India keen to strike trade deal with US, but wary about crossing red lines on agriculture, dairy

Straits Times

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Around 60 per cent of India's 1.4 billion people are engaged directly or indirectly in agriculture.
– In the central Indian state of Madhya Pradesh, soya bean farmer Harnam Singh Lodhi lamented that he has enough difficulties without having to worry about competition from American farmers.
'This year, non-stop rains after sowing have hurt the crop,' said Mr Lodhi, who fears 70 per cent of his soya bean crop was washed out and ruined.
'I am also worried about getting good rates when the crop is harvested in October,' added the farmer, who has an 8.1ha farm in the biggest soya bean producing state in India, on which he also cultivates wheat.
'So how can I, on top of all that, compete with American soya bean farmers?'
Soy farmers like Mr Lodhi are contending with a market glut due to a good November harvest, which has pushed average prices down by about 10 per cent since 2024 to around 4,000 rupees (S$59.60) for 100kg.
Prices could fall further if the United States gets its way.
Soy – along with dairy, wheat, rice and apples – is among the American produce Washington wants India to ease import restrictions on. The US is the world's second-largest producer of soya beans, while India is ranked the fifth.
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The South Asian country is looking to reduce a
26 per cent 'reciprocal' tariff imposed by the Trump administration.
But resistance from Indian farmers to the US push for greater market access in agriculture and dairy has been a major sticking point in the government's tariff negotiations.
India's Finance Minister Nirmala Sitharaman said in a July 1 interview with The Financial Express that these sectors 'have been among the very big red lines, where a high degree of caution has been exercised'.
Around 60 per cent of India's 1.4 billion people are engaged directly or indirectly in agriculture, a sector that accounts for about 18 per cent of the annual economic output of the world's fourth-largest economy by nominal GDP.
Collectively, farmers wield enormous political clout.
Pressure from farmer groups was one key reason behind India's 2019 decision not to join the Regional Comprehensive Economic Partnership, a free trade agreement involving 15 Asia-Pacific countries.
In 2021, following 11 months of
massive farmer protests, the government was forced to repeal three farm laws which farmers believed to favour large companies.
More on this topic India proposes retaliatory duties at WTO against US tariffs on vehicles
Pushback to pressure
Currently, US agricultural exports to India include nuts such as almonds and pistachios, pulses such as chick peas, and some fresh fruit.
US President Donald Trump has said that 'India basically is working along that same line' of the deal struck with Indonesia, which has agreed to buy US$4.5 billion in US produce, among other measures, in exchange for a tariff rate of 19 per cent, down from the original 32 per cent.
Agriculture accounts for about 18 per cent of the annual economic output of the world's fourth-largest economy by nominal GDP.
PHOTO: AFP
Indian Commerce and Industry Minister Piyush Goyal said on July 15 that the two countries are moving quickly to reach a 'win-win' agreement.
But farmers' associations in India are against any tariff reduction deal giving American agricultural products unfettered access to the Indian market.
They are also against the entry of genetically modified crops, such as corn from the US, which is among the key sticking points in the negotiations. India allows cultivation of genetically modified cotton but does not allow cultivation of any other genetically modified crops domestically.
The Indian Coordination Committee of Farmers Movements (ICCFM), a network of farmers' organisations, has urged the government 'to protect the interests of Indian farmers, ensuring our food sovereignty and security' in the India-US trade deal.
The Bharatiya Kisan Sangh (BKS) – a farmers' organisation affiliated with the Rashtriya Swayamsevak Sangh, the ideological parent of the ruling Bharatiya Janata Party – has made a similar call.
'We are not on a level playing field when it comes to American farmers. The landholding is smaller in India. How will we compete?' asked Mr Mohini Mohan Mishra, BKS All-India general secretary.
'It will be better to keep discussions on agriculture and dairy out of this deal,' he added.
Small Indian farms cannot match the scale and efficiency of US farms, which average 188.5ha and often benefit from large-scale operations, advanced mechanisation, subsidies and better infrastructure.
In comparison, India's farms are small, fragmented and hardly mechanised. Some 86 per cent of farmers operate from less than 2ha of land.
The agriculture sector also struggles with low productivity, rising costs of items like fertilisers and seeds, poor irrigation infrastructure and an over-dependence on rain for water.
While the government supports farmers with guarantees that it will buy certain agricultural products at pre-determined rates, farmers continue to struggle to make ends meet.
A single crop failure or a drop in prices for produce could send Indian farmers, who are typically already weighed down by loans, spiralling into financial crisis.
Cereals such as rice, wheat, maize and millet account for more than half of India's total agricultural production and two-thirds of agricultural crop area.
Indian farmers fear that an influx of these cheaper produce from the US will further erode their earnings amid already difficult circumstances.
'There is no way, because of food security and livelihood issues, that we can expose our farmers to face competition from large agri businesses,' said Dr Biswajit Dhar, a trade expert at the Council for Social Development, a think-tank focusing on justice and equality in development.
Dairy sensitivities
India is the world's largest producer of milk, but it only has a 0.25 per cent share of global dairy trade due to high domestic consumption.
This makes India an attractive market for US dairy.
But if US milk were allowed into India, prices are likely to fall by about 15 per cent – spelling a potential annual loss of 103 billion rupees to dairy farmers, a State Bank of India report forecasts.
There is also cultural and religious resistance to importing US dairy, due to the American practice of feeding cattle with animal by-products.
Recent trade agreements that India inked with Australia and the United Kingdom could offer some ideas on resolving the impasse with the US.
The India-Australia Economic Cooperation and Trade Agreement signed in 2022 exempted duties on Australian barley, oats and lobsters – but dairy and chickpeas were excluded.
In the free-trade agreement with UK, India refused tariff reductions on UK dairy, apples, poultry and sugar to protect farmers.
'What could be done is that India could increase market access for the US in some areas like nuts and processed foods,' Dr Dhar said.
'The government will be worried about facing farmers' wrath. I don't think the government will test them.'
BKS' Mr Mishra warned that if the government goes ahead with agriculture and dairy in the deal, 'we will also decide how to go ahead'.
'The government will have to think – there are so many elections coming one after the other,' he said, referring to state-level elections.
He added: 'If they don't work for the welfare of farmers, farmers will also not cooperate.'