Pragmatic tariff adjustments with US can secure India's farm exports: NITI paper

Mint

02-06-2025

New Delhi: India should grant more market access to American products that do not hurt Indian farmers—including apples, almonds and pistachios—for a mutually beneficial bilateral trading arrangement, according to a working paper by NITI Aayog.
In turn, India could benefit from greater long-term market access for its shrimp, fish, rice, tea, coffee and rubber, the paper said as the two countries tried to wrap up a bilateral trade agreement.
The paper supports a 'give and take' approach that will allow the US to lower its trade deficit with India, while also helping India to secure its farm exports. The paper, co-authored by member Ramesh Chand and senior advisor Raka Saxena, also suggests that India introduce market reforms in the farm sector and work with states in order to improve competitiveness of India's agriculture exports.
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'India must pursue a pragmatic mix of tariff adjustments, strategic import liberalization and long-term competitiveness to safeguard its farm sector while preserving strong trade ties with the United States. With calibrated give-and-take, India can prevent large-scale disruption, avoid trade conflict and emerge as a more competitive and resilient agri-export economy," said the latest working paper from the federal policy think tank. It clarifies that authors' views are personal.
India can consider lower tariffs on agricultural commodities where either domestic production is small or import does not compete with domestic production because of different quality grades and seasons, the report said, citing examples of US apples which sell at a premium price in India and products like almonds and pistachios, the demand for which is met through imports. Apples from the US now attract 50% import duty in India, while pistachios and walnuts attract 30%, the paper pointed out.
The authors explained that India, which accounts for over 40% of US imports of frozen shrimp and prawn, its largest source of import, now faces a 26% tariff under the now-suspended reciprocal tariff plan, compared with the earlier zero-duty regime, potentially weakening India's price advantage if the tariffs are not averted.
India is currently in trade talks with the US to avoid the tariffs announced on 2 April and suspended for three months to facilitate talks.
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Ecuador, with a lower share and lower unit value for the commodity per tonne, faces only a 10% tariff under the reciprocal tariffs, positioning it to gain from the shifting trade dynamics with the US, the report pointed out.
'As a leading supplier with over 40% market share, India stands to lose price competitiveness, especially against countries like Ecuador and Argentina, which now face only a 10% tariff. This shift could lead to reduced demand for Indian shrimp in the US unless exporters absorb part of the cost or reposition toward value-added or certified sustainable products," the report pointed out.
Indonesia and Vietnam, however, stand to take a heavier hit from the reciprocal tariffs on shrimp at 32% and 46% respectively.
The pause on reciprocal tariffs announced by the US has created a level playing field for now, but exporters are hoping for a permanent solution.
'We are confident that the negotiations between India and US for concluding a trade agreement would yield fruit quickly and allow import of shrimp into the US without any tariff barriers," said K.N. Raghavan, secretary general of the Seafood Exporters Association of India.
Export of processed and value-added seafood has immense potential, Raghavan said, adding that more focus on this area with support from government will lead to higher exports.
"We are confident that with support from government and related agencies, we will be able to double the present export turnover of $7-8 billion a year within the next five years," added Raghavan.
The report said rice is the second-most important commodity exported by India to the US, commanding 27% share in its rice imports after Thailand, which controls more than half of all US import of rice. India exported rice worth $ 409 million to the US in 2024.
India, now faces the threat of a 26% reciprocal tariff on rice, which would be an increase from the otherwise 0.6% tariff. This poses a moderate yet strategic challenge. India still retains a tariff advantage over Thailand, which faces a higher 36% rate.
'There is ample of scope as well as opportunity for semi-milled rice and basmati rice exports from India to US, if the trade deal is done keeping the interest of Indian farmers," said Satish Goel, president, All India Rice Exporters of India.
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Like exports, the composition of India's agricultural imports from the US has also undergone considerable changes during the last two decades. Edible fruits and nuts have emerged as a dominant item of agricultural imports followed by cotton and beverages and spirits. These three categories constitute 75% of total agricultural imports from US into India, the report said.
By turning current challenges into reform opportunities, India can position itself as a global food power in the coming decades, the report said.