The interim trade understanding between India and the United States has triggered intense political debate. Critics describe it as a concession-heavy arrangement, while the government presents it as a pragmatic reset after tariff escalations in 2025. As with most trade negotiations, the outcome lies between these extremes.
India has indicated its intent to purchase $500 billion worth of U.S. goods over five years — spanning energy, aircraft, and high-technology equipment. In return, the U.S. has reduced tariffs on Indian exports to 18%, broadly aligned with rates applied to competitors in South and Southeast Asia and significantly lower than those imposed on China. The most sensitive debate, however, concerns agriculture.
India–U.S. Trade Balance: The Numbers
In 2024:
- India exported roughly $81 billion in goods to the U.S.
- It imported about $43 billion.
- Trade surplus stood at approximately $38 billion.
In agriculture:
- Agri-exports to the U.S. were around $5.7 billion.
- Agri-imports were about $2.1 billion.
- India maintained an agri-trade surplus of roughly $3.6 billion.
These figures suggest that India enters the deal with a structurally strong agricultural position, at least in aggregate terms.
Will U.S. Farm Imports Hurt Indian Farmers?
The first concern is that U.S. agricultural products will flood Indian markets and depress domestic prices. However, the crops reportedly opened under the agreement are largely those not widely cultivated in India — such as almonds, walnuts, pistachios, pecans, cranberries, and blueberries.
Almonds already enter India at relatively low duties. If tariffs on similar tree nuts are reduced to 10–15%, imports may rise but are unlikely to directly affect staple crop producers.
The sensitive case is apples. Duties could fall from 50% to around 25%, but indications suggest that import quotas may accompany tariff reductions, offering calibrated protection.
Genetically Modified (GM) Crops: Risk or Overstated Fear?
A second concern is the entry of genetically modified (GM) crops or their derivatives — such as soybean oil and dried distillers’ grains (DDGs).
India has not permitted the import of living GM corn or soybeans capable of cultivation. However, processed derivatives like soybean oil and DDGs have been imported previously.
Key distinctions include:
- Processed derivatives are not living modified organisms.
- They cannot be germinated or cultivated.
- Scientific regulators in exporting countries maintain that such products do not pose health risks.
Globally, GM crops are cultivated across over 200 million hectares in dozens of countries. Nonetheless, domestic debates persist regarding biosafety, ecological implications, and consumer choice. Regulatory transparency and labelling mechanisms remain essential for public trust.
Can Small Indian Farmers Compete?
The third apprehension relates to structural asymmetry. U.S. farms are large, mechanised, and receive subsidies. Indian agriculture is dominated by smallholders.
However, India’s agricultural trade record suggests competitive resilience:
- Total agri-exports in 2024 were about $52 billion.
- Total agri-imports were roughly $37 billion.
- The U.S., by contrast, ran an overall agri-trade deficit of $59 billion.
India also provides substantial support to farmers — including fertiliser subsidies, concessional credit, crop insurance, and direct income transfers such as PM-KISAN.
The deeper issue is productivity. U.S. GM corn and soybean yields are reportedly significantly higher than India’s. Strengthening agri-research, extension services, and technology adoption may be more critical to competitiveness than tariff protection alone.
Balancing Caution with Opportunity
The agricultural segment of the interim agreement appears to reflect calibrated liberalisation rather than full-scale opening. Sensitive staples like cereals reportedly remain protected, and tariff reductions are focused on niche or limited-impact products.
That said, three factors will determine the long-term outcome:
- The final tariff schedules and quota arrangements.
- The clarity of biosafety and import standards for GM derivatives.
- The scale of domestic investment in agri-R&D and productivity enhancement.
Trade agreements are rarely absolute victories or defeats. They represent negotiated trade-offs shaped by geopolitical and economic constraints. The agricultural dimension of this deal, based on available information, appears cautious rather than sweeping — though the final contours will become clearer once detailed schedules are published.
What to Note for Prelims?
- Trade surplus refers to exports exceeding imports.
- Processed GM derivatives differ from living modified organisms in regulatory treatment.
- provides direct income support to farmers.
- Tariff quotas combine reduced duties with quantitative limits.
What to Note for Mains?
- Critically examine the impact of agricultural trade liberalisation on smallholders.
- Discuss the regulatory and biosafety challenges surrounding GM crop imports.
- Analyse the role of productivity enhancement and R&D in strengthening farm competitiveness.
- Link to GS Paper II (International relations, trade diplomacy) and GS Paper III (Agriculture, food security, subsidies).
