As US tariffs hit India, New Delhi doubles down on farm livelihoods at the WTO, balancing domestic imperatives with global trade pressures.
The United States’ punitive action of imposing a “napkin deal” of a 50 percent tariff on India is unwelcome, though not unexpected. New Delhi has consistently drawn red lines, reflecting its long-standing approach to trade negotiations in agriculture, where domestic imperatives have once again taken precedence over balancing a sensitive geoeconomic situation.
The Uruguay Round of the General Agreement on Tariffs and Trade (GATT) laid the foundation for the World Trade Organization’s (WTO) Agreement on Agriculture (AoA) in 1995—the first attempt to establish a free and fair agricultural trading system. India and other developing countries expressed concern that liberalisation of agriculture would undermine domestic food production, increase import dependence, and hurt smallholder farmers ill-equipped to compete with heavily subsidised agricultural exports from other advanced economies.
While India has always supported WTO’s rules based order, with the flailing WTO state, it will need to friend-shore to ensure its interests are guarded and aligned with the Global South.
In subsequent negotiations, including the Doha and Nairobi rounds, India’s core demands included the removal of export subsidies by advanced nations, the continued use of domestic subsidies for food procurement, and buffer stock operations to support food security. At the WTO’s 13th Ministerial Conference (MC13) in Geneva in 2024, India reiterated its “right to food”, demanded sovereign space in agricultural policy, and stressed the importance of public stockholding as a permanent solution for food security.
Given that India constitutes nearly 46.1 percent of the workforce within the agricultural sector, according to the Economic Survey 2024-25, this sector reflects India’s domestic concerns and priorities, especially about the livelihoods of the farmers. With 89 percent of Indian farmers classified as smallholders—owning less than two hectares of land—the sector struggles to compete globally. India’s position has therefore been to correct historical imbalances in agricultural trade by permitting higher domestic subsidies for emerging economies.
Rural development, food security, and environmental sustainability are recognised as non-trade-distorting issues under the WTO’s “Green Box”, alongside provisions of Special and Differential Treatment for developing economies. More contentious issues include the Minimum Support Prices (MSPs) for Indian farmers, classified under the “Amber Box” as trade-distorting. India, however, argues that MSPs are integral to the country’s development-centric schemes such as Pradhan Mantri Kisan Samman Nidhi and Pradhan Mantri Garib Kalyan Ann Yojana (PMGKAY). India has often maintained that MSPs are not merely hedging tools for farmers but Sustainable Development Goals (SDG)-aligned instruments to address broader development, such as improving farmers’ livelihoods.
Meanwhile, India has argued that food grains, dairy products, genetically modified (GM) crops, and ethanol remain highly subsidised in advanced nations such as the US. For instance, the US has Price Loss Coverage (PLC)—analogous to India’s MSP—which allows the state to compensate farmers when market prices fall below reference prices. There are other trade-distorting subsidies such as Agriculture Risk Coverage (ARC), Dairy Margin Coverage (DMC), and Crop Insurance Premium Subsidies (CIPS). Similarly, the European Union (EU) provides Direct Payments under its Common Agricultural Policy (CAP), where farmers are supported with annual per-hectare payments, alongside Rural Development Programme Subsidies. While advanced nations have kept these subsidies within WTO limits, emerging economies such as India argue that they exploit “Green Box” loopholes to provide extensive state support, whereas emerging economies are coerced to retreat from their red lines.
A counterargument to India’s agricultural stance is the need for a second green revolution, albeit a much more climate-centric one. While India’s grain dependency is low, with agriculture now expected to go beyond food security and address climate change, it becomes crucial for India to improve its agricultural productivity and its contribution to the Gross Domestic Product (GDP).
Another argument is that a higher import dependency ratio (IDR), defined as the extent to which a country relies on imports to meet its needs, typically for food, can actually lead to cheaper food and thus higher standards of living for the population.
A related argument is that a higher import dependency ratio (IDR) —the extent to which a country relies on imports to meet its needs, typically for food—can lead to cheaper food and higher living standards. Policy analyst Ben Chu, in his book ‘Exile Economics’, points to Japan as an example. It was also found that as national incomes rise, consumers tend to demand diverse food choices and shift from food grains to diets richer in protein, processed foods, and fruits. In India, there has been significant price stabilisation for pulses, edible oil, and fruits due to a reduction in import duty and favourable tariff structures. Technology transfer is another area where developing economies have benefited from trade liberalisation—US-based precision agri-technologies have allowed Indian farmers to optimise resource allocation, especially in Maharashtra.
Climate woes, including degraded land and irregular rainfall, urgently call for the use of technology-enabled precision farming and advanced sustainable farming techniques. Allowing greater market access could arguably improve income opportunities, knowledge transfer and per-hectare productivity for Indian farmers. However, this should not translate into buckling under tariff pressures; the bargain should be non-coercive and balanced to ensure fair trade requirements are met.
Looking ahead, India must strengthen agriculture through R&D, efficient subsidies, climate-resilient farming, and better post-harvest management to boost export competitiveness. Friend-shoring and new trade partnerships will also be essential in securing its national interests, especially as the multilateral system weakens. India will further need to press for reforms in the AoA, particularly on Aggregate Measurement of Support (AMS) entitlements.
Nearly 30 years after the AoA, India’s priorities in agricultural trade remain largely unchanged. Yet the US’s latest tariff action presents unprecedented pressure. The central question is whether India can continue balancing its domestic imperative of safeguarding farm livelihoods with the growing international demand for greater market access.
Shruti Jain is an Associate Fellow with the Centre of Development Studies, Observer Research Foundation
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Shruti is an Associate Fellow at the Centre for Development Studies, Observer Research Foundation (ORF), where her research examines the intersections between policy, economic diplomacy ...
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