The thick red line: Why India shouldn't agree with US on agri

India Today

2 days ago

July 9, Donald Trump's tariff deadline, is fast approaching. He's expecting a "very big deal". Indian officials camping in Washington, DC, have extended their stay, with External Affairs Minister S Jaishankar rushing to the US capital to meet his counterpart, Marco Rubio. Amid all this diplomatic hustle and heat, New Delhi's goal is clear — secure a favourable interim deal for India before Trump's threatened high tariffs, up to 26%, on Indian exports, kick in. But there's an impasse in the talks. India has a "big red line", on which it will find difficult to negotiate. Team Trump is reportedly seeking concessions from India in the agriculture and dairy sectors. There are big reasons why India shouldn't agree to the US demands on agri and dairy.advertisementNew Delhi has dug in its heels, and is determined to safeguard India's domestic agricultural sector, and the dairy domain. Millions of Indians, about 40% of the population, are employed in the sector, even though it's not as heavily subsidised as farming in the US, whose government is driving a hard bargain to ensure American agricultural products don't face steep import tariffs in India.Though the US tries to project it as an attempt at creating a level playing field, the situation is heavily tilted in its favour. A mere quid pro quo tariff regime will not address the mismatch created by the US by providing massive subsidies to its farmers vis-a-vis farmers in India.
While farmers in the US get over $61,000 in subsidies annually, their counterparts in India get just $282 a year.advertisementAs India rightly called the agriculture and dairy sectors a "big red line", it, in all likelihood and fairness, shouldn't give in to Trump's demands because doing so could jeopardise the livelihoods of nearly half the country's workforce dependent on agriculture, say the data and experts.It could expose the Indian market to heavily subsidised US farm dumping, undermine food security standards, some tied to religious and cultural practices, fear experts and reportedly the Indian government and a think tank."As far as the import of genetically modified (GM) soybean, maize and dairy products from the US is concerned, the government does not seem to be ready for it at all," agricultural expert Om Prakash tells India Today Digital.Then there are risks of cross-pollination from GM crops that could harm India's native seed varieties. There's also the matter of dietary sensitivities and consumer trust, especially in dairy, where feeding cattle animal remains clashes with Indian cultural and religious values."India is protective of its farmers, which is why they have relatively high tariffs compared to anywhere in the world," agricultural trade expert Sharon Bomer Lauritsen told Politoco."They're going to protect their farmers," added the former negotiator of the US Trade Representative.AGRICULTURE'S ROLE IN EMPLOYMENT: INDIA-US CONTRASTadvertisementFirst, let's look at the numbers. They will highlight how agriculture produces, employment, and their demand and supply vastly differ between India and the US, and why trade negotiations must acknowledge these realities with fairness.As of 2020, around 196.64 million people were employed in agriculture in India, compared to just 2.11 million in the US. Agriculture accounts for 41% of total employment in India, while in the US, it is merely 1%. At 14.6%, agriculture is one of the biggest components of India's GDP, while it contributes 0.92% to the American economy.When it comes to average farm size, the difference is stark.The average farm holding in the US is about 180 hectares, while in India, it is just 1.08 hectares.Farmers in the US also receive significantly more government support, with an average of $61,286 per farmer (2016), compared to $282 per farmer in India (2018–19), according to World Trade Organisation (WTO) data, accessed from Kisan Tak, India Today Digital's sister portal on agriculture, farmer welfare and environment.Agricultural expert Om Prakash says that India has been constrained by the WTO's discriminatory policies since the Agreement on Agriculture (AOA) came into effect on January 1, 1995. He argues, "India's farm subsidy is significantly lower, even more so when adjusted per farmer, yet the WTO continues to pressure India to reduce it even further".advertisementKisanTak's Prakash ties them directly to the WTO's flawed subsidy accounting method.The WTO's subsidy accounting method is flawed because it doesn't look at how many farmers India has. It just counts the total money given to them. On the other hand, the US, with fewer farmers, gives more money, and each farmer gets a much bigger sum. But in India, where millions of farmers get little help, it looks like India is giving more than it should, even when it's not.WHAT IF INDIA LOWERS TARIFFS ON US FARM AND DAIRY GOODS?To ring-fence its farmers and the agriculture sector, India is forced to charge much higher import tariffs on agricultural products compared to the US.On average, India puts a 39% tax on farm goods coming from other countries. But for the items that are imported the most, the tax goes up to 65%. This shows how strongly India protects its farmers by making imported farm goods more expensive. In contrast, the US keeps its agricultural import taxes lower, with a simple average of just 5% and a trade-weighted rate of 4%, according to data from the WTO.advertisementThe New Delhi-based think-tank Global Trade Research Initiative (GTRI) has warned that reducing import tariffs on subsidised US agricultural products, particularly grains, could harm Indian farmers and destabilise food prices in India. Lowering tariffs could allow cheap, subsidised US grains to flood the Indian market, especially when global prices are low.This would potentially undercut local farmers and disrupt the domestic food supply in India.While staples like frozen shrimp, basmati rice, and spices still lead India's export basket, there's been a notable surge in shipments of processed cereals and other value-added food products. On the import side, India continues to source premium items from the US, with almonds, pistachios, and walnuts making up a significant share.NITI AAYOG BACKED GM IMPORTS, CONGRESS PROTESTEDA March NITI Aayog discussion paper titled Promoting India-US Agricultural Trade Under the New US Trade Regime highlighted stark productivity gaps between the two countries.It noted that "India's average soybean yield has stagnated around "one tonne per hectare", whereas in the US, it is "3.4 tonnes per hectare". Similarly, "maize yields in India are just 3.5 tonnes per hectare," compared to "11.1 tonnes per hectare in the US".advertisementThese differences, the now-withdrawn paper says, show there is "a clear scope for improvement" in India's agricultural productivity.The paper, whose withdrawal attracted Congress MP Jairam Ramesh's attack on the Centre, argued that beyond strategic trade management, "India must undertake medium-term structural reforms to improve the global competitiveness of its farm sector". These reforms should focus on "bridging the productivity gap with developed nations by embracing appropriate technologies", while also "nudging states to undertake long-pending reforms".It further called for "liberalising private sector participation", enhancing logistics, and developing "competitive value chains" to strengthen India's agricultural exports. The Centre's move to do the same suffered backlash during the farm protests of 2020-21.India is the world's biggest buyer of edible oil, and the US has a lot of soyabean oil to export, which comes from genetically modified crops. The NITI Aayog paper said India could allow some imports of this oil to reduce the trade imbalance with the US, without hurting local farmers."Except for cotton, no other GM crop is allowed to be cultivated in India. In such a scenario, the question of importing GM soybean and maize from the US for consumption simply does not arise. In essence, the US-India trade deal poses a trial by fire for the Indian government, to safeguard the interests of farmers, agriculture, and the faith of the country's vegetarian population," Om Prakash tells India Today Digital.The NITI Aayog paper also said India should try to get better access to the US market for top exports like shrimp, fish, spices, rice, tea, coffee, and rubber. India earns about $5.75 billion every year from farm exports to the US, and this could grow if India negotiates for lower duties or special trade quotas.Congress leader Jairam Ramesh, on June 30, pointed out that the NITI Aayog working paper had been withdrawn from the think-tank's website. India Today Digital also could not access it. Ramesh alleged that the paper recommended duty-free import of GM maize and soyabean from the US. He added, "For the Modi sarkar, the interests of Midwestern American farmers and large Multinational Corporation traders are bigger than that of the maize farmers of Bihar and soyabean farmers of MP, Maharashtra, and Rajasthan".Lowering tariffs could also disrupt India's food security."In today's geopolitically unstable world, food security must remain sovereign," GTRI Founder Ajay Srivastava was quoted as saying by news agency PTI.However, Finance Minister Nirmala Sitharaman, in a June interview with the Financial Express, said that New Delhi will not compromise on areas that affect vulnerable domestic sectors.She said that agricultural and dairy sectors remain "very big red lines" in the talks.GOVT HOLDS FIRM ON BAN OVER ANIMAL-FED COW MILK PRODUCTSThen there are dietary, cultural and religious sensitivities that complicate the issue of dairy imports from the US, especially when it comes to genetically modified products or items derived from animals not raised according to the norms of several Indian communities. These concerns are deeply rooted and can't be dismissed as mere trade hurdles, as they touch upon dietary restrictions, traditional practices, and faith.India firmly maintains its ban on importing dairy products from cows fed animal-derived feed, according to the USRT's National Trade Estimate (NTE) Report, according to news agency ANI."Imagine eating butter made from the milk of a cow that was fed meat and blood from another cow. India may never allow that," GTRI's Srivastava said.Indians wouldn't like to compromise with milk and dairy products as they are used in religious rituals too.There are several reasons why the big red line exists when it comes to food imports. Cultural beliefs, employment, the agricultural markets, and concerns over the long-term impact are some of them. GM crops' impact on health and the environment is another concern. These are not just policy preferences but emotional and political red zones too.Agricultural trade is deeply sensitive in India too. These developments follow the massive farmer protests in 2020-21 and again in 2024. The policy shift revamping agricultural trade triggered protests and resistance, enough for the Centre to retract.Still, a way forward may be there. Sure, it'll take time, persuasion, trust-building, and change, which could be in favour of one of the two parties. But why not both?- EndsTune InMust Watch