How India is Likely to Shield Its Farmers in the US Trade Deal
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Trade Deal Overview
– India and the United States have finalized a trade deal aiming to reduce U.S. tariffs on Indian goods from 50% to 18%, in exchange for India ceasing its purchases of Russian oil and easing trade restrictions.
– Though both nations have outlined the general terms, specific details remain undisclosed, with early reports indicating India will provide limited access to its agricultural market.
Will India Lower Tariffs on U.S. Agricultural Products?
– India maintains a ban on genetically modified (GM) food crops, making it unlikely to lower tariffs on imported agricultural products such as corn, soybeans, and soymeal. This approach is designed to protect the livelihoods of millions of small farmers who depend on meager incomes.
– The U.S. primarily cultivates GM corn and soybeans, which limits market access in India. In contrast to China, which imports large quantities of corn and soybeans, India’s demand for these crops is relatively low.
India’s Agricultural Imports and Ethanol Production
– Currently, India has significant stockpiles of corn and soymeal, and it is the world’s leading importer of soyoil, sourcing mainly from Brazil, Argentina, and the U.S. However, its soybean imports remain minimal.
– India also boasts ample domestic production of ethanol from corn, rice, and sugarcane, making concessions on corn imports unlikely.
Dairy Market Concerns
– The U.S. has sought increased access to India’s dairy market, which is protected by high tariffs and various non-tariff barriers. Given the critical role dairy farming plays in sustaining farmer livelihoods, India is expected to keep this sector off the negotiation table.
– Indian farmers typically manage small herds of only two to three animals, while U.S. farmers often oversee hundreds, placing Indian farmers at a considerable disadvantage.
Potential Concessions in Agricultural Trade
– India may consider reducing tariffs or expanding import quotas on premium agricultural products such as almonds, walnuts, pistachios, apples, pears, and berries.
– Additionally, it could lower trade barriers for fruits, vegetables, and select beverages that are less likely to adversely impact domestic farmers.
– Such moves may be easier for Prime Minister Narendra Modi’s Bharatiya Janata Party to justify to constituents, while simultaneously providing the U.S. administration a public relations win for American farmers.
Importance of Agriculture in India’s Economy
– Despite contributing only 15% to India’s nearly $4 trillion economy, the agricultural sector supports nearly half of the nation’s 1.4 billion inhabitants.
– Almost 80% of Indian farmers are smallholders, owning two hectares or less, which restricts their income potential. The farmers’ influence in Indian politics necessitates careful navigation of agricultural policies to avoid backlash from this vital voting group.
– The Samyukt Kisan Morcha, an umbrella organization of farmers’ groups, has already scrutinized the Modi government regarding the trade agreement with the U.S.
Conclusion
India’s approach to the U.S. trade deal highlights its commitment to farmers’ protection, ensuring that despite global economic pressures, the livelihoods of millions of small farmers remain safeguarded. As negotiations continue, the balance between securing trade advantages and maintaining domestic agricultural stability will be paramount.