The
resurgence of protectionist policies in global trade has reignited concerns
about the future of agricultural exports, with former US President Donald
Trump’s push for “reciprocal tariffs” emerging as a potential game-changer.
With the US trade deficit surging to $918.4 billion in 2024, the highest
recorded with China at $295.4 billion and India’s contribution at $45.7
billion, Washington’s focus on tariff parity is intensifying. India, frequently
labelled the “tariff king” by Trump due to its high import duties, finds itself
in the crosshairs of this policy shift. While the specifics of the proposed
tariffs remain unclear, their implications for India’s agricultural trade with
the US—its largest agri-export market—could be profound.
Trade
statistics reveal the depth of the tariff imbalance. India imposes an average
tariff of 17% on all goods, compared to just 3.3% by the US. The disparity is
even starker in the agriculture sector, where India’s simple average tariff
stands at 39%, with a trade-weighted average of 65%, while US agricultural
tariffs remain at a modest 5% and 4%, respectively. This disproportionate
tariff structure has historically shielded Indian farmers from external
competition, but in an era of reciprocal trade policies, such protections could
become a liability.
India’s
agricultural exports to the US, which generated a trade surplus of $3.46
billion in 2023-24, are at significant risk. Shrimp, basmati rice, processed
foods, and honey—key Indian exports—could lose their competitive edge if
subjected to higher US tariffs. Conversely, US agricultural exports to India,
which include almonds, cotton, ethanol, and soya bean oil, may surge if India
is pressured to lower its import duties. Given India’s traditionally high
tariffs on American agricultural goods—including 150% on whisky, 100% on
walnuts and cut chicken legs, and 40-50% on wheat, maize, and soya
bean—negotiations must be approached with strategic foresight.
One
of the most contentious issues in US-India agricultural trade is India’s
restrictive stance on genetically modified (GM) crops. Despite adopting Bt
cotton, India continues to prohibit GM soya bean and maize, even as domestic
demand for high-protein animal feed and ethanol production rises. The US, as a
global leader in GM crop production, has long viewed this policy as a
non-tariff barrier. Reconciling India’s commitment to protecting small-scale
farmers with the need to modernize agricultural trade policies will be crucial
in navigating these negotiations.
India
and the US are already engaged in discussions for a broader trade agreement,
with the ambitious “Mission 500” aiming to elevate bilateral trade to $500
billion by 2030. For India, the key to sustaining and expanding its
agricultural exports lies in securing greater market access while offering
selective tariff reductions in return. India has already shown flexibility,
reducing tariffs on Washington apples from 50% to 15%. A phased reduction in
duties on other American agricultural products—such as food preparations
(currently at 150%), walnuts (100%), and dairy products (30-60%)—could
facilitate a more balanced trade environment. However, gradual reductions
should be applied to commodities where domestic producers face stiff
competition, such as poultry and dairy, to prevent abrupt market disruptions.
While
tariff adjustments may serve as a short-term measure, India must take decisive
steps to fortify its agricultural sector for long-term competitiveness. The
most critical among these is ramping up investments in agricultural research
and development (R&D). Currently, combined central and state agricultural
R&D investments remain below 0.5% of agri-GDP—alarmingly low compared to
global benchmarks. A minimum investment of 1% of agri-GDP in R&D is
imperative to sustain export competitiveness. By fostering innovations in
high-yield, climate-resilient crops and improving farm productivity, India can
reduce reliance on tariff protections while enhancing global market presence.
Additionally,
modernizing India’s agri-value chains will be essential. Expanding cold storage
capacity, upgrading logistics infrastructure, and ensuring stringent quality
certification and traceability measures will enable Indian agricultural
products to meet international standards. Developing key production clusters as
agri-export hubs—with the support of the Agricultural and Processed Food
Products Export Development Authority (APEDA)—can unlock export potential in
high-value horticultural commodities like bananas, mangoes, mango pulp, and
pomegranates. Expanding these exports to markets in Russia, Korea, Japan, and
Australia could mitigate risks associated with over-dependence on the US
market.
The
evolving landscape of global trade necessitates a paradigm shift in India’s
agricultural policy. The traditional reliance on tariff barriers and subsidies,
particularly in the fertilizer sector, must give way to a more resilient,
productivity-driven export strategy. Trump’s proposed tariffs, while posing a
significant challenge, also present an opportunity—a chance for India to
transition from a tariff-heavy, protectionist approach to a dynamic,
competitive agricultural economy. If handled wisely, this moment could mark a
transformative shift, ensuring sustained long-term gains for Indian farmers and
exporters alike.
(Views
are personal. Email: dipakkurmiglpltd@gmail.com)
