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The imposition of tariffs by the United States, particularly under the administration of President Donald Trump, has presented a complex and multifaceted challenge to India's agricultural export sector. While a temporary suspension of tariffs may offer a brief respite, the long-term implications necessitate a strategic shift in India's approach to international trade. Experts and stakeholders emphasize the critical need for diversification of export markets and a focus on value-added agricultural products to mitigate the potential adverse effects of these tariffs. The reliance on the US market, while historically significant, exposes Indian exporters to vulnerabilities arising from protectionist policies and trade disputes. Diversification, therefore, becomes paramount to ensure the sustainability and resilience of the agricultural export sector. This includes exploring alternative markets in regions such as the European Union, the Middle East, Africa, and ASEAN countries. Each of these regions presents unique opportunities and challenges, requiring a tailored approach to market entry and product adaptation. The European Union, for example, boasts a large and affluent consumer base with a strong preference for high-quality and sustainably produced agricultural products. Meeting the stringent quality standards and regulatory requirements of the EU market necessitates investments in quality certification, traceability systems, and supply chain infrastructure. The Middle East, on the other hand, represents a rapidly growing market with a high demand for food imports due to limited domestic agricultural production. However, this region is also characterized by intense competition and price sensitivity, requiring exporters to offer competitive prices while maintaining quality standards. Africa presents a vast and largely untapped market with significant potential for agricultural exports. However, challenges such as inadequate infrastructure, political instability, and varying regulatory frameworks need to be addressed to effectively penetrate this market. ASEAN countries, with their rapidly growing economies and increasing consumer spending, offer promising opportunities for Indian agricultural exporters. However, competition from regional players and varying levels of market access need to be considered. In addition to market diversification, focusing on value-added agricultural products is crucial to enhance competitiveness and increase export earnings. This involves processing raw agricultural commodities into finished or semi-finished goods with higher value. For example, instead of exporting raw turmeric, India can export turmeric powder, turmeric oleoresin, or turmeric-based nutraceutical products. Similarly, instead of exporting raw cashew nuts, India can export roasted cashews, salted cashews, or cashew-based confectionery products. Value addition not only increases export earnings but also creates employment opportunities in the processing and manufacturing sectors. It also reduces reliance on the export of raw commodities, which are often subject to price volatility and lower profit margins. To facilitate value addition, investments are needed in processing infrastructure, technology upgradation, and skill development. The government can play a crucial role by providing incentives and support to promote value addition in the agricultural sector. Furthermore, reducing input costs is essential to enhance the competitiveness of Indian agricultural exports. High input costs, such as fertilizers, pesticides, and energy, can erode profit margins and make it difficult for Indian exporters to compete with their counterparts in other countries. Rationalizing GST rates on agricultural inputs and providing duty concessions on imported machinery and equipment can help reduce input costs. Streamlining regulatory processes and reducing bureaucratic hurdles can also contribute to lowering the overall cost of production. Enhancing trade negotiations is equally important to secure favorable market access for Indian agricultural products. Bilateral and multilateral trade agreements can provide preferential access to key markets and reduce tariff barriers. India needs to actively engage in trade negotiations with its trading partners to promote its agricultural export interests. These negotiations should focus on reducing tariffs, eliminating non-tariff barriers, and ensuring fair and transparent trade practices. Providing MSME exporters with access to credit and simplifying compliance requirements can also help boost agricultural exports. MSMEs play a crucial role in the agricultural export sector, particularly in the processing and export of value-added products. However, they often face challenges in accessing credit and complying with complex regulatory requirements. Streamlining access to credit and simplifying compliance procedures can help MSMEs overcome these challenges and enhance their export capabilities. Upgrading infrastructure through cold chains and logistics is essential to reduce post-harvest losses and improve the quality of agricultural products. Inadequate infrastructure, such as cold storage facilities, transportation networks, and port facilities, can lead to significant post-harvest losses and reduce the competitiveness of Indian agricultural exports. Investing in infrastructure development, particularly in cold chains and logistics, can help reduce post-harvest losses, improve product quality, and enhance export competitiveness. Finally, empowering Farmer Producer Organizations (FPOs) to engage in contract farming, direct exports, or branding of niche products can help small farmers negotiate better prices and cushion external shocks. FPOs can play a crucial role in aggregating produce from small farmers, providing them with access to markets, and helping them negotiate better prices. They can also engage in direct exports or branding of niche products to capture a greater share of the value chain. By empowering FPOs, the government can help small farmers improve their livelihoods and enhance their resilience to external shocks.
The US Trade Representative's annual report, released on March 31, 2025, sheds light on the significant trade barriers posed by India's high tariffs across various sectors, including agriculture. These tariffs, which can reach up to 150% on alcoholic beverages, 45% on vegetable oils, and 70% on apples, corn, and natural rubber, present a considerable impediment to US agricultural exports. The report emphasizes that these high tariff rates particularly affect processed foods, poultry, potatoes, citrus, almonds, and fast-food ingredients. While India maintains a competitive edge over certain rivals due to differing tariff rates, the overall impact of these tariffs on trade relations cannot be ignored. For instance, while India faces a 26% tariff on exports to the US, China faces a higher reciprocal tariff of 34%, creating an 8% differential advantage for Indian exporters. However, Vietnam (46%), Bangladesh (37%), Thailand (36%), and Indonesia (32%) face even higher tariffs, further solidifying India's competitive position. Despite this, the need for diversification and strategic planning remains paramount to ensure long-term stability and growth in the agricultural export sector. The analysis of tariff differentials underscores the importance of understanding the competitive landscape and leveraging advantages where they exist. However, relying solely on relative advantages may not be a sustainable strategy in the long run. A more proactive approach involves identifying and addressing the underlying factors that contribute to high production costs and inefficiencies in the supply chain. This includes investing in research and development to improve crop yields and reduce reliance on imported inputs. It also involves promoting sustainable farming practices that minimize environmental impact and enhance the quality of agricultural products. Moreover, fostering innovation in agricultural technologies and processes can help reduce costs and improve efficiency. This includes adopting precision farming techniques, utilizing data analytics to optimize resource allocation, and leveraging automation to streamline operations. Furthermore, strengthening the agricultural infrastructure, including irrigation systems, storage facilities, and transportation networks, is essential to reduce post-harvest losses and improve market access. The government can play a crucial role in facilitating these investments by providing incentives, subsidies, and technical assistance to farmers and agribusinesses. In addition to these measures, promoting greater transparency and accountability in the agricultural sector can help reduce corruption and improve governance. This includes implementing electronic procurement systems, establishing independent regulatory agencies, and empowering farmers to participate in decision-making processes. By creating a more level playing field and fostering a culture of integrity, India can attract more foreign investment and enhance its competitiveness in the global agricultural market. Furthermore, promoting agricultural education and training is essential to develop a skilled workforce that can meet the evolving needs of the industry. This includes providing vocational training to farmers and farmworkers, as well as offering advanced degrees in agricultural sciences and engineering. By investing in human capital, India can ensure that its agricultural sector remains innovative and competitive in the long run.
Neha Gupta, Associate Director of Transform Rural India (TRI), highlights the specific challenges faced by small and marginal farmers who are heavily involved in the cultivation of high-value export-oriented crops such as turmeric, cardamom, and chilli. The 26% US tariff diminishes the price competitiveness of these products, directly impacting farmers’ earnings and livelihood security. While India remains competitive due to higher US tariffs on Vietnam and China, coastal small-scale aquaculture farmers are now facing market volatility and price sensitivity from US buyers, resulting in unpredictable income streams. This situation underscores the vulnerability of small-scale producers to external trade policies and the need for targeted support measures to protect their livelihoods. The impact extends beyond the immediate loss of income for farmers. Gupta warns that small enterprises involved in processing jaggery, pickles, and traditional snacks for export may face declining demand due to the 26% US tariff. This could have a ripple effect on job creation and rural livelihoods, exacerbating existing socio-economic inequalities. The interconnectedness of the agricultural value chain means that reduced demand from exporters could lead to lower procurement prices even in domestic markets, further squeezing the income of farmers who produce export-linked varieties. This highlights the importance of considering the broader economic and social implications of trade policies and implementing measures to mitigate their adverse effects. To address these challenges, Gupta suggests investing in decentralised, rural-based processing units for products like millets, spices, and pickles. This approach enables marginal farmers to tap into domestic and global demand while retaining more value locally. By processing agricultural commodities closer to the source of production, transportation costs can be reduced, value can be added, and employment opportunities can be created in rural areas. This approach also empowers farmers to have greater control over their products and participate in the value chain. Empowering FPOs to engage in contract farming, direct exports, or branding of niche products can further help small farmers negotiate better prices and cushion external shocks. FPOs can play a crucial role in aggregating produce from small farmers, providing them with access to markets, and helping them negotiate better prices. They can also engage in direct exports or branding of niche products to capture a greater share of the value chain. By empowering FPOs, the government can help small farmers improve their livelihoods and enhance their resilience to external shocks. In addition to these measures, promoting agricultural diversification can help reduce reliance on a single crop or market. By encouraging farmers to cultivate a wider range of crops, they can reduce their vulnerability to price fluctuations and market shocks. This approach also promotes biodiversity and improves soil health. Furthermore, providing farmers with access to timely and accurate market information can help them make informed decisions about what to plant and when to sell their produce. This information can also help them negotiate better prices with buyers. Overall, addressing the challenges posed by US tariffs requires a comprehensive and multifaceted approach that includes market diversification, value addition, cost reduction, trade negotiations, infrastructure development, and empowerment of small farmers and FPOs. By implementing these measures, India can strengthen its agricultural sector, enhance its competitiveness in the global market, and improve the livelihoods of its farmers.