The ‘framework’ for the interim trade agreement being ‘negotiated’ between India and the US was revealed on Saturday, Feb. 7.
As has become the practice in the current relationship between Donald Trump and Narendra Modi, the ‘joint statement’ was first announced by the White House, followed by Indian agencies. Several Indian actors then rushed to frame the perception of the fine print for the benefit of key domestic constituencies, mainly agriculture and business.
As per the framework, India will eliminate or reduce tariffs on “all US industrial goods” and “a wide range of US food and agricultural products”, including dried distillers’ grains (DDGs), red sorghum for animal feed, tree nuts, fresh and processed fruit, soybean oil, wine and spirits, and other items.
While not quite committing to bringing all tariffs down to zero, as Donald Trump claimed in a Truth Social post earlier in the week, this is still tantamount to throwing wide open the doors of India’s agriculture market to American produce and value-added products.
Commerce Minister Piyush Goyal took pains to say that the most vulnerable Indian farmers would continue to be protected. While the jury is still out on that claim, it is clear that millions of farmers engaged in cultivating cash crops such as cotton, soybean, dried fruits, corn for ethanol and fruits will now have to compete with US counterparts subsidized by their government to the tune of USD1.5 trillion.
This unequal competition is likely to have a deep and as yet uncharted impact on the entire Indian agrarian ecosystem. In addition to making Indian farmers’ produce uncompetitive, it could send shocks down the line to several subsystems, including food processing, labour, land demography, input manufacture and mechanisation. Together, these sub-systems employ at least 50 percent of India’s workforce.
Was this concession offered to the US after a thorough study by NITI Aayog and ICAR of all these consequences? There is no evidence of it. Instead, India’s ministers have spoken around the issue, emphasising who is spared rather than who might be better off.
Agriculture Minister Shivraj Chauhan said the core produce of India, meaning basic food grains such as rice, wheat and maize, would not be affected. But what about the soya farmers of Madhya Pradesh, whose market might collapse if industry finds US soya products cheaper to source?
The Commerce Minister could not even bring himself to describe this as a “calibrated opening up of India’s agriculture”, choosing instead to highlight the US rollback of tariffs from 25 percent to 18 percent. What confidence can India’s farmers have when ministers appear reluctant to acknowledge the scale of the changes, even through euphemisms?
This framework contains sweeping commitments by New Delhi spanning several sectors agriculture, energy, regulation, digital policy, and economic security alignment compared to just one by Washington, to roll back tariffs from 50 percent to 18 percent.
The implications of each of them need to be studied and debated before the interim trade deal with the US is signed. What happens now to India’s policy of energy security, citing which we embarked on oil purchases from Russia? By agreeing to switch purchases to US energy, and by allowing Washington to ‘monitor’, our future buying, have we not reneged on our own policy? A deal with such wide ramifications must have the confidence of the people. If not, the results would be disastrous.