THE CONTEXT: Agricultural trade still cushions India’s merchandise account. A surplus of US$ $13.4 billion in 2024-25 is barely half the surplus a decade ago. Three large partners—the United States, the European Union, and the United Kingdom—are simultaneously negotiating ambitious Free-Trade Agreements (FTAs) that seek steep tariff cuts, wider tariff-rate quotas, and stricter sanitary and phytosanitary (SPS) commitments for farm products.
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- These partners together account for ≈40 percent of India’s existing high-value agri-exports (shrimp, rice, spices, coffee) and a growing share of its high-value imports (almonds, apples, wines, whisky, dairy preparations). The negotiations will shape incomes of over 100 million farming and allied households.
TRADE PROFILE: TEN-YEAR TRAJECTORY AT A GLANCE
| Indicator | 2013-14 | 2019-20 | 2024-25 |
|---|---|---|---|
| Agri-exports (US $billion) | 43.3 | 35.6 | 51.9 |
| Agri-imports (US $billion) | 15.5 | 23.7 | 38.5 |
| Trade surplus | 27.7 | 11.9 | 13.4 |
DRIVERS:
1. Global price cycles: 2022-24 commodity bull-run lifted rice, sugar and marine earnings.
2. Domestic supply swings: Rain-shock (2023) forced wheat and sugar export bans; cotton output fell 27 percent after plateau in Bt-hybrid yields.
3. Consumption premiumisation: Rapid growth of oil-rich, protein-dense foods elevating imports of vegetable-oils (US $20.8 billion) and pulses (US $5.5 billion).
FTA LANDSCAPE – DEMANDS ON THE TABLE
| Partner | Principal asks |
|---|---|
| UNITED STATES | • Cut bound tariffs on almonds (₹100/kg) and apples (50 percent) to ≤ 10 percent |
| • Lift restrictions on genetically modified (GM) soybean, maize, cotton | |
| • Larger tariff-rate quota (TRQ) for dairy proteins | • Work visa mobility window for services |
| • Mutual recognition of digital trade standards | |
| • Tariff roll-back on labour-intensive textiles and gems | |
| EUROPEAN UNION | • Eliminate 40-70 percent duties on wines, cheeses, pork, and olive oil |
| • Adhere to Farm-to-Fork sustainability labelling | |
| • Tight SPS audit for shrimp antibiotics | • GSP-plus-like access for apparel and leather |
| • Liberal Rules-of-Origin for pharmaceuticals | |
| UNITED KINGDOM | • 150 million-litre duty-free quota for Scotch whisky (phased to 0 percent) |
| • Larger TRQs for pork and apples | • Flexible movement for healthcare professionals |
| • Zero-duty window for basmati, marine, mangoes |
COMMODITY-WISE IMPACT ASSESSMENT
| Commodity | Current Position | FTA Sensitivity | Key Risk or Opportunity |
|---|---|---|---|
| Frozen shrimp | 35 % of exports land in US; margin already hit by 10 % “baseline” Trump tariff | High | 17.7 % → 26 % duty risk could erase ₹4,000 crore earnings unless countered by US tariff-quota or duty-free carve-out. |
| Rice (Basmati & non-Basmati) | Record US $12.5 billion exports; minimal shipments to US/EU | Low | EU’s aflatoxin norms and CBAM could, however, raise compliance costs. |
| Edible oils (Palm, Soy, Sunflower) | 60 % import dependence; SEA projects value > US $21 billion in 2025-26 | Medium-High | Cheaper US soya-oil with lower 7.5 % duty could depress domestic oilseed prices unless MSP + Price Deficiency Payments (PDP) are upgraded. |
| Pulses (Tur, Urad, Masur) | Record import bill US $5.5 billion despite PSS procurements | Medium | UK push for duty-free canned lentils could undercut nascent domestic processing. |
| Cotton | Net importer since 2020; GM yield stagnation | High | US demand for GM-approval harmonisation could expand seed choice but may trigger activism over biosafety. |
COMPARATIVE INTERNATIONAL LENS
| Country/Bloc | Strategy that protects farmers while integrating markets |
|---|---|
| United States | Decoupled Farm Bill subsidies (crop insurance, counter-cyclical payments) + strong SPS diplomacy. |
| European Union | Common Agricultural Policy (CAP): Green Payments tied to sustainability; export competitiveness retained via high R&D intensity. |
| Brazil | EMBRAPA innovations + concessional farm credit enable cost-efficient soyabean exports. |
| Vietnam | Cluster-based aquaculture & traceability reforms secured zero-duty shrimp access under EU–Vietnam FTA. |
POLICY ARCHITECTURE IN INDIA
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- Agriculture Export Policy 2018 targets US $100 billion by 2030; focus states notified in 2024.
- PM-Fasal Bima Yojana, PM-Krishi Sinchai Yojana and Oilseeds Mission 2.0 address input-side risks.
- Agriculture Infrastructure Fund (₹1 lakh crore) subsidises storage and pack-houses; 45 percent utilisation till April 2025 (DACFW data).
- National Standards Setting Body (FSSAI + DAHD labs) upgraded to ISO 17025 for residue testing in 2024.
- One District One Product for Export (ODOP-E)—175 agri districts mapped till March 2025 (APEDA).
THE CHALLENGES:
Structural Challenges
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- Low R&D Intensity: Sub-5% R&D spending vs. Brazil’s 12% limits innovation in oilseeds, pulses, and cotton, driving $5.5 billion in vegetable oil imports. ICAR’s $1.2 billion budget is inadequate compared to Brazil’s Embrapa. Bt cotton yield stagnation (291 lakh bales, 2024-25) reflects biotech gaps.
- Fragmented Landholdings: 86% of farmers with <2 ha hinder scale economies, with rice yields (2.6 tonnes/ha) trailing Vietnam’s (5.8 tonnes/ha).
Example: Punjab’s FPOs boost basmati exports, but only 12% are export-focused. - SPS Infrastructure Deficit: Only 34 of 136 labs are EU-compliant, causing 20% mango export rejections. US shrimp exports were hit by 17.7% tariffs and SPS issues, and they lost 8% of the market share.
- Supply Chain Losses: 15-20% post-harvest losses due to 10% cold chain coverage vs. Brazil’s 40%. Mango exports to UK suffer from pre-cooling gaps, unlike Chile’s grape hubs.
Trade-Negotiation Challenges
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- Asymmetric Tariffs: India’s 114% bound tariffs vs. US/EU <15% fuel demands for cuts, threatening dairy and pulses. India-Australia ECTA increased pulse imports, needing safeguards.
- Green Box Constraints: 1% of agricultural GDP vs. US’s 10%; PM-KISAN’s reclassification contested.
- NTBs and Sustainability: EU’s CBAM and SPS norms cost $300 million annually; US GM crop push raises biosafety concerns. 2023 EU spice ban cost $50 million.
- Geopolitical Pressures: US reciprocal tariffs and EU’s sustainability focus threaten sensitive sectors. US-China soy tariff war cut exports by $9.9 billion, a caution for India.
Climate and Resource Challenges
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- El Niño-La Niña Volatility: 30% La Niña risk in 2025-26 threatens rice yields, with 2022 wheat ban costing $1 billion. Vietnam’s stable rice exports contrast India’s disruptions.
- Groundwater Depletion: Punjab-Haryana’s 166% overexploitation endangers $12.5 billion rice exports.
- Soil Degradation: 30% arable land degraded, limiting pulse yields (0.8 tonnes/ha vs. Canada’s 1.9 tonnes/ha).
Institutional Challenges
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- Fragmented Governance: Overlaps between Agriculture, Commerce, APEDA, and MPEDA delay SPS certification. Gujarat’s 2023 onion ban disrupted $200 million exports.
- Weak Export Promotion: APEDA’s $100 million budget vs. USDA’s $1 billion limits market penetration. Chile’s ProChile doubled fruit exports to $7 billion.
- Farmer Capacity: Only 5% of farmers use digital platforms vs. Brazil’s 40%. Kenya’s training boosts vegetable exports by 15%.
- Trade Dispute Weakness: Understaffed Trade Defence Wing struggles with WTO disputes. Thailand’s WTO win secured $1 billion in shrimp exports.
THE WAY FORWARD:
PRODUCTIVITY AND RESILIENCE
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- National Mission on Oilseeds and Pulses (NMOP): Scale hybrid mustard and pulse technologies with 50% input subsidies and cluster drip irrigation, targeting 50% yield increase by 2035. Reward states with >2 tonnes/ha yields via a $500 million Innovation Fund.
- Climate-Smart Credit Line: $1 billion NABARD-IFAD fund for micro-weather insurance and carbon-saving practices, monetized via carbon markets ($50-100/ha). Vietnam’s low-carbon rice generates $10 million in credits.
VALUE CHAIN UPGRADATION:
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- Traceability 2.0: Blockchain-enabled e-Choupal 2.0 for shrimp and grapes, linked to EU’s Digital Product Passport, with $200 million for 5,000 FPOs.
- Agri-Logistics Corridors: 1,000 DFC rail reefer wagons, 40% freight subsidy, and 50 ICDs with $300 million annually.
- GI Diplomacy: Fast-track 100 GI tags, secure FTA recognition, and enforce via WTO TRIPS with $50 million.
SMART TRADE DIPLOMACY:
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- Negative-List Carve-Outs: Retain 30-50% tariffs on pulses and oils until 70% self-sufficiency, with quota-based triggers ($100 million cost).
- SPS Capacity-Building Fund: $200 million to upgrade 50 labs to EU standards by 2027, training 20,000 exporters.
- Farmer Adjustment Package: $2 billion Green Box income support ($50/ha) for cotton, rubber, and apple growers, with training.
- GM Reciprocity: Event-based GM approvals tied to US/EU PRA recognition for mango and okra ($50 million trials).
- Regional Value Chains (RVCs): ASEAN/Africa FTAs and Northeast agro-hubs with $500 million FDI via IMEC.
- Climate-Trade Diplomacy: Task Force for CBAM exemptions, $100 million for SME low-carbon tech.
THE CONCLUSION:
The impending FTAs represent neither a boon nor a bane per se; their net welfare impact hinges on India’s ability to convert tariff concessions into higher value addition at farm-gate while cushioning vulnerable segments from import shocks. A calibrated, standards-centric, innovation-driven strategy can turn potential headwinds into a tailwind for the vision of US $100 billion agri-exports by 2030.
UPSC PAST YEAR QUESTION:
Q. What are the direct and indirect subsidies provided to farm sector in India? Discuss the issues raised by the World Trade Organization (WTO) in relation to agricultural subsidies. (2023)
MAINS PRACTICE QUESTION:
Q. India’s pursuit of Free-Trade Agreements with advanced economies could expose farmers to high-subsidy competition. Suggest a multi-pronged strategy to safeguard farmer livelihoods.
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