Why Agriculture Is A Point Of Contention In India-US Trade Talks Despite Soaring Farm Exports

Last Updated:August 07, 2025, 14:46 IST

Agriculture has emerged as one of the biggest stumbling blocks in India-US trade talks, yet, ironically, two-way farm trade is booming like never before

India exported $6.21 billion worth of agricultural products to the US in 2024, compared to $2.38 billion imported from the US.

On August 6, US President Donald Trump announced a second 25 per cent tariff on Indian goods, taking the total duty to a staggering 50 per cent, the highest rate India faces among major trading partners, barring Brazil. This move followed the collapse of long-drawn trade talks, which, according to Reuters, had stalled over one critical issue: access to India’s agricultural market.

The increased tariff is expected to disproportionately impact India’s labour-intensive agri exports such as seafood, spices, and processed foods, sectors that had seen strong growth over the past year.

Washington has been pressing New Delhi to open up to a wider range of US farm products, including genetically modified (GM) corn and soybeans, ethanol, wheat, poultry, and dairy. However, India has pushed back firmly, citing both cultural sensitivities and economic risks to its vast rural population.

Why Is India Resisting US Agricultural Demands?

India’s opposition to certain US farm products is rooted in concerns over health, tradition, and politics. As per a Reuters report, most corn and soybean crops grown in the United States are genetically modified, a category India does not permit for human consumption. The report also notes that despite developing a GM mustard strain domestically, India has not cleared it for cultivation due to ongoing legal challenges.

Resistance is equally strong against US dairy imports, largely because of the Indian population’s predominantly vegetarian dietary habits. A major concern is that US dairy cattle are often fed animal by-products, which runs counter to cultural and religious beliefs in India. Public opposition to GM foods in India is strong, with several civil society groups and farmer unions warning of long-term ecological risks and loss of seed sovereignty.

India is also hesitant to allow ethanol imports for fuel use. Its current ethanol blending programme is built around domestically produced sugarcane and corn, both to reduce energy imports and support local farmers. Allowing US fuel-grade ethanol could depress domestic corn prices, particularly in states like Bihar, which is heading into elections and has a large corn-growing population.

Officials told Reuters that opening the sector could trigger backlash, especially in poll-bound Bihar.

What Makes Agricultural Imports Politically Risky?

Although agriculture contributes just 16 per cent to India’s $3.9 trillion economy, it remains the primary source of livelihood for nearly half of the population. Food inflation is a key driver of voter sentiment in India, and basic food items account for almost half of the country’s consumer price index.

India learned a hard lesson from liberalising its edible oil market three decades ago. After it opened up imports in the 1990s, the country became heavily dependent on palm oil supplies from nations like Indonesia and Malaysia. Today, it imports nearly two-thirds of its vegetable oil demand, as per Reuters. Officials now fear a repeat scenario if other staples such as grains, pulses, and dairy are opened to global competition.

A sudden flood of cheaper American imports could crash domestic prices, hurt smallholder farmers, and lead to political unrest. The memory of the 2020–21 farmers’ protest, which forced the government to roll back three farm laws, remains fresh in political minds.

There is also concern that a trade deal with the US could set a precedent, forcing India to grant similar access to other countries under most-favoured nation provisions, a WTO rule that bars countries from offering selective trade benefits without extending them to all members.

Modi Signals No Retreat On Agri Front: ‘Ready To Pay The Price’

After Trump announced additional tariffs on Indian goods, Prime Minister Narendra Modi on Thursday pushed back, asserting that India would not compromise on the interests of rural communities despite external pressure.

“India will never compromise on the interests of its farmers, livestock rearers, and fishermen brothers and sisters. I know personally that I will have to pay a heavy price for this, but I am prepared for it," Modi said.

The remarks, seen as a direct response to Washington, reinforce New Delhi’s hardened stance on trade negotiations, particularly its refusal to open up sensitive agricultural sectors.

But Isn’t US-India Farm Trade Growing?

That’s the paradox. While talks are stuck on agriculture, bilateral agri trade is growing faster than ever before. According to US Department of Agriculture data reported by The Indian Express, India’s imports of agricultural products from the US rose by 49.1 per cent year-on-year in the first half of 2025, from $1.13 billion in Jan–June 2024 to $1.69 billion in the same period this year.

US agricultural exports to India could cross $3.5 billion this year if current trends hold.

India’s farm exports to the US are also booming, up 24.1 per cent in the same period, from $2.79 billion to $3.47 billion. Projections suggest India’s agri exports to the US could top $7.7 billion by year-end.

Yet this growth is uneven. India’s exports are more diverse, led by high-value items like seafood (especially frozen shrimp), spices, rice, processed foods, and essential oils. In contrast, the US exports a narrower band of goods, dominated by tree nuts like almonds and pistachios, ethanol, cotton, and soybean oil. Ethanol and soybean oil, although derived from GM corn and soybean respectively, are allowed into India for industrial purposes but not for direct fuel blending or human consumption.

Why Is Seafood Trade Under Threat?

India’s biggest agri export to the US is seafood, especially shrimp. In 2024, Indian seafood exports to the US were valued at $2.48 billion, second only to Canada, according to The Indian Express. But with Trump’s new 50 per cent tariff, India now faces a disadvantage compared to competitors: Chile faces only a 10 per cent tariff, Ecuador 15 per cent, Vietnam 20 per cent, and Canada 35 per cent. The 32.5 per cent year-on-year growth seen in seafood exports during Jan–June 2025 may not sustain if this tariff gap widens further.

Reuters reports that Indian officials are concerned that these tariffs could reverse gains in segments like processed foods, spices, and rice, sectors where small and medium enterprises dominate the supply chain.

What Does The Data Tell Us?

According to figures published by The Indian Express, India exported $6.21 billion worth of agricultural products to the US in 2024, compared to $2.38 billion imported from the US. The export-import gap is wide and growing, but this does not mean India holds all the leverage. In fact, the US has significant influence in tariff-setting and could extend its pressure beyond agriculture to other sectors if talks remain deadlocked.

Interestingly, soybean oil exports from the US to India have surged in 2025 after India slashed import duty on the product from 27.5 per cent to 16.5 per cent on May 31. This, however, was a calibrated move aimed at tempering domestic inflation rather than signalling any long-term policy shift.

Conclusion: Trade Is Booming, But Politics Remains The Spoiler

The irony is inescapable. At a time when US-India farm trade is on track to hit record highs, it is agriculture that is holding the larger trade deal hostage. This contradiction is explained not by trade logic but by domestic political compulsions, cultural factors, and longstanding distrust of foreign influence in food policy.

Trump’s tariff hike may force some tactical concessions, but on the core issues, the stalemate is likely to persist, unless one side redefines its red lines. Until then, both sides risk escalating trade tensions further, with India’s export sectors bracing for volatility and the US facing limited access to one of the world’s fastest-growing food markets.

Karishma Jain

Karishma Jain, Chief Sub Editor at News18.com, writes and edits opinion pieces on a variety of subjects, including Indian politics and policy, culture and the arts, technology and social change. Follow her @kar...Read More

Karishma Jain, Chief Sub Editor at News18.com, writes and edits opinion pieces on a variety of subjects, including Indian politics and policy, culture and the arts, technology and social change. Follow her @kar...

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August 07, 2025, 14:46 IST

News explainers Why Agriculture Is A Point Of Contention In India-US Trade Talks Despite Soaring Farm Exports

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