Representative image showing agriculture.
Credit: iStock Photo
New Delhi: Agriculture has become the defining fault line in the protracted trade negotiations between India and the United States. The USA, under President Donald Trump, continues to press for expanded access for American farm exports, framing it as essential to balancing trade ties.
India, however, has drawn a clear boundary, arguing that the livelihoods of millions of small farmers and the stability of its rural economy cannot be placed on the bargaining table.
“The livelihood interests of our farmers and requirements of food security have always been paramount for the government while negotiating trade agreements with our international partners, including the US,” Minister of State for Agriculture and Farmers Welfare Ramnath Thakur said, in reply to a question in the Lok Sabha recently.
Through the Comprehensive Economic and Trade Agreement, signed with the UK in July, the Narendra Modi government claims to have secured significant market access for the Indian farm sector in the British market.
However, perishables like dairy products, edible oils, apples and oats have remained out of the deal.
India has signed more than a dozen free trade agreements with major partners, including the UAE, Japan, Australia, Singapore and South Korea. In each case, however, New Delhi has held firm on agriculture, refusing to offer concessions.
These are efforts to shield a sector that sustains a majority of the population and underpins food security despite seeing a fall in GDP share. According to data from the Central Statistics Department, the share
of agriculture in India’s GDP has fallen from 47.6% in 1961 to below 15% today.
The decline has been most pronounced since the economic liberalisation in 1991, when the share of agriculture and allied sectors halved. It dropped from 29.5% in 1991 to 22.3% in 2001, and further to 14.4% in 2011. Over the past decade and a half, the sector has hovered around the 15% mark.
Still, agriculture remains a mainstay of the economy, employing nearly half (55%) of the country’s workforce. Given its deep link to rural livelihoods, the sector continues to wield significant influence over India’s politics.
This centrality of agriculture has been evident in the policies of successive prime ministers, from Nehru to Modi. Pandit Jawaharlal Nehru, India’s first Prime Minister, famously remarked, “Everything can wait but agriculture.”
This political sensitivity has also been reflected in India’s stand in the bilateral trade agreement negotiations with the US. “For us, the welfare of our farmers is of the highest priority. Bharat will never compromise on the interests of its farmers, livestock rearers, and fishermen. And I am fully aware that I may have to pay a very heavy price personally, but I am prepared for it,” Modi said last month after US President Trump announced the imposition of a 50% tariff on Indian goods.
Agriculture has long been a key driver of India’s exports. Between 2013-14 and 2023-24, overall merchandise exports grew from $314 billion to $437.10 billion, marking a 39% increase over the decade.
In the same period, agricultural exports rose at a much faster pace, jumping by 112% from $22.70 billion to $48.15 billion. This surge was partly driven by a surge in food prices in the international market. In the financial year ending March 2025, agricultural exports grew 6.4% year-on-year to reach $51.9 billion, even as overall merchandise exports stayed almost flat at $437.4 billion.
Agriculture accounts for over 11% of India’s overall merchandise exports. Basmati and non-Basmati rice, spices, sugar, buffalo meat, oil, fruit, vegetables and marine products constitute major products of export. Globally, India is among the top 10 exporters of agricultural products.
India is also a significant importer of agricultural products. According to the World Trade Organisation’s Trade Statistical Review (2022), the country’s share in global agricultural exports was 2.4%, while its share in imports stood at 1.7% in 2021.
“Agriculture is steadily emerging as a key engine of India’s export growth. However, sustaining this momentum amid shifting geopolitical dynamics will require greater focus on high-value markets, consistent policies, and targeted infrastructure investments to fully unlock India’s potential in the global agri-trade market,” said Avinash Chandani, Partner at Deloitte India.
Inconsistent policy
India’s agricultural export policy has often been shaped by concerns over domestic inflation, leading to sudden bans on commodities such as rice, wheat, sugar and onion. In 2023 and 2024, for instance, restrictions were imposed on the export of rice, wheat and onion in an effort to contain rising prices.
According to Deepak Ballani, Director General of the Indian Sugar & Bio-energy Manufacturers Association (ISMA), a consistent export policy would strengthen India’s position in global markets.
“Consistent policy is important. If we know that we will get an export every year, we can plan for raw sugar. The demand for raw sugar is higher in the international market,” Ballani said. Ballani said sugar production is estimated to jump to 350 lakh tonnes in the sugar year, starting from October 2025.
“Out of roughly 350 lakh tonnes, about 285 lakh tonnes are for domestic consumption. That leaves 65 lakh tonnes. On top of that, the closing stock this year is 52 lakh tonnes. If we are not allowed to export, prices will crash in the domestic market,” he said.
Ballani advocates for the industry to be given the freedom to decide on the timing of exports. The government normally sets a mill-wise quota and decides on the time of export, depending on the domestic price and stocks.
“Eliminate sudden export bans and minimum export price shocks. Credibility is a market asset,” said Amit Vatsyayan, leader, GPS-Agriculture, Livelihood, Social and Skills, EY India.
Vatsyayan also emphasised the need for tax and other policies to support exports. “Fix GST input credit on cold-chain assets, reefer trucks, testing, and export packaging; ensure refunds are cleared in days, not months. Remove the inverted duty on processing inputs and rationalise the mandi cess for export lots,” he added.
Impact on farmers’ income
Sudden bans and restrictions, in the form of quotas and the imposition of duties, also affect farmers’ income. In December 2023, the government banned the export of onions in view of the jump in prices in domestic markets. The ban was lifted in May 2024, ahead of the Lok Sabha election, but restrictions continued in the form of minimum export price and export duty.
The export restrictions led to widespread protests in Maharashtra, India’s largest onion-producing state. Karnataka, Madhya Pradesh, Himachal Pradesh, Rajasthan and Gujarat are among the other major onion producers.
The restrictions triggered a sharp fall in onion prices in the domestic market, forcing farmers to offload their stocks. In protest, several farmers in Nashik and other parts of Maharashtra even dumped their produce in the fields, arguing that the prevailing market prices did not cover their cultivation costs.
“A few years ago, the Union Government restricted the import of yellow peas to India. However, since 2017, the policy has been changing, and now it is being imported duty-free,” said Basavaraj Ingin, president, Karnataka Pradesh Red Gram Growers Association.
The lack of a long-term import and export policy at the central level has been hurting Indian farmers and traders. “Frequent changes in export-import policies create uncertainty across the agricultural sector. For farmers, sudden bans mean a surplus at home and a crash in prices,” said Chetan Dabke, president, Bidar Horticulture Farmer Producer Company.
For Farmer-Producer Organisations (FPOs), the impact is even deeper. Months of aggregation, contracts, and logistics can collapse overnight, causing not only financial losses but also eroding the trust farmers and buyers place in FPOs. The broader consequence is on India’s reputation: When international buyers witness cancelled shipments, they often turn to competitors, and regaining their confidence can take years, Dabke noted.
Erratic rainfall driven by climate change adds another layer of vulnerability. Staples like onions, tomatoes, and potatoes are particularly susceptible to extreme weather, even though India maintains self-sufficient production levels. Small and marginal farmers, who form the bulk of vegetable suppliers, bear disproportionate losses due to limited safeguards, storage, and transport infrastructure.
Export targets
The Indian government has set a vision to nearly double annual agricultural exports to $100 billion by 2030. Over the past 30 years, agricultural exports have grown elevenfold. However, this growth has been uneven. In 1994, exports stood at $4.4 billion and took a decade to double. Between 2004 and 2014, they surged nearly fivefold, only to take another ten years to double again.
India’s agricultural exports are concentrated in five commodities — rice, marine products, spices, sugar, and buffalo meat — which together accounted for more than 80% of total agricultural exports in 2024-25. Within many markets, exports remain concentrated in specific products.
To achieve the $100 billion target, diversification of both the product basket and export destinations is essential. Emphasis must be placed on high-value, value-added, and processed food products. While doubling exports may seem feasible based on the rapid growth between 2004 and 2014, evolving geopolitical dynamics, particularly US tariffs, pose significant challenges.
(With inputs from Mrityunjay Bose in Mumbai, Pavan Kumar H in Hubballi and SNV Sudhir in Hyderabad)