Agri deadlock: Red lines in the India-US trade talks

India should ensure that trade liberalisation does not come at the cost of its farmers’ survival.

As India and the United States edge closer to the July 9 deadline for a new bilateral trade agreement, agriculture has emerged as a make-or-break chapter. Washington wants deeper market access. New Delhi is wary of the consequences. Both sides are negotiating hard.

Recently, Vietnam agreed to drop duties on American imports — even as it faces a 20% levy on its exports to the US. The pressure is mounting.

At the heart of the India–US stalemate are five key agricultural issues: Maize, soybean, ethanol, dairy and poultry. These are not just trade lines; they are political red lines. What is at stake is the livelihood of millions of Indian farm households and the government’s food and energy self-reliance goals. 

Maize is central to India’s crop diversification efforts, especially in Punjab, Haryana and Uttar Pradesh. The government wants farmers to move away from water-guzzling paddy to maize.

The fast-growing poultry sector, expanding at 8-10% annually, also depends on maize as feed.

But the numbers are tight. India produces just enough maize to meet domestic demand. In the past two years, we have imported around 1 million tonnes annually. With ethanol blending programmes accelerating, maize is being pulled in even more directions.

If we allow duty free imports of US maize today, the landed price (including discharge and bagging cost at port warehouse) would be about Rs 2,250 per quintal. The MSP for the upcoming kharif season is Rs 2,400 per quintal. This would make domestic cultivation unviable for India’s 8-9 million maize farmers. Worse, it could open the gates to genetically modified (GM) maize — exposing Indian farmers, who are not allowed to grow GM varieties, to unfair competition. 

Soybean farmers are struggling with low mandi prices, despite strong domestic production. While edible oil importers bring in cheap soybean oil, domestic crushers face a margin crisis, caused by a global crash in soybean meal prices and aggressive competition from ethanol by-products like distillers dried grains with solubles (DDGS). 

Crushing margins have dropped by nearly 15% between December 2023 and March 2025, discouraging processors and hurting farmers. Many of India’s 6 million soybean growers are planning to move away from soybean this kharif season.

Some economists argue that India should import US soybeans, crush them locally for oil, and export the meal. But this argument assumes that the domestic production is insufficient and the global demand for the meal is limitless. Both are questionable assumptions in today’s oversupplied market. If India wants to achieve some self-reliance in edible oils, it must support its farmers, not offshore the opportunity.

Dairy and poultry

Dairy is one of India’s most politically sensitive sectors, supporting over 80 million farmers. Unlike any other agricultural commodities, milk prices in India have never fallen in retail terms over the past decade—a fact that stands out. According to the consumer price index data from the Ministry of Statistics and Programme Implementation (MoSPI), the annual milk inflation has consistently stayed positive since January 2014. Prices received by farmers may have dipped in states like Gujarat or Karnataka, but consumers have never seen milk prices go down.

A 2018-research study by the Organisation for Economic Co-operation and Development (OECD) and the Indian Council for Research on International Economic Relations (ICRIER) compared domestic and global milk prices. The analysis showed that Indian milk is globally competitive, even after adjusting for quality differences. One reason is the dominance of the informal market: nearly 80% of Indian milk bypasses the organized sector, keeping costs low.

Liquid milk imports from the US are unlikely due to high transport costs and limited price advantage. However, there may be space for modest tariff concessions on processed dairy products like butter and cheese—currently taxed at 30% and 60% respectively. These could be considered without hurting domestic producers significantly. In trade negotiations, some give-and-take is inevitable.

Yet, tariff cuts alone are not the crux of the issue. The core challenge is labelling and certification.

India mandates that all dairy imports certify the source animals were never fed meat or animal by-products. Any concessions on dairy would need to meet these norms.

In the US, chicken legs are unpopular—considered “black meat” in a market that prefers boneless breasts. In India, they are a delicacy. That mismatch has created an incentive for US exporters to push chicken legs in India, if allowed.

India currently imposes a 100% duty on chicken leg imports. If removed, landed US legs could retail at Rs 250 to RS 300 per kg, much far lower than Indian market prices. That would undercut not only Indian poultry farmers but also the domestic chicken meat ecosystem, which is deeply interlinked with maize, soybean meal, and rural employment. 

As per NITI Aayog’s roadmap for National Biofuel Policy (NBP) 2018, for meeting its 2025-26 E20 mandate (the target of blending 20% ethanol with petrol), the country would need about 10.16 billion litres of ethanol for fuel blending and an additional about 3.6 billion litres of ethanol for industries including pharmaceuticals, potable alcohol etc.

Imports for industry

Climate change, feedstock competition, and fluctuating yields in sugarcane, maize, and even paddy may make the E20 target hard to meet under business as usual. Meanwhile, the US is a major ethanol exporter. In the last two years, India’s ethanol imports, mostly from the US, have more than doubled.

This is one area where India might consider offering limited concessions. But doing so risks replacing our crude oil imports with ethanol imports. This merely shifts, and does not reduce, energy dependence. India may consider expanding ethanol imports for industrial use while continuing to prioritise domestic feedstocks for fuel blending to preserve energy security.

India cannot isolate itself from global markets. But it must enter them on its own terms.

As the 2024 report of the OECD shows, the contrast is stark: The average Indian farmer earns 25% below global prices and receives just $366 in annual support. Their US counterpart earns above world prices and receives $17,100 in subsidies, and farms on land that is 160 times larger.

Agriculture is not just an economic sector in India. It is cultural, political and deeply human. India has to open its markets gradually — but that would be done while ensuring that trade liberalisation does not come at the cost of its farmers’ survival. Trade negotiations must be calibrated to protect both rural livelihoods and national food security.  

(Shweta Saini is an agriculture economist and CEO, Arcus Policy Research. T Nandakumar is a former agriculture secretary to the Government of India.)