2: This contrast implies that India possesses a proven capacity for rapid, mission-driven transformation in various fields—technology, industry, and even within agriculture (as shown by the White Revolution). Therefore, the continued “incapacity” of agriculture to become competitive is not an inevitable fate but a result of policy choices, structural bottlenecks, and perhaps a lack of focused reform. It suggests that with the right mix of technology, organization, and investment, a turnaround is possible, but it has not been prioritized with the same intensity as other national achievements.

Q3: What is meant by the statement that protecting agriculture is “a waste of India’s demographic dividend”?
A3: The demographic dividend refers to the economic growth potential that arises from having a large, working-age population relative to dependents. The statement argues that by keeping nearly half of this potential workforce in a low-productivity sector like agriculture, the economy is not maximizing their output or income. It’s akin to underutilizing a precious resource. Their labor could generate far higher value and drive faster growth if deployed in more productive manufacturing or service sectors. The current setup traps human capital in an activity with diminishing returns, thereby squandering the growth opportunity the young population presents.

Q4: How does India’s agricultural challenge differ fundamentally from that of a country like France, which also protests trade deals?
A4: While both countries have politically powerful farmer lobbies, the scale and nature of the challenge are fundamentally different. France has fewer than 400,000 farming households, and its agriculture is highly mechanized, efficient, and export-oriented. Its resistance is often about protecting specific standards, subsidies, or cultural heritage. India’s challenge involves the livelihood and food security of 150 million people (15 crore), most of whom are poor, small-scale, and subsistence-oriented. For India, it’s a macroeconomic employment and survival issue; for France, it’s more a sectoral economic and cultural issue. The political magnitude in India is exponentially larger.

Q5: What are the key elements of a long-term solution to move beyond agricultural protectionism, according to the analysis?
A5: The long-term solution requires a strategic overhaul focusing on two parallel tracks:

1. Making Agriculture Productive: Investing in infrastructure (irrigation, storage, logistics), technology, and cooperative models to increase farm income per person, enabling those who remain in farming to be competitive.

2. Creating Viable Pathways Out of Agriculture: This is the core. It involves:

   • Job Creation: Fostering labor-intensive manufacturing (through schemes like PLI) and services to absorb migrating workers.

   • Skill Development: Large-scale programs to equip rural youth with skills for industrial and service jobs.

   • Social Security: Building a safety net (income support, health, pension) that reduces dependence on farming as the sole source of subsistence.
     The goal is to reduce the share of the workforce in agriculture to 20-10% over decades, allowing India to negotiate trade deals from a position of economic strength rather than social vulnerability.