Here's why Indian farmers may be ‘better off' without India-US trade deal, LGT Wealth's Lokapriya explains

Mint

a day ago

The highly anticipated $100 billion trade deal between India and the US remains in limbo. A key sticking point is agricultural and dairy access—an area where India is unlikely to yield. Indian agriculture is dominated by small-scale farmers who lack the economies of scale and government support enjoyed by large US agricultural businesses. With over 60% of India's population living in rural areas, opening the door to subsidised US farm products could devastate livelihoods.
Cultural differences further complicate matters. US dairy products often contain animal fat, which clashes with the dietary preferences of India's largely vegetarian population. For these reasons, India's farmers may be better off without the deal—rather than risk economic 'hara-kiri' by opening up sensitive sectors.
Against this backdrop—and amid uncertainty over whether tariffs will settle at 10% or spike to 27%—markets are taking a cautious "wait and watch" approach.
Vehicle sales, a good barometer of consumer sentiment, remain flat. Two-wheeler sales are declining by 2–3%, and commercial vehicle growth is also subdued. Even in urban areas, demand for essentials like toothpaste and detergents is muted, indicating limited growth in consumption and stagnant wage increases.
This cautious consumer behaviour is mirrored globally, with companies holding back on discretionary IT spending while awaiting clarity on tariffs. However, there's a silver lining: while large US firms are shifting IT functions in-house, they're primarily moving from third-party vendors to Global Capability Centres (GCCs). As a result, IT sector wage growth remains stable, sustaining demand in IT hubs like Bengaluru, Chennai, Hyderabad, and Gurgaon—reflected in robust real estate activity.
With private investment on hold, it's state-owned enterprises that are driving growth, as they did over the past two years. Transmission and distribution companies, in particular, are expected to translate their strong order books into revenue growth. Meanwhile, emerging sectors such as data centres, green energy, and electric vehicles are showing strong momentum and contributing meaningfully to GDP expansion.
No rate cut is expected this month in the US, but Jerome Powell isn't shutting the door just yet. In fact, he's leaving it slightly ajar. If inflation eases a bit or the job market shows some softness, the Fed might just sneak in a rate cut later this summer. It's a far cry from the earlier they needed lots of data before making a move.
India, on the other hand, might not wait around. The RBI could go for not one, buttwo rate cuts in the coming months. Why? To keep the growth party going, of course. So while the US is still thinking about it, India's already warming up the rate-cut engine. Stay tuned.
If former President Trump imposes blanket tariffs of 15–20% on countries still in negotiations, markets are likely to react negatively. However, if the US adopts a two-tier structure—10% tariffs for countries that strike deals and 30–50% for China—it could work in India's favour. A deal that caps tariffs at 10% while protecting India's agricultural and dairy sectors would be a clear win.
This is a space worth watching. In a few months, you'll likely know just how much more (or less) your next iPhone will cost.
The author, Chakri Lokapriya, is the CIO Equities of LGT Wealth India.
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