31st March 2025 (31 Topics)
India-US Agriculture Trade Negotiations
Context
The ongoing trade negotiations between India and the United States have put a spotlight on agricultural market access. The US is pushing for greater entry into India's farm sector, emphasizing the principle of reciprocity in trade agreements. However, a major sticking point remains the disparity in government support for farmers in both countries. Extensive subsidies for American farmers make their produce significantly cheaper, raising concerns about fair competition and the potential impact on Indian farmers' livelihoods.
How India and the US Support Their Farmers?
- India: India’s agricultural support primarily targets small and marginal farmers by providing subsidized fertilizers, irrigation, and electricity.
- The Minimum Support Price (MSP) ensures price stability for key crops, while low-interest loans and crop insurance schemes help mitigate financial risks.
- United States: The US relies on direct financial support for farmers, ensuring income stability through various programs.
- These include Price Loss Coverage, which compensates farmers when market prices fall below a threshold, and Agriculture Risk Coverage, which provides financial protection against revenue losses.
- Additionally, the US government supports dairy farmers, offers extensive crop insurance, and provides disaster assistance in times of extreme weather events.
Challenges for Indian Agricultur
- Unequal Competition and Market Pressures: The significant difference in subsidy structures creates an uneven field for Indian farmers. While the high cost of inputs already makes Indian agriculture less competitive, the influx of cheaper American products could further erode their market position.
- If Indian tariffs on agricultural imports are lowered, local farmers may struggle to compete with heavily subsidized US goods, potentially affecting their income and livelihoods.
- Trade Commitments vs Domestic Needs: India has traditionally maintained high tariffs to shield its farmers from the impact of subsidized imports. The US, however, has been pushing for reduced tariffs to enhance its market access in India.
- India’s Position at the WTO: India has consistently defended its right to protect its agricultural sector under World Trade Organization (WTO) rules, which allow developing nations to use tariffs and subsidies to support their farmers.
- The principle of “non-reciprocity” recognizes that developed countries should not expect equal market access in return for trade concessions granted to emerging economies.
Government Subsidies for Farmers:
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| PYQ
Q: What are the direct and indirect subsidies provided to farm sector in India? Discuss the issues raised by the World Trade Organization (WTO) in relation to agricultural subsidies. [2023] Q: WTO is an important international institution where decisions taken affect countries in a profound manner. What is the mandate of WTO and how binding are their decisions? Critically analyse India’s stand on the latest round of talks on Food security. [2014] |
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