Contents
Introduction
India’s agricultural trade has long been characterized by a healthy surplus. In 2024–25, India’s farm exports stood at $51.9 billion while imports were $38.5 billion, yielding a surplus of $13.4 billion. However, this surplus has been steadily shrinking—down from $27.7 billion in 2013–14—amid rising imports and trade liberalization pressures. Proposed Free Trade Agreements (FTAs) with the US, European Union (EU), and United Kingdom (UK) may further accelerate this trend, with demands for tariff reductions and broader market access posing both challenges and opportunities for India’s agricultural sector.
Impact of FTAs on India’s Agricultural Trade Surplus
- Tariff Reductions and Import Surge: These Western economies are pushing for reduced tariffs on high-value agricultural exports such as dairy, poultry, wine, processed foods, and genetically modified crops like soy, maize, and cotton. India’s historically high tariffs protect millions of smallholder farmers, but FTAs could lead to a surge in imports of items like:
- Dry fruits, wines, spirits from EU and UK
- GM soybean, maize, and cotton from the US
- Dairy and poultry products, where the US and EU are globally competitive
Such imports may undercut Indian producers, exacerbating the trade deficit in sensitive commodities.
- Non-Tariff Barriers (NTBs): Western economies also seek the removal of NTBs such as sanitary and phytosanitary (SPS) standards and restrictions on GMOs, which India uses to safeguard public health and farmer livelihoods. Easing these may raise public health concerns and pose a threat to India’s biosafety norms.
- Loss of Export Competitiveness: Indian agri-exports like marine products (shrimp), spices, and buffalo meat may face retaliatory tariffs or market saturation. For instance, marine exports to the US, already facing 17.7% duties, could suffer if the Trump-era tariffs are increased to 26%.
Challenges for India’s Farm Sector
- Productivity Deficit: India’s low per-acre yields in oilseeds, pulses, cotton, and rubber make it dependent on imports. Pulses imports hit $5.5 billion in 2024–25; vegetable oil imports have consistently exceeded $14–15 billion annually.
- Inadequate Technological Adoption: Stagnation in cotton production due to lack of GM innovations and limited research in pulses/oilseeds further weakens India’s global competitiveness.
- Smallholder Vulnerability: Nearly 85% of Indian farmers are small or marginal. An import influx without adequate support mechanisms—like price compensation, MSP extension, and insurance—could trigger rural distress.
- Compliance Costs: Western FTAs often include stringent sustainability, traceability, and labor standards. Many Indian exporters may find compliance financially and logistically burdensome.
Opportunities for India
- Export Diversification and Value Addition: India can expand its export basket in spices, processed food, organic products, and non-basmati rice. Coffee, tea, fruits, and vegetables saw record exports in 2024–25, reflecting global supply shortages India can capitalize on.
- Market Access in Premium Segments: If tariff parity is secured, India can increase its exports of high-margin goods like basmati rice, organic spices, ayurvedic herbs, and ready-to-eat foods in developed markets.
- Agri-Tech and Innovation Push: FTAs can be leveraged to attract investment in agri-tech, post-harvest infrastructure, and food processing, critical to boosting exports and reducing wastage.
Conclusion
The proposed FTAs with the US, EU, and UK present a double-edged sword for India’s agricultural trade. While they open doors to newer markets and investments, they also bring the risk of import-led pressures on India’s vulnerable farm sector. A calibrated approach—protecting sensitive sectors while enhancing export capabilities and farmer resilience—is essential to preserving the agricultural trade surplus and ensuring inclusive rural growth.
