In an increasingly interconnected global economy, Free Trade Agreements (FTAs) between developed and developing nations are often seen as tools of mutual growth. When countries like India deal with powerful economies such as the USA, the benefits are not always equal. If we look into the report of traditional trade theories, many developing countries often do not gain much from it because they already have limited trade to begin with, so there are not a lot of new trade which are created. Recently, when we saw the Modi-Trump talks, the US made it clear that they are still very much into indulging in “fair” trade with India. If we look into this from their point of view, we can see that if India imposes tariffs on American products, the US will also hit back with similar tariffs, also called reciprocal tariffs. For India, this approach can be both a challenge and an opportunity. If we see on the one hand, it puts pressure on India to reduce its import duties, and along with that, opens its market. On the other hand, it also pushes India to be more competitive at a global level and rethink its trade strategies to avoid any sort of disadvantages. Now, when we view it through the traditional lens, India has always imposed tariff barriers to protect its key domestic industries, such as agriculture, pharmaceuticals, and automobiles. This has led to various trade disputes with the Americans, where the US has always been in favour of greater market accessibility.
When we look specifically into the agriculture sector, India’s overall import taxes seem high, but that’s mostly because of the very steep taxes on farm products. These high tariffs are meant to defend Indian farmers from foreign competition and ensure that the country has enough food. When it comes to goods like electronics, clothing or machinery, or we can say all non-agricultural products, the taxes have always remained reasonable, normally under 15% between 2018 and 2023. But for things like wheat, pulses, or dairy products, the tariffs have stayed higher, usually over 38%, except in 2020 because of the COVID-19 pandemic. One of the big reasons why India cannot lower the farm tariffs by a long shot is due to the agriculture sector that does not get enough support or subsidies (6% of total national investment). This leaves many farmers using outdated methods, which makes them less competitive. Whereas, if we see, countries like the US give large subsidies to their farmers, which lowers the cost their produce and makes it harder for Indian farmers to achieve those prices. Without strong tariffs, cheap foreign goods would overflow the Indian market, and local farmers would suffer badly.
According to Ashok Gulati, agricultural economist and former chairman at Commission for Agricultural Costs and Prices, says that, “at present, we are surplus in agricultural exports to the US. If they (USA) put reciprocal tariffs on agriculture, the surplus will be wiped out. But we could play our cards smartly and give them some access through tariff quotas and ask for market access. Because their duty structure is very low but market access is a problem”. In 2023, India made a profit out of farm-related products which sold in the US. It sold more than it bought. The profit was 3.46 billion dollars. Some of the top agricultural exports of India to the US included things like frozen prawns and shrimp, both basmati and regular rice, plant extracts, natural honey, and other ready-to-eat foods or, in simple terms, processed foods. This report is according to the economic group. So, we can see that India’s farm exports to the US are strong in certain corners, chiefly seafood and rice.
A report by the think tank Global Trade Research (GTRI) says that India’s fish, meat, and seafood industry will be hit the hardest if America increases the tariffs. In 2024, India was expected to export about 2.58 billion dollars’ worth of these products, but they could face a big challenge due to a 27.83% difference in tariffs. Shrimp, which is one of India’s biggest exports, could be affected the most. With America’s new taxes, Indian shrimps would become very expensive as well as less attractive compared to other countries. Yogesh Gupta, a seafood exporter from Kolkata, has said that Indian shrimps already face penalties in America, like anti-dumping and counterbalancing duties. If more tariffs are added, then it will be very hard to compete in the international market. He added that 40% of India’s shrimp exports go to the US, so it would be a major setback to the industry. Other areas could also be hit by turbulence, like India’s processed food, sugar, and cocoa exports, where the tariff gap is 24.99%. And the exports were at 1.03 billion dollars in 2024. In the case of cereals, vegetables, fruits, and spices, the trade gap was 5.72%. As per Ajay Srivastava, founder of GTRI, India’s dairy products, which include ghee, butter, and milk powder, could be the worst among all of them in the US. With a trade difference of 38.23%, these products would become costly for the Americans, meaning only fewer people could buy them. Other Indian exports could also lose their edge here, like the edible oils, where export was nearly $200 million worth, but at a trade gap of 10.67%, it could hurt their affordability. In alcohol, wines, and spirits, the export value is much smaller at 19.2 million; the trade difference is huge at 122.10%, which makes them very expensive. Live animals and animal products face a trade gap of 27.75%, with exports worth 10.3 million dollars.
So now the question which arises is that how can we counter this or what’s the way forward? Ajay Srivastava’s point of view is that India must not yield to any kind of pressures from the US to open its agricultural sector because, if India does, it would disrupt the lives of many Indian farmers. So, India must prioritise its national interest while protecting its economy. At the same time, India needs to invest in the agricultural industry and support its scientists in developing new kinds of seeds that can survive climatic conditions. This will make our food system stronger and protect us from future risks.