Navigating the Fields of Free Trade, India’s Agricultural Calculus in the US-India Trade Agreement
The announcement of a US-India trade agreement, heralded as a landmark deal by both Washington and New Delhi, has sent ripples across the global economic landscape. While the broad contours suggest a mutual de-escalation of trade tensions, the devil, as always, resides in the details—nowhere more so than in the politically sensitive and economically vital arena of agriculture. A stark contrast in official statements underscores the delicate dance underway. India’s Union Agriculture Minister, Shivraj Singh Chouhan, has firmly declared that the deal will not force India to open its market to any “major crops,” be it foodgrains, fruits, or dairy. Conversely, US Agriculture Secretary, Brooke Rollins, has triumphantly proclaimed the deal will result in the “export of more American farm products into India’s massive market.”
This divergence is not mere political posturing; it is the fundamental expression of a complex negotiation where two agricultural superpowers, with vastly different structures and comparative advantages, seek a mutually beneficial arrangement. The path to an agreement lies not in maximalist demands but in a nuanced, strategic approach that identifies low-hanging fruit while firmly protecting core domestic interests. This requires India to move beyond an overly defensive posture towards a proactive, give-and-take strategy that balances the welfare of its 150 million farm households with the imperatives of global trade integration and strategic partnership.
The Stumbling Block: Bulk Commodities and the Threat of Displacement
India’s apprehension about opening its market to US bulk commodities is deeply rooted in economic reality and recent history. The United States is a titan of large-acreage, mechanized, and highly subsidized production of crops like soybean, corn (maize), and cotton. India, too, is a major producer of these very crops, but on a fundamentally different basis.
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Soybean: Cultivated on approximately 13 million hectares (mh) in India, largely by smallholders in Madhya Pradesh and Maharashtra.
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Corn & Cotton: Each grown on about 12 mh across the country, supporting millions of livelihoods.
The threat lies in the staggering productivity gap. The US boasts average per-hectare yields of over 11 tonnes for corn and 3.4 tonnes for soybean. India’s averages languish at around 3.5 tonnes for corn and a mere 1 tonne for soybean. This differential is not just a matter of technology but of scale, climate, and capital intensity. If tariffs were removed or significantly reduced, a flood of cheaper, high-volume American corn and soybean could enter the Indian market, depressing domestic prices. The effects, as the source text warns, “would be no different from those of Indonesian and Malaysian palm oil”—a reference to the long-standing struggle of Indian oilseed growers against cheap palm oil imports that have stifled domestic production of mustard and groundnut.
Beyond grains and oilseeds, a more insidious pressure point is ethanol. The US is the world’s largest producer of corn-based ethanol. A key US objective in any trade deal is to find markets for this biofuel. India, however, has its own National Biofuel Policy, which mandates ethanol blending with petrol. This ethanol is primarily derived from domestically grown sugarcane and surplus grains. It is a carefully constructed ecosystem that supports cane farmers, provides an outlet for sugar surpluses, reduces oil imports, and creates revenue for distilleries. Allowing large-scale imports of US corn ethanol would disrupt this entire domestic value chain, inviting fierce opposition from powerful farm lobbies, especially in states like Uttar Pradesh and Maharashtra. This is the essence of why agriculture has been the perennial “stumbling block” in trade talks.
The EU Precedent: Why This Deal is Different
India’s relative comfort in finalizing a Free Trade Agreement (FTA) with the European Union (EU) on agriculture offers an instructive contrast. The EU is not a low-cost, bulk commodity exporter. Its agricultural strengths lie in high-value, niche products—premium Gouda cheese from the Netherlands, wines and spirits from France and Italy, olive oil from Spain and Italy. Importing these products caters to a small, affluent urban demographic and does not compete directly with the mass-market products of the Indian farmer. An Indian dairy farmer is not threatened by Parmigiano-Reggiano, nor is a mustard oil producer by extra virgin olive oil. The EU deal was about gourmet shelves; the US deal touches the mandi (wholesale market).
The Low-Hanging Fruit: A Case for Strategic Liberalization
A rigid, protectionist stance on all agricultural products is neither necessary nor beneficial. India’s strategy must be surgical, identifying areas where liberalization imposes minimal pain on domestic producers while delivering tangible benefits in terms of consumer choice, nutritional security, and negotiation capital. This is the realm of the low-hanging fruit.
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Tree Nuts: A Clear Win-Win: India is already the US’s largest market for tree nuts, importing an estimated $1.5 billion worth in 2025. The primary products are almonds and walnuts, for which there is negligible domestic commercial cultivation. Yet, India imposes steep duties: a 100% import duty on walnuts and a specific duty of Rs 100/kg on shelled almonds. These are essentially revenue tariffs that inflate consumer prices without protecting any significant domestic industry. Reducing these duties would make protein-rich nuts more affordable for Indian consumers, fulfill US export aspirations in a major market, and provide India with valuable negotiating currency to demand concessions elsewhere.
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Berries and Specialty Fruits: Similarly, fruits like blueberries, cranberries, cherries, and pecans are not widely grown in India. They are premium, nutrient-dense products with a growing market among health-conscious urban consumers. Granting better market access for these items diversifies Indian diets and retail offerings without threatening apple growers in Himachal Pradesh or mango farmers in Uttar Pradesh.
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Defending Export Interests: Trade is a two-way street. India runs a surplus in agricultural trade with the US. Key exports include:
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Shrimps and Frozen Fish: A major earner, facing stringent US food safety (FDA) and environmental regulations.
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Spices: Like chili powder, turmeric, and cumin, subject to potential non-tariff barriers.
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Basmati Rice: The premium aromatic rice where India fiercely competes with Pakistan and must protect its Geographical Indication (GI).
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Mangoes: Where market access has historically been hampered by phytosanitary concerns.
India’s negotiating leverage should be deployed to secure smoother, more predictable access for these products. Simplifying US inspection regimes, recognizing Indian food safety certifications, and resolving phytosanitary disputes are goals as important as shielding corn farmers.
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The Path Forward: A Proactive, Sectoral Strategy
For India, a “flexible approach” means moving from blanket defense to smart, sector-specific strategies:
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The Sensitive List: A clearly defined, non-negotiable list of sensitive commodities must be established. This should include staple food grains (rice, wheat), pulses, dairy products (where millions of small milk producers are vulnerable), sugarcane, and the bulk commodities of soybean, corn, and cotton. For these, tariff rate quotas (TRQs) with very high out-of-quota duties could be the final line of defense.
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The Bargaining List: This includes products like tree nuts, berries, and alfalfa hay (for dairy feed), where tariff reductions can be traded for concrete US concessions on Indian exports or in non-agricultural sectors like IT services, pharmaceuticals, and professional visas.
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The offensive Strategy: India must table its own demands aggressively. These include pressing the US to reduce its massive trade-distorting agricultural subsidies (under the WTO’s Amber Box), granting equitable access for Indian generic pharmaceuticals, and easing visa regimes for Indian professionals.
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Domestic Reforms are Key: Ultimately, the best defense is a strong offense. India must simultaneously accelerate domestic agricultural reforms to bridge the productivity gap. This involves investing in R&D for high-yielding, climate-resilient seeds, expanding micro-irrigation, building efficient supply chains to reduce post-harvest losses, and providing direct income support (like PM-KISAN) to make farmers more resilient to trade shocks.
Conclusion: Beyond the Binary of Open vs. Closed
The US-India trade agreement on agriculture cannot be viewed through a simplistic binary lens of “open” or “closed” markets. It is a complex negotiation that demands statecraft. India must protect its vulnerable agrarian base from disruptive import surges that could trigger social and economic unrest. Yet, it must also recognize the benefits of strategic integration—access to technology, investment, and new markets for its own high-value products.
The solution lies in a three-pronged approach: staunchly defending the core (sensitive staples), strategically trading concessions on non-competing luxuries and niche products (the low-hanging fruit), and aggressively pursuing better access for its export champions. By adopting this proactive, nuanced, and confident posture, India can secure a trade deal that safeguards farmer welfare, satisfies consumer demand for diversity, strengthens a crucial geopolitical partnership, and ultimately contributes to building a more productive and prosperous agricultural sector for the future.
Q&A: Unpacking India’s Agricultural Trade Dilemma with the US
Q1: Why is the US-India trade deal so much more contentious for agriculture than the India-EU deal was?
A1: The fundamental difference lies in the nature of the competing exports. The European Union’s agricultural strength is in high-value, niche, and luxury products (premium cheeses, wines, olive oil) that cater to a small, affluent segment of the Indian market. These imports do not compete with the staple crops produced by the vast majority of Indian farmers. In contrast, the United States is a powerhouse of bulk, mass-produced commodities like soybean, corn, and cotton—crops that are also widely cultivated by millions of small and marginal farmers in India. The massive productivity and cost advantage of US farmers, driven by scale, technology, and subsidies, means that opening the Indian market to these commodities could lead to a flood of cheap imports, severely depressing domestic prices and threatening farmer livelihoods. The EU deal affected gourmet store shelves; the US deal threatens the wholesale mandi.
Q2: What exactly are the “low-hanging fruit” mentioned, and why are they considered safe for liberalization?
A2: “Low-hanging fruit” refers to agricultural products where India can reduce import tariffs with minimal risk to its own farmers, creating goodwill and negotiation capital. Prime examples are tree nuts (almonds, walnuts), blueberries, cranberries, and cherries. India has very little domestic commercial production of these items. The high tariffs on them (e.g., 100% on walnuts) function primarily as revenue collectors for the government, not as protective measures for a domestic industry. By lowering these duties, India can:
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Make nutritious food cheaper for its consumers.
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Fulfill a key US export demand in a significant market.
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Gain concessions from the US in return, either on other agricultural imports (like dairy or chicken legs) or in non-farm sectors like services or intellectual property.
These products are “safe” because they occupy a different market niche and do not displace the income of core Indian farming communities.
Q3: The article mentions the threat of US corn-based ethanol. Why is this a particularly sensitive issue for India?
A3: Ethanol is a biofuel used for blending with petrol to reduce fossil fuel consumption and emissions. The sensitivity is twofold:
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Economic Ecosystem: India has deliberately built a domestic ethanol production ecosystem based on sugarcane and surplus food grains (like rice and maize). This policy serves multiple purposes: it provides an additional revenue stream for sugar mills and cane farmers (helping clear dues), disposes of surplus sugar/grains, reduces crude oil imports, and meets environmental goals. Large-scale imports of cheaper, subsidized US corn ethanol would undermine this entire domestically focused system.
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Political Economy: Sugarcane farming is politically influential in states like Uttar Pradesh, Maharashtra, and Karnataka. Displacing domestically produced ethanol with imports would spark fierce opposition from a powerful and vocal agrarian lobby, making it a political minefield for any government. It pits the interests of Indian cane growers and distilleries against those of American corn farmers.
Q4: How can India “defend its export interests” in this negotiation?
A4: India runs an agricultural trade surplus with the US, meaning it exports more than it imports. Defense of these exports is a critical bargaining chip. Key areas include:
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Reducing Non-Tariff Barriers (NTBs): Pressing the US to streamline its food safety inspections (by the FDA), accept Indian certifications, and resolve persistent phytosanitary (plant health) issues that block exports like mangoes and pomegranates.
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Securing Market Access: Ensuring continued and predictable access for flagship exports like Basmati rice (protecting its GI status), shrimps (a major seafood export), and spices.
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Dispute Resolution: Using the trade agreement to establish clearer channels for resolving technical trade disputes that often hamper Indian agricultural exports.
By proactively demanding easier access for its own products, India can create a more balanced negotiation, rather than being purely on the defensive.
Q5: What long-term domestic measures are essential for India to engage confidently in such trade agreements?
A5: To move from a defensive to a confident trading posture, India must undertake deep-seated domestic agricultural reforms:
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Boost Productivity & Resilience: Invest in R&D for high-yielding, climate-resilient seeds, promote drip and micro-irrigation to conserve water, and improve soil health. Bridging the yield gap for crops like soybean and corn is crucial.
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Strengthen the Supply Chain: Reduce massive post-harvest losses by building modern cold chains, warehousing, and efficient logistics. This improves farmer realizations and makes produce more competitive.
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Shift to Direct Income Support: Policies like PM-KISAN, which provide direct cash transfers to farmers, are less trade-distorting than price support mechanisms (like MSP) and help cushion farmers against price volatility, whether domestic or import-driven.
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Diversify and Promote High-Value Crops: Encourage a shift towards horticulture, organic farming, and crops where India has a comparative advantage (e.g., spices, medicinal plants), reducing over-reliance on water-intensive staples vulnerable to global competition.
A stronger, more efficient, and income-secure agricultural sector is the ultimate foundation for a confident and beneficial trade policy.
