India’s resistance to opening up its agriculture and dairy sector – a politically and economically sensitive area – appears to have derailed a mini deal with the US in the lead up to the bilateral trade agreement (BTA) which leaders of the both countries had agreed to conclude by fall.
India was one of the earliest movers with the intent to strike a trade deal with the US. The Prime Minister visited Washington in February, weeks after Donald Trump returned to the White House. Thereafter, the US President had on multiple occasions claimed that the two countries were close to making a deal.
While the narrative from Washington continued, an unease settled in over the US’s insistence on greater access to India’s dairy and agri sector. Given that 700 million people in India’s rural economy are dependent on agriculture, the government was keen to hold up the tariff wall.
It was perceived that if India removes tariffs, cheap, subsidised US grains could flood Indian markets during global price crashes.
Unlike the US, where agriculture is corporatised, Indian farming continues to be a livelihood issue. Tariffs are essential to protect small farmers, manage price volatility, and ensure food security. India’s insistence that the US should reduce its sectoral tariff on steel and aluminium and products thereof also appeared to have not yielded a positive outcome. The US has imposed a 50 per cent tariff on steel, aluminium and now on copper. The steel tariff is particularly hurting India’s engineering and automobile export,which grosses over $3 billion annually, to the US.
Trump’s repeated claims that US has brokered a ceasefire between India and Pakistan in Operation Sindoor, a stance stoically denied by the Modi government in the face of criticism from the Opposition, also added a new dimension to the Indo-US bilateral relation while the trade talks were ongoing.
Moreover, India’s continued purchase of Russian crude oil added to the irritation of the Trump administration which was frustrated in its effort to stop the Russian Ukraine war.
Notably, President Trump chided India for buying Russian oil, which is allegedly funding the Kremlin’s war with its neighbour, hours after he gave Vladimir Putin a 10-12 days window to end the war during his visit to Scotland.
So far, five rounds of talks have been completed between US and India countries. For the next round, the US team, headed by assistant US trade representative for South and Central Asia, Brendan Lynch, is visiting India from August 24.
On Saturday, PM Modi asked Indians to be self-reliant and promote Swadeshi, a day after India was subjected to one of the harshest duties by the US. However, with another round of talks scheduled, the door remains open for a trade deal which may bring down tariffs on India, in tandem with its Asian peers.