Agriculture is centre stage US-India trade showdown

Why will not India purchase even a single bushel of American corn?

That is the query US Commerce Secretary Howard Lutnick raised lately whereas criticising India’s commerce insurance policies, taking a swipe at its market restrictions.

In one other interview, Lutnick accused India of blocking US farmers and urged it to open its agricultural market – suggesting quotas or limits as a attainable method.

Agriculture is a key battleground in US President Donald Trump’s escalating trade war, with tit-for-tat or reciprocal tariffs set to kick in on 2 April.

Tariffs are taxes charged on items imported from different nations.Trump has repeatedly branded India a “tariff king” and a “large abuser” of commerce ties.

For years, Washington has pushed for higher entry to India’s farm sector, seeing it as a significant untapped market. However India has fiercely protected it, citing meals safety, livelihoods and pursuits of hundreds of thousands of small farmers.

To make certain, India’s transformation from a food-deficient nation to a food-surplus powerhouse is one in all its greatest success tales.

Within the Fifties and ’60s, the nation relied on meals assist to feed its inhabitants, however a collection of agricultural breakthroughs modified that. India grew to become self-sufficient in staples, and have become the world’s largest milk producer. Fast development in horticulture, poultry and aquaculture expanded its meals basket.

In the present day, India isn’t just feeding its 1.4 billion folks however, because the world’s eighth-largest agri-produce exporter, additionally transport grains, fruits and dairy worldwide.

But, regardless of such main positive factors, Indian agriculture nonetheless lags in productiveness, infrastructure and market entry. International worth volatility and local weather change add to the problem. Crop yields lag far behind the worldwide finest. Small landholdings worsen the issue – Indian farmers work with lower than a hectare on common, whereas their American counterparts had over 46 hectares in 2020.

No shock then that productiveness stays low, though farming stays India’s spine, supporting over 700 million folks, practically half the nation’s inhabitants. Agriculture employs practically half of India’s workforce however accounts for simply 15% of GDP. Compared, lower than 2% of the US inhabitants relies on farming. With restricted manufacturing jobs, extra persons are caught in low-paying farm work, an uncommon pattern for a growing nation.

This structural imbalance additionally shapes India’s commerce insurance policies. Regardless of its farm surplus, India retains tariffs excessive to defend its farmers from low-cost imports. It maintains average to excessive tariffs – starting from zero to 150% – on farm imports.

The weighted common tariff – the typical obligation fee per imported product – in India on US farm merchandise is 37.7%, in comparison with 5.3% on Indian agricultural items within the US, in response to the Delhi-based assume tank International Commerce Analysis Initiative (GTRI).

Bilateral farm commerce between India and the US is modest, at simply $8bn (£6.2bn).

India primarily exports rice, shrimp, honey, vegetable extracts, castor oil and black pepper, whereas the US sends almonds, walnuts, pistachios, apples and lentils.

However as the 2 nations work on a trade deal, consultants say Washington now desires to push “big-ticket” farm exports – wheat, cotton, corn and maize – to slender its $45bn commerce deficit with India.

“They don’t seem to be seeking to export berries and stuff this time. The sport is far larger,” says Biswajit Dhar, a commerce professional from the Delhi-based Council for Social Improvement assume tank.

Pushing India to decrease farm tariffs, bargain assist and confide in genetically modified (GM) crops and dairy ignores the basic asymmetry in international agriculture, consultants argue.

The US, as an example, closely subsidises its agriculture and protects farmers by way of crop insurance coverage.

“In some circumstances,” says Ajay Srivastava of GTRI, “US subsidies exceed 100% of manufacturing prices, creating an uneven enjoying subject that would devastate India’s smallholder farmers.”

Abhijit Das, former head of the Centre for WTO Research on the Indian Institute of International Commerce, says “the important thing factor to recollect is that agriculture within the two nations is fully totally different”.

“The US has business agriculture, whereas India depends on intensive, subsistence farming. It is a query of the livelihoods of hundreds of thousands of Indians versus the pursuits of US agribusiness.”

However India’s agricultural challenges aren’t simply exterior. Mr Dhar says a lot of the sector’s struggles are “its personal doing”. Farming has lengthy been underfunded, receiving lower than 6% of India’s complete funding – funds meant for infrastructure, equipment and different long-term belongings essential for development.

To guard hundreds of thousands of livelihoods, the federal government shields key crops like wheat, rice and dairy with import duties and worth assist. “However even that does not encourage confidence,” he says.

4 years in the past, tens of thousands of farmers held protests demanding higher costs and authorized ensures of minimal authorities support-price for staples, primarily wheat and rice.

“Even comparatively well-off farmers promoting surpluses do not see a turnaround anytime quickly. And in the event that they really feel that approach, think about the plight of subsistence farmers,” says Mr Dhar.

Past home discontent, commerce negotiations add one other layer of complexity.

Mr Das says the actual problem for India can be how “to have an settlement with the US that takes under consideration US export curiosity in agriculture whereas balancing India’s pursuits within the farm sector”.

So what’s the best way ahead?

“India should not yield to US stress to open its agriculture sector,” says Mr Srivastava. He warns that doing so would disrupt hundreds of thousands of livelihoods, threaten meals safety and flood native markets with low-cost imports.

“India should prioritise its nationwide curiosity and shield its rural financial system. Commerce cooperation mustn’t come at the price of our farmers, meals sovereignty or coverage autonomy.”

In the long term, consultants say India should modernise its agriculture, making farming extra remunerative, and turn out to be extra aggressive to spice up exports. Unupom Kausik of agri-business Olam estimates that with high international yields, India may generate a surplus of 200 million metric tonnes of paddy – sufficient to provide international commerce and fight starvation.

“In a approach, Trump is holding up a mirror to us. We have executed little to put money into agriculture’s productive capability,” says Mr Dhar. “For now, shopping for time is one of the best technique – perhaps providing the US cheaper imports of business items as a trade-off.”

However for one of the best end result, he says, India should “play hardball. Principally, inform the US – we’re open to negotiations on different fronts, however do not destabilise our agriculture”.

Clearly India’s problem is to barter from a place of power – providing simply sufficient to maintain Washington on the desk whereas safeguarding its rural spine. In any case, in international commerce as in farming, timing and persistence usually yield one of the best harvest. The jury is out on whether or not Trump is prepared to attend.