India and the United States are in advanced discussions for an interim trade agreement, but disagreements over agricultural products remain a significant obstacle. A key official indicated that reaching a consensus is within reach, but Washington's demands concerning agriculture are proving to be a hurdle.
The United States has long sought greater access to India's agricultural sector, viewing it as a major untapped market. They are pushing for access to the Indian market for genetically modified (GM) crops, cattle feed, and a variety of dairy and agricultural products. Specifically, Washington is eyeing bigger agricultural exports, particularly corn, soybean, cotton, and maize, to help shrink its $45 billion trade deficit with India. They are also seeking tariff reductions on industrial goods, electric vehicles, petrochemicals, and wines.
However, India has traditionally resisted liberalisation in these areas, citing concerns about food security, the livelihoods of millions of small farmers, and domestic political sensitivity. Indian officials have stated that there will be no compromise on certain sensitive sectors, including market access in agriculture, GM crops, and dairy products. These issues are deeply tied to the interests of Indian farmers, many of whom rely on small-scale, subsistence agriculture. Some experts fear that pressure for tariff concessions could undermine India's support mechanisms for farmers, including the minimum support price (MSP) system and public procurement schemes that protect growers from price volatility. India is resisting opening its market for agricultural products, such as soybeans and maize. For example, the Soybean Processors Association of India (SOPA) has voiced concerns over allowing imports of GM soybeans while not allowing Indian farmers to grow them.
In addition to agricultural products, India's non-tariff measures, specifically its growing array of Quality Control Orders (QCOs), present significant hurdles to US exports. These QCOs are aimed at curbing low-grade imports and boosting domestic manufacturing, but critics, including Niti Aayog, have expressed concerns.
On the other hand, India is negotiating for duty concessions on exports from key labour-intensive sectors such as textiles, leather goods, gems and jewellery, chemicals, plastics, and agricultural produce like shrimp, oilseeds, grapes, and bananas. New Delhi is also seeking full exemption from the additional 26% tariffs announced earlier.
Both sides are aiming to finalize the first part of the deal by July 9, which is the deadline when the U.S. will levy a 26 percent tariff. According to sources, the interim agreement may be structured in phases, with the first tranche covering multiple sectors and more detailed negotiations continuing through October as part of a broader Bilateral Trade Agreement (BTA).
Despite the hurdles, optimism remains that a deal can be reached. If concluded, it would mark one of the first such agreements between Washington and a major trading partner. However, the window to reach a deal is narrowing, and the coming week could determine whether India and the US settle for a limited 'mini-deal' or walk away from the table, at least for now.
