R. Suryamurthy
India’s agricultural trade policy is entering a decisive phase, caught between mounting pressure from a potential US-imposed tariff regime and the urgent need to secure domestic food supplies. A recent recommendation by NITI Aayog to offer tariff concessions on US agricultural imports under a proposed Free Trade Agreement (FTA) has stirred intense debate among policymakers and experts. While proponents view it as a strategic move to strengthen bilateral trade ties, critics caution that such concessions could threaten the livelihoods of Indian farmers and compromise long-term food security.
Professor Nilabja Ghosh of the Institute of Economic Growth, while acknowledging the NITI Aayog report’s timely international perspective, emphasizes the necessity of developing a comprehensive “agri-trade intelligence” framework for policy formulation. Ghosh commends the report for its compilation of information, highlighting its potential as a prelude to a more sophisticated analytical approach. However, she raises pertinent questions regarding the methodological basis of the analysis and its disproportionate focus on certain agro-exports like prawns, which, while significant to US trade, may not comprehensively represent India’s agricultural landscape.
Ghosh underscores that despite the US being India’s largest trade partner, agricultural products do not constitute the most significant export component, a reality exacerbated by the persistent struggles within India’s agricultural economy. She notes that a substantial portion of visible agricultural exports to the US comprises consumable goods catering to the Indian diaspora. Importantly, Ghosh posits that the current trade emergency, though “disturbing,” presents an “opportunity to correct the weaknesses of Indian agriculture from both producer and consumer points of view.”
A key area of contention, according to Ghosh, is the measurement of competitiveness. While the report rightly highlights its importance, relying solely on relative international prices is deemed “simplistic and short-sighted,” as such metrics fail to account for “other less quantified aspects of trade relations.” Ghosh warns against complacency in describing India as “not an inefficient producer,” stressing that comparative advantage, the fundamental driver of trade flows, is intrinsically linked to the cost of production. She argues for a more rigorous cross-country comparison of production costs, explicitly incorporating environmental considerations, to genuinely convince both Indian producers and the US administration of the cost advantages and disadvantages of potential export items.
Ghosh further points out a missed opportunity in the NITI Aayog report: the potential for diversifying India’s exportable agricultural spectrum. She advocates for including processed farm products and other items like honey, which are discussed in the report but often overlooked in conventional trade analyses. Furthermore, she suggests a redesign of the import basket, proposing that tariff adjustments could facilitate the import of essential goods like edible oils, alongside items of superior nutritional value and those processed with innovative technology and skill. To mitigate the impact of the US tariff burden on processed item exports, Ghosh proposes international collaboration, with India potentially partnering with other raw product-producing countries. Ultimately, she asserts that navigating the “inevitable resulting from a looming tariff regime” necessitates negotiation, global cooperation, and a strategic overhaul of in-house agriculture based on product advantages measured not merely by quantity but by genuine competitiveness.
In stark contrast to the NITI Aayog’s proactive stance on tariff concessions, a detailed counter-analysis by the Global Trade Research Initiative (GTRI) issues a sharp warning regarding the potential for such moves to “fundamentally weaken India’s food security system and threaten the livelihoods of millions of farmers.” The GTRI report strongly cautions against the NITI Aayog’s proposal to reduce duties on a range of US agricultural products, including rice, dairy, poultry, soybean derivatives, corn by-products, and genetically modified (GM) soybeans.
GTRI critically assesses the rationale of using tariff reductions to address short-term supply gaps, labeling it “deeply flawed and historically risky.” The report draws parallels with India’s experience in the 1960s and 70s under GATT, where zero-bound import tariffs on staples like rice and wheat became significant liabilities post-self-sufficiency, leading to costly renegotiations. GTRI warns that repeating this historical error could leave India vulnerable to global price shocks and future trade disputes.
The proposed removal of tariffs on sensitive items like rice and pepper is particularly contentious. GTRI highlights the distorting effect of heavily subsidized grain exports from countries like the US and EU on global markets, which have historically devastated local agriculture in developing nations. The report warns that India, with its over 100 million smallholder farmers, risks being drawn into a “boom-bust cycle” if tariff protections on staples are relaxed.
Beyond economic implications, GTRI emphasizes the risk to India’s public food procurement and Minimum Support Price (MSP) systems, which are crucial for food security and rural incomes. Concessions on staples could embolden international industry groups, like the USA Rice Federation, to intensify WTO challenges against India’s food policies, thereby undermining its ability to defend critical subsidies and procurement operations.
Regarding dairy and poultry, NITI Aayog’s suggestion of replacing tariffs with Sanitary and Phytosanitary (SPS) standards is met with skepticism by GTRI. The report points to the US’s long-standing disputes with India’s SPS requirements, such as those related to imported dairy. GTRI asserts that India’s weak regulatory and enforcement capacity makes the implementation and defense of stringent SPS norms at the WTO far more challenging than maintaining existing tariffs. Furthermore, applying rigorous SPS norms to imports would necessitate their application to domestic producers, potentially disadvantaging many Indian farmers and allowing better-capitalized foreign producers to dominate the market.
The import of genetically modified materials also raises significant alarm for GTRI. While NITI Aayog suggests a “controlled model” for importing GM soybean seeds and corn by-products, GTRI argues that India’s fragmented logistics and weak regulatory oversight render such containment strategies “unworkable.” The risk of GM materials entering domestic agricultural systems is deemed high, potentially eroding public trust and jeopardizing exports to GM-averse countries.
In light of these concerns, GTRI strongly advises against hastily implementing tariff reductions without “comprehensive, evidence-based consultation” involving state governments, farmer organizations, and trade experts. The report emphasizes that decisions impacting over 700 million people dependent on agriculture must prioritize long-term national interest over short-term diplomatic or commercial expediency. GTRI also urges NITI Aayog to publish a complete position paper detailing the terms of the India-US FTA, specifically highlighting any asymmetries in tariff reduction commitments, as the report suggests India is being asked to significantly reduce its MFN tariffs with limited reciprocal concessions from the US.
In conclusion, GTRI’s analysis underscores that for India, agriculture is not merely an economic sector but a fundamental pillar of rural livelihoods, food security, and a crucial buffer against global market volatility. In the current unpredictable global food market, GTRI posits that tariff flexibility is a “vital strategic tool” rather than a “protectionist relic.” Conceding this flexibility, especially under pressure from a trade partner with vastly different structural advantages, could lead to significant long-term costs for India.
