NEW DELHI: As India and the United States finalized key contours of their trade agreement, one sector stood firmly outside the ambit of concessions: agriculture and dairy. Despite pressure from Washington for greater market access, New Delhi has categorically protected these sectors—an outcome the government sees as non-negotiable.
To understand why India refused to dilute safeguards in agriculture and dairy, one must look beyond tariff tables and trade jargon. For India, farming is not just an economic sector—it is a social, political and livelihood pillar. The decision reflects structural realities of India’s rural economy, global trade asymmetries, and long-standing concerns over food security and farmer incomes.
Here is a detailed explainer on why agriculture and dairy remain sacrosanct in India’s trade policy.
AGRICULTURE IS A LIVELIHOOD ISSUE, NOT JUST A TRADE SECTOR
Agriculture and allied activities—including animal husbandry, dairy, fisheries and horticulture—employ over 700 million Indians, directly or indirectly. For nearly half the country’s population, farming is the primary source of income, sustenance and survival.
Unlike developed economies such as the US, Canada or Australia, where agriculture is highly mechanized, corporatised and capital-intensive, Indian agriculture is dominated by small and marginal farmers. Over 85 per cent of Indian farmers operate on landholdings of less than two hectares. Their capacity to absorb price shocks is limited.
In this context, opening India’s agricultural market to heavily subsidised imports from developed countries could devastate rural livelihoods. Cheap food grains, dairy products and processed farm goods entering India would directly undercut domestic prices, pushing farmers into distress.
For the Indian state, agriculture is therefore not just about efficiency or competitiveness—it is about social stability, employment and rural survival.
THE GLOBAL AGRICULTURAL TRADE IS DEEPLY SKEWED
One of the core reasons behind India’s protective stance is the unequal nature of global agricultural trade.
According to various estimates, over 90 per cent of global food trade is controlled by just five multinational corporations. These agribusiness giants—based largely in developed economies—have historically relied on predatory pricing, economies of scale and state subsidies to dominate markets.
If India were to significantly reduce tariffs or relax import regulations, domestic farmers would be forced to compete with global corporations that enjoy:
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Massive government subsidies
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Advanced mechanisation
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Cheaper credit
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Superior logistics and storage infrastructure
This asymmetry would place Indian farmers at a structural disadvantage. Experts warn that such exposure could lead to farm exits, rural unemployment and heightened political unrest—outcomes no Indian government can afford.
WHY DEVELOPED NATIONS PUSH FOR MARKET ACCESS IN INDIA
For countries like the United States, agriculture is a major export-driven industry, not a livelihood sector.
In 2024 alone, US agricultural exports stood at USD 176 billion, accounting for nearly 10 per cent of total US merchandise exports. American farming is driven by large agribusinesses, supported by substantial government subsidies and insurance programmes.
With saturated domestic markets, developed countries see India—home to 1.4 billion consumers—as a lucrative destination for expanding farm exports.
This explains why agriculture and dairy routinely emerge as sticking points in India’s trade negotiations with the US, the European Union and Australia. These countries seek lower tariffs, fewer regulatory barriers and easier access for products ranging from dairy and meat to grains and processed foods.
India’s resistance is rooted in the fear that such access would disproportionately benefit foreign exporters at the cost of domestic producers.
HOW INDIA PROTECTS ITS AGRICULTURE SECTOR
India shields its agriculture sector through a mix of tariffs, regulations and policy safeguards.
Currently, agricultural imports into India are subject to moderate to high tariffs, ranging from zero to as high as 150 per cent, depending on the product. These duties act as a buffer against sudden surges of cheap imports.
Opening up agriculture in a trade agreement typically involves reducing import duties, easing quantitative restrictions and aligning domestic standards with international norms. India has consistently avoided such commitments in agriculture and dairy, even while offering concessions in other sectors like manufacturing and services.
Trade officials argue that without such protection, Indian farmers—already grappling with rising input costs, climate risks and volatile markets—would face existential threats.
THE MYTH OF “HIGH INDIAN TARIFFS”
A recurring argument from developed nations is that India maintains excessively high agricultural tariffs. However, experts point out that this criticism often ignores the trade practices of developed economies themselves.
For instance, the United States imposes extremely high tariffs on certain agricultural goods—tobacco imports face tariffs of up to 350 per cent. Additionally, the US employs non-ad valorem (NAV) tariffs, which are levied per unit rather than as a percentage of value. These often make imports significantly more expensive but are less visible in headline tariff comparisons.
In other words, agricultural protectionism is not unique to India—it is widely practiced, especially by developed nations, albeit through more complex instruments.
US AGRICULTURAL EXPORTS TO INDIA: THE REALITY CHECK
Despite complaints about market access, the US already enjoys a sizeable agricultural export presence in India.
In 2024, US agricultural exports to India were valued at USD 1.6 billion. Key items included:
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Almonds (in shell): USD 869 million
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Pistachios: USD 121 million
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Apples: USD 21 million
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Ethanol (ethyl alcohol): USD 266 million
These figures underscore that India is not a closed market. However, imports are largely limited to products that do not directly threaten Indian farmers’ livelihoods, such as nuts and speciality items.
Staple crops and dairy, which support millions of small producers, remain protected.
THE ROLE OF SUBSIDIES IN DISTORTING GLOBAL TRADE
One of India’s strongest arguments against opening agriculture lies in the scale of subsidies provided by developed countries.
According to trade experts, US farm subsidies have in some years exceeded 50 per cent of production value for certain products. Examples include:
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Rice: 82 per cent
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Canola: 61 per cent
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Sugar: 66 per cent
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Cotton: 74 per cent
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Mohair: 141 per cent
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Wool: 215 per cent
Such massive support enables exporters to dump products at artificially low prices in international markets. Indian farmers, who receive comparatively modest and often delayed support, simply cannot compete on such terms.
Without tariffs and safeguards, Indian agriculture would be exposed to what experts describe as “unfair trade competition”.
ARE ALL AGRICULTURAL PRODUCTS SENSITIVE FOR INDIA?
In India’s case, the answer is effectively yes.
With over 50 per cent of the population dependent on agriculture, the government treats the entire sector as sensitive. Import duties are particularly crucial for:
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Staple food crops
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Dairy and milk products
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Oilseeds
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Key cereals and pulses
Dairy is especially politically sensitive, given India’s vast cooperative network and millions of small milk producers. Any influx of cheap dairy imports could disrupt this ecosystem, threatening rural incomes and food self-sufficiency.
WTO Rules Back India’s Position
Contrary to some claims, India’s agricultural protection does not violate World Trade Organisation (WTO) rules.
WTO agreements allow member countries to designate sensitive sectors and impose tariffs to protect food security, rural employment and livelihoods. Developing countries, in particular, are granted policy space to shield vulnerable populations.
India’s tariff levels remain within its bound commitments under the WTO, giving it legal backing to resist pressure in bilateral trade negotiations.
INDIA’S GROWING AGRICULTURAL EXPORT FOOTPRINT
While India protects its domestic market, it is simultaneously expanding its presence as an agricultural exporter.
In FY 2025, India’s agricultural exports crossed USD 51 billion, up from USD 43.7 billion in 2023-24. Exports to the US alone stood at USD 5 billion.
India’s total exports in FY25 were valued at USD 437 billion, and the government has set an ambitious target of reaching USD 100 billion in combined exports of agriculture, marine products, food and beverages within the next four years.
India is currently the world’s second-largest agricultural producer by value, but accounts for just 2.2 per cent of global farm exports, up from 1.1 percent in 2000. Major export items include tea, coffee, rice, cereals, spices, cashew, oil meals, oilseeds, fruits and vegetables.
This highlights India’s dual approach: protect domestic livelihoods while expanding exports where Indian farmers remain competitive.
Non-Tariff Barriers: The Hidden Trade Wall
Tariffs are only one part of the trade equation. Non-tariff measures often play a bigger role in restricting market access.
According to Global Trade Research Initiative (GTRI) Founder Ajay Srivastava, the US employs complex sanitary and phytosanitary (SPS) regulations that function as disguised trade barriers.
A key example is the Maximum Residue Limits (MRLs) imposed on pesticides and chemicals in agricultural products. US standards are among the strictest globally, making compliance costly and technically challenging for farmers in developing countries like India.
These measures effectively limit Indian agricultural exports, even as the US seeks lower tariffs in India—an imbalance New Delhi frequently flags in negotiations.
THE BOTTOM LINE
India’s decision to protect agriculture and dairy in its trade deal with the US is not ideological—it is structural and strategic. With hundreds of millions dependent on farming, limited social safety nets, and deep global trade asymmetries, agriculture remains too sensitive to expose to unfettered competition.
As India integrates further into global trade, its approach remains clear: open up where gains are mutual, but draw firm red lines where livelihoods, food security and rural stability are at stake. In agriculture and dairy, those red lines remain firmly in place.
