Safeguarding Indian Agriculture in Global Trade

Context

Indian agriculture, which supports over 100 million smallholder farmers, is facing unprecedented challenges due to global trade shifts, including trade wars and tariffs. These geopolitical maneuvers not only affect the livelihoods of farmers but also pose significant threats to India’s agricultural economy. The recent imposition of reciprocal tariffs by countries like the United States has heightened these risks, necessitating urgent reforms and strategic safeguards to protect Indian farmers.

Impact of Trade Wars and Tariffs

The imposition of tariffs and trade wars is not an instrument of diplomacy; rather, it has economic implications for agriculture in India. The imposition of a reciprocal duty by the U.S. at the rate of 27% upon Indian major exports, such as shrimp, basmati rice, and spices, would threaten the profitability and competitiveness of these items in international markets. Indian farmers stand to lose more, with considerable tariff retaliations coming from other countries, where subsidies and insurance coverages are offered at a much higher rate than in India.

Challenges Faced by Indian Farmers

International Trade Environment: The global agricultural trade environment is becoming more intricate with increasing layers of protectionism and non-tariff barriers. This environment presents significant challenges for Indian farmers, who are constrained in their engagement with countries that enjoy higher subsidies and better market access. 

Protectionism and Trade Barriers: 

• Evolving Tariffs: The U.S. and other major economies have imposed steadily escalating tariffs on agricultural imports, challenging Indian export competitiveness. For instance, the 27% tariff on Indian shrimp exports severely vacuumed coastal farmers.
• Non-tariff barriers: Such requirements as pesticide residue limits and carbon labeling set forth by the EU further complicate India’s access to lucrative markets. Standards often do not sync with India’s diverse agricultural system, isolating Indian farmers from these markets.

Domestic Challenges

• Absence of Infrastructure and Technology: Indian agriculture lacks the infrastructure and technological capacity to fully capitalize on processed food exports, which are increasingly in demand globally. This gap hinders India’s ability to compete effectively with countries like the U.S. and EU in the high-value processed food market.
• State Agricultural Ecosystem: Agriculture is the subject of states in India, and many states either under fund or do not modernize their agricultural ecosystems. Such an absence of state support, in turn, hurts the ability of farmers to cope with changing global trade paradigms and deprives them from competing fairly.

Opportunities and Strategies for Indian Farmers

• Free Trade Agreements (FTAs): FTAs are beneficial for Indian farmers as they open up new markets for them, but at the same time it entails conditions which are quite difficult to meet especially in matters like sustainability and traceability that the EU lays emphasis on. This, however, makes Indian farmers eligible for EU produce, when supported adequately to meet the standards.
• Strategic Engagement: India can build up the obstacles of tariffs into avenues through strategic negotiations. It should take care that agricultural exports are pressed against attractive tariff levels compared to other nations by making standalone bilateral trade agreements (BTAs) under its policy framework. 

Domestic Reforms

• Treating Agriculture as an Enterprise: India needs to shift its perspective on agriculture from a welfare issue to a business opportunity. This involves investing in infrastructure, technology, and export compliance to enable farmers to meet global standards and compete effectively.
• State-Level Agricultural Visions: Each state should develop its own agricultural vision aligned with local strengths, climatic challenges, and market opportunities. This approach will help farmers adapt to global trade shifts and capitalize on emerging opportunities.

Key Concepts and Policies

• Agricultural Export Policy (AEP) of 2018: Aims to increase India’s agricultural exports by promoting value-added products and improving market access.
• Agricultural Produce Market Committees (APMC) Reforms: Aimed at improving market efficiency and reducing intermediaries to benefit farmers directly.
• Minimum Support Price (MSP): A critical price support mechanism for farmers to ensure they receive a minimum price for their produce.
• Production-Linked Incentive (PLI) Scheme: Encourages domestic manufacturing and can be extended to support value-added agricultural products.
• e-National Agriculture Market (e-NAM): A digital platform to facilitate farmers’ access to markets across India.

Implications for Indian Farmers

• Global Trade Shifts: Rising protectionism and non-tariff barriers pose significant challenges for Indian farmers, affecting their export competitiveness and profitability.
• Domestic Reforms: Essential for enhancing farmers’ ability to compete globally by improving infrastructure, technology, and market access.

Role of State Governments

• State-Level Agricultural Visions: Crucial for aligning agricultural strategies with local conditions and market opportunities.
• Funding and Modernization: States must prioritize funding and modernization of agricultural ecosystems to support farmers effectively.

Conclusion

The trade trap for Indian farmers is a complex issue that requires both strategic safeguards and domestic reforms. By addressing the dual challenges of protecting vulnerable farmers and forging strategic international partnerships, India can ensure that its agricultural sector not only survives but thrives in a dynamic global trade environment. This involves transforming agriculture into a competitive enterprise, enhancing state-level agricultural ecosystems, and negotiating favorable trade agreements.

Source: BL

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