Blanket Tariff Cuts On US Farm Goods May Harm Indian Agriculture

The paper recommended the opening of Indian markets to a wide range of US farm products, including rice, pepper, soybean oil, shrimp, tea, coffee, dairy, poultry, apples, almonds, pistachios, corn, and genetically modified (GM) soy products.

The obvious reference was towards the ongoing India-US BTA negotiations. 

While the recommendation has been justified on the grounds of addressing supply gaps or ensuring reciprocal access, it ignores the structural risks to India’s 700 million farm-dependent citizenry.

To address those concerns, a broader public consultation process is required.

Why Tariff Cuts Are Risky For India’s Farmers?

Reducing tariffs on agricultural products, like corn, soybean derivatives, edible oils, dairy, and poultry, raises serious concerns. This market-access-first approach is deeply flawed, both in terms of implementation and long-term impact.

In the past, India tried the strategy of offering tariff concessions on products with domestic supply gaps, and paid a high price.

In the 1960s and 70s, when India was heavily dependent on imports of rice, wheat, and skimmed milk powder, it agreed to GATT (General Agreement on Tariffs and Trade) recommendations of zero binding tariffs on these items.

However, by the 1990s, as India became self-sufficient, these zero-duty bindings became a major threat to millions of Indian farmers.

While India later succeeded in raising bound tariffs on key staples, like rice, wheat, and milk powder, it had to offer significant concessions elsewhere, mainly to developed countries, by lowering its bound tariffs on other products, like butter, apples, citrus fruits and olive oil.

This opened the door to a surge in subsidised agricultural imports to India.

The lesson is clear: Using trade policy to address short-term supply gaps can create long-term structural vulnerabilities that are difficult to reverse.

Risk Of Exposing Indian Agriculture To Global Prices Volatility

The paper also argues for eliminating tariffs on items like rice and pepper, which India exports in large volumes. However, subsidised grain exports from developed countries have been a major driver of global grain price volatility, with devastating consequences for self-sufficient farming systems in several African nations.

Between 2005 and 2008, and again in 2010-11, global grain prices spiked sharply. Wheat rose by over 130 per cent, maize by nearly 70 per cent, triggering food riots and forcing governments in countries like Ghana, Nigeria, and Senegal to resort to costly subsidies and emergency imports.

Equally destructive were the artificially low-price periods that followed. From 2014 to 2016, global wheat prices fell below US$ 160 per metric tonne, driven largely by surplus subsidised exports from the developed West.

These low-price phases wiped out local cultivation incentives, leading to widespread farm abandonment and a dangerous dependence on imports.

The cycle is vicious: Cheap imports depress farmer incomes and reduce planting, while sudden price surges, often caused by droughts, conflicts, or export bans, lead to inflation, hunger, and political unrest.

Cutting Tariffs Likely to Encourage Adversarial US Counterparts

Slashing tariffs on rice would also be playing into the hands of the USA Rice Federation — an industry body that has repeatedly attacked India at the WTO.

It accuses India of breaching subsidy limits on rice, misusing the ‘Peace Clause’, and distorting trade through minimum support prices (MSPs) and public procurement. The most recent accusation happened in 2022-23.

In 2013, the WTO members agreed to a 'Peace Clause' as an interim measure, with a commitment to find a permanent solution. 

Any tariff cuts would only embolden such adversarial actors and increase pressure to dismantle India’s food security architecture.

Indian Dairy Products May Also Be At Risk

The NITI Aayog paper also recommends allowing the import of dairy and poultry products if the US products meet India’s SPS (sanitary and phyto-sanitary) measures, rather than imposing any tariffs.

The US has long challenged India’s dairy SPS requirement that imported milk must come from animals that have not been fed meat, blood, or internal organs.

Washington sees this as an unjustified trade barrier, but India considers it essential for public health and cultural values.

India’s lack of capacity in formulating stringent SPS measures got exposed in the WTO dispute initiated by the US against India during the avian flu epidemic in 2012.

Finally, here’s the rub: Stringent SPS measures would apply not only to outside importers but also to domestic producers. If Indian domestic producers are unable to comply with India’s own stringent SPS norms, they would not be able to sell even in the domestic market.  

And Then There Are GM Concerns

Another proposal recommends imports of US corn for ethanol blending, and also permits corn byproducts like Distiller’s Dried Grains with Solubles (DDGS) for processing and re-export. The claim is that it will keep genetically modified (GM) material out of India’s food and feed supply.

It also suggests importing GM soybean seeds under a “controlled model”, where the seeds would be crushed in coastal areas, the oil sold locally, and the soymeal (which contains GM traits) exported to avoid domestic contamination.

These plans assume India can tightly control the movement of GM material through strict SPS protocols. In reality, enforcement in India is weak, supply chains are fragmented, and markets are hard to monitor.

Once GM products enter the country, there is a high risk they will leak into domestic agriculture — raising serious concerns over food safety, environmental impact, and export bans from countries that do not accept GM contamination.

Tariff Flexibility Not Protectionism, More Stakeholder Consultations Needed

Keeping tariff flexibility is not outdated protectionism. It’s a smart, essential policy tool to protect food security, support rural incomes, and respond to market shocks. Once this flexibility is given up in a trade agreement, getting it back is extremely difficult.

India should hold open, transparent consultations with state governments, farmer groups, and agricultural experts before making any binding commitments.

Attention should also be paid to the asymmetry in commitments — while India is being asked to reduce its MFN (most-favoured-nation) tariffs, the US is offering no such concessions.

With over 700 million Indians dependent on farming, agriculture is not just a source of livelihood. It is the bedrock of India’s rural economy and food security system.

Trade policy must be aligned with India’s development goals, not dictated by external pressures.