India’s Agricultural Trade Balance

India is in the final stages of negotiating Free Trade Agreements (FTAs) with the United States, European Union, and the United Kingdom. These agreements involve discussions on tariff reductions and greater market access, particularly for agricultural commodities, which has sparked concerns about the implications for India's agricultural trade surplus.

India’s Agricultural Export-Import Dynamics in the Context of FTAs

• Export Trends:
  • Agricultural exports increased by 4% to $51.9 billion in 2024–25, up from $48.8 billion in 2023–24.
  • Key export items include marine products, rice (basmati and non-basmati), spices, tobacco, coffee, and fruits & vegetables.
• Import Trends:
  • Agricultural imports rose by 2%, from $32.9 billion to $38.5 billion in 2024–25.
  • Key import items: vegetable oils, pulses, cotton, natural rubber, dry fruits, spices (pepper, cardamom), alcoholic beverages.
• Trade Surplus Trends:
  • Surplus dropped from $27.7 billion in 2013–14 to $13.4 billion in 2024–25.
  • Imports grew at a faster pace (148%) than exports (20%) over the last decade.

• Tariff and Market Access Pressures:
  • US, EU, and UK are seeking tariff cuts and non-tariff barrier relaxations (e.g., GM crops).
  • Likely increase in imports of maize, soyabean, cotton, dry fruits, wine, spirits.
• Marine Product Exports at Risk:
  • US imposes 7% duty on Indian shrimp exports.
  • Possible increase to 26% (policy decision pending) could severely affect exports, especially with 35% of India's shrimp exports going to the US.

• Strong Performing Commodities:
  • Rice exports at record highs: 1 million tonnes (non-basmati) + 6.1 million tonnes (basmati) = $12.5 billion.
  • Coffee and tobacco exports surged due to global shortages.
  • Spices exports and imports both at record levels.
• Struggling Commodities:
  • Wheat and sugar exports restricted or banned due to domestic shortages.
  • Cotton: From exporter to net importer; production fell from 398 lakh to 291 lakh bales (2013–14 to 2024–25).
  • Natural rubber: Production stagnant at 5 lakh tonnes, with rising demand to 15 lakh tonnes.

4. Drivers of High Agricultural Imports

• Vegetable Oils and Pulses:
  • High dependency due to low productivity, no MSP procurement, and limited domestic incentives.
  • Pulses import crossed $5.5 billion for the first time in 2024–25.
• Structural Constraints:
  • Lack of productivity-enhancing technologies (especially in cotton, pulses, oilseeds).
  • Insufficient investment in agro R&D and value-chain infrastructure.

Challenges Emerging from FTAs:

• Erosion of Trade Surplus: India’s agri-trade surplus is under stress due to faster rise in imports.
• Tariff Liberalization Risk: Lower tariffs may allow subsidized and high-quality agricultural produce from developed countries to flood Indian markets, impacting price realization for Indian farmers.
• Non-Tariff Barrier Relaxation: Pressure to permit GM crops like maize, soybean and cotton might override biosafety and farmer autonomy concerns.
• Price Volatility and Farmer Vulnerability: Greater market access for foreign goods can increase price competition, adversely affecting smallholder farmers.

Opportunities:

• Export Diversification: Coffee, spices, processed foods, and niche agri-products have growing global demand.
• Strategic Leverage in FTAs: India can negotiate sanitary-phytosanitary compliance standards, mutual recognition agreements, and export facilitation measures in return for limited tariff liberalization.

Way Forward:

• Calibrated Trade Liberalization: Carefully identify sensitive sectors (e.g., pulses, edible oils, cotton) and negotiate exclusion or longer adjustment periods in FTAs.
• Domestic Policy Support: Expand MSP to oilseeds and pulses; improve procurement infrastructure.
• Agro-Tech Push: Invest in high-yield, climate-resilient varieties and post-harvest value chains.
• Export Facilitation: Streamline port logistics, SPS clearances, and provide subsidized export credit for priority agri-products.
• Farmer Protection Measures: Include safeguard clauses in FTAs to re-impose tariffs if imports surge and harm domestic producers.