Why farm may still be a thorn in India-US trade deal | Explained | India News

US President Donald Trump announced on Monday that India and the US had reached a trade deal that would reduce bilateral tariffs on Indian imports from 25% to 18%, claiming that New Delhi would reduce tariff and non-tariff barriers on American goods, potentially reducing them to zero.

He also said that India will purchase US worth over $500 billion. Energy, Technology, Agriculture, Coal and many more products.

However, no official statement was made by India regarding the reduction of customs duties on US goods to zero or any statement regarding the key sectors where the agreement was made.

US Secretary of Agriculture Brooke Rollins also thanked the US President for the announcement of the agreement, stating that agriculture is a key sector that India has agreed to consider.

US Secretary of Agriculture thanked President Trump

Brooke Rollins wrote, “Thank you @POTUS for once again delivering to our American farmers. The new US-India deal will export more American agricultural products to India’s massive market, raising prices and pumping cash into rural America.”

He further added: “America’s agricultural trade deficit with India in 2024 was $1.3 billion. India’s growing population is an important market for American agricultural products, and today’s agreement will go a long way in reducing this deficit.”

Rollins also called the agreement the United States’ “first victory” among dozens of trade agreements focused on increasing agricultural exports.

Not mentioned in PM Modi’s statement

Prime Minister Narendra Modi’s statement regarding the agreement did not include any specific statement regarding agriculture. In fact, the zero tariff aspect was not mentioned, as he only expressed his satisfaction with the reduction of tariffs to 18%.

Regardless of the trade agreement, no Indian government official has made any statement that US agricultural products are being exported by India at zero tariffs to India. It is not yet clear whether India has actually opened up its agricultural sector as this has only been claimed by Trump and the US Secretary of Agriculture.

Agriculture remains a major sticking point in India-US trade negotiations, often described as a “sticking point” issue due to deep protectionism on both sides.

India’s reluctance to open its market to the US agricultural sector is due to a combination of social, economic and political factors. Despite persistent US demands for greater access to the Indian market for agricultural exports such as corn, soybeans, dairy, poultry and genetically modified (GM) crops to manage the trade deficit, New Delhi has consistently prioritized domestic priorities.

1. Protecting farmers’ livelihoods and the rural economy

Agriculture employs almost half of India’s workforce, and more than 100 million small and marginal farmers depend on agriculture for survival. Indian farms are typically small (averaging around 1-2 hectares), fragmented, and less mechanized than large, industrialized U.S. operations. Opening markets to cheaper, heavily subsidized U.S. imports could flood the market, suppressing domestic prices and devastating rural incomes, potentially leading to widespread hardship and job losses. The dairy industry, dominated by cooperatives and small producers that support 70-80 million households, is particularly vulnerable to competition from U.S. products.

2. An uneven playing field due to subsidies and dumping

U.S. agriculture benefits from large government subsidies with direct income payments and support programs; allows overproduction and exports at below market prices; This practice is sometimes called “dumping.” Without similar support, Indian farmers cannot compete fairly with US products. This disparity is a key reason why India maintains high tariffs and resists reductions that would subject domestic producers to subsidized imports such as wheat, rice, corn and soybeans.

3. Political and Social Sensitivities

The agricultural sector is one of the politically sensitive sectors; Farmers remain a strong voting bloc that can mobilize large-scale protests, as the 2020-2021 farm bill agitation has shown.

In addition, Prime Minister Narendra Modi has publicly promised to protect farmers’ interests, even at the cost of higher US tariffs, to ward off opposition attacks and maintain rural support. Culturally, industries such as dairy are tied to traditions and community structures.

Why does the US want to sell its farm produce in India?

The United States wants to sell more agricultural (farm) products in India, primarily for economic and strategic reasons.

1. India’s huge and growing market

India is the world’s most populous country (more than 1.4 billion people), with one of the fastest growing economies, rising consumer spending, and increasing urbanization. This creates a strong demand for high-quality, diverse imported foods and agricultural products, especially at a time when domestic production faces challenges such as climate change, water scarcity, land issues and workforce shifts to cities. US officials frequently describe India as a “huge market” for American agricultural products.

2. Reducing the US agricultural trade deficit with India

The US has an agricultural trade deficit with India (about $1.3 billion in 2024, for example), which means India exports more agricultural products (like spices, rice, and seafood) to the US than it imports. Expanding U.S. exports helps narrow that gap, increase incomes for American farmers, raise domestic prices, and inject money into rural U.S. areas.

3. Supporting US farmers and “America First” policies

US agriculture is highly productive and subsidized; This leads to a surplus in products such as tree nuts (almonds, pistachios), cotton, soybeans, dairy products, poultry, ethanol, apples, legumes. Opening the Indian market provides new outlets for these goods, increases farmer incomes, and aligns with policies (especially under recent administrations) that prioritize American exports and rural economic gains.

Michael Rubin, senior fellow at the American Enterprise Institute, is skeptical of this deal. He said: “We’ll see where the dust settles on this, but I suspect the total will be 18 per cent. Frankly, if India’s tariffs on US goods are 0 per cent, I think India needs to make it very clear that the mutual equivalent now will be 0 per cent tariffs on Indian goods to the US.”

He also stated that the United States is becoming a little more concerned about its own economy.

He added: “Trump faces pressure on inflation that we have seen reflected in the selection of the new Federal Reserve chairman. So Trump is perfectly happy to claim a so-called ‘win’ at home. Whether this is actually a gain in the long run remains questionable, not because the outcome is positive because it is negative, but because of the negative consequences of the way Trump negotiated it.”

Therefore, it is not yet clear whether India will open its market to US agricultural products. Such a move could have serious domestic implications in India, especially in the agricultural sector. As a result, prudence continues to dictate India’s approach to agricultural trade liberalisation.