By Ashok Gulati, Distinguished Professor, ICRIER
Let me state at the very outset that anyone who thinks that exports are always good, but imports are bad does not understand trade policies. There has been lot of noise in the Indian parliament over the Indo-US trade deal. The opposition feels that the deal is a total surrender. But the government benches projected it as the best deal under the given circumstances. The truth may be somewhere in between. There is always a give and take in any trade deal. This one is no different.
India had to give in to the US’s demand for buying more energy, aircraft, and high-tech equipment. Also, we had to agree to show our “intent” or “commitment” to buy $500 billion worth of goods from US over the next five years. That looks huge as our current imports of goods from the US are well under $50 billion a year. But in return, India got the US to slash its import tariffs on Indian goods from 50% to 18%, which is very much in line with our competitors in South and Southeast Asian countries, and almost half of what is being imposed on China. This, the government says, is the biggest victory and opens doors for significantly higher exports from India to the largest economy in the world.
Opposition parties as well as some farmer groups have also expressed strong apprehensions about the agricultural segment of the trade deal. Let me dwell on it and try to clear some misgivings.
What are the fears on agri-trade front? First, the US will flood the Indian market with their agri-produce and our farmers will be severely hurt. Second, they will throw their genetically modified (GM) crops or their derivates like soya oil and dried distillers’ grains (DDGs) in our food system that will risk the health of millions of our citizens. Third, US farmers are very large in size, mechanised, and receive large subsidies, and our small farmers cannot compete with them. Let me discuss each of these.
In 2024, India exported total goods worth roughly $81 billion to the US and imported goods worth $43 billion, giving India a trade surplus of about $38 billion. Out of this, India’s agri-exports were about $5.7 billion and imports roughly $2.1 billion, giving India an agri-trade surplus of $3.6 billion. In the trade deal, India has opened largely those crops which are either not grown in the country or grown on a very small area—like tree nuts and berries.
Almonds have already been coming to India at a low duty of about 10% in ad-valorem terms (`42/kg). Walnuts, pistachios, pecans, cranberries, and blueberries are likely to attract similar duty (10-15%) and there would be some imports of those. But they are not going to impact our farmers much. Concerns are raised about apples, and their duties are likely to come down from 50% to 25% or so, although more would be known only when the fine print is out. My information is that lowered duties will be accompanied by import quotas, safeguarding our farmers adequately.
The other concern on agri-imports is that of GM crops or their derivatives like soya oil and DDGs. It may be noted that India has not allowed direct import of GM corn or GM soya, which have living modified organisms and can be seeded to grow GM crops in India. But soya oil or DDGs, which are permitted to be imported, actually have been coming for quite some time.
It may be noted that when GM soya or GM corn are processed into oil or DDGs, traces of GM are either absent or negligible, but more importantly they are no more living modified organisms. They cannot be germinated, and there is no adverse health impact either on poultry, cattle or human beings according to the Food and Drug Administration. Some scientists and many non-governmental organisations have reservations about this, but the fact remains that GM crops are being grown in 76 countries over 200 million hectares and these crops range from papaya and brinjal to corn and soya bean. The people in these countries are not dying by consuming these crops.
The third point is about competition. It may be noted that our small farmers have done reasonably well as far as global competition goes. Our overall agri-exports are about $52 billion and imports about $37 billion in 2024. The US is a net importer of agri-products ($59 billion in 2024). We also give a lot of input subsidies to our farmers—be it in the form of fertiliser, credit, or insurance premium subsidy—and even direct income support in the form of PM-KISAN. If we want to retain the competitive strength of our small holders, we need to invest much more in agri-R&D. It may be worth noting that US GM corn and soya bean productivity is three times higher than in India. We must make smart choices in our domestic expenditures related to agriculture.
Overall, I find the trade deal a smart move by India at least in the agri segment. They have avoided major concerns and opened the doors with caution and quota systems. Therefore, farmers need not worry much as of now.