India’s agricultural sector contributes 16 per cent of the country’s GDP while still providing employment to 46 per cent of the population, and thus it is overburdened and in some ways underproductive. The COVID-19 outbreak and subsequent announcement of an unplanned lockdown have led to reverse migration, which further troubled the sector. However, at the beginning of the financial year 2025, in the official discourse, optimism was expressed regarding the sector's performance, as the Economic Survey 2024-25 projected agricultural Gross Value Added growth of around 3.8 per cent for FY25. Even exports seemed buoyant. Agricultural exports from India increased from approximately US$48.8 billion in 2023-24 to US$51.9 billion in 2024-25, registering a 6.4% growth. In fact, preliminary data for 2025-26 indicate that agricultural exports could reach US$55 billion if current trends continue. Key exports include rice, spices, sugar, tobacco, and fruits, primarily destined for the US, EU, and West Asia, as well as coffee, which has seen higher foreign demand due to global supply shortages. Agricultural exports to the US, specifically, have thrived, with a 24 per cent year-on-year growth between January and June 2025.

Trump Versus Indian Agriexports

On paper, this indicates a healthy agricultural sector. However, this global expansion and integration collide head-on with the recent announcement of high US tariffs on Indian goods and the ongoing pressure to open the agriculture and dairy sector. The US Trade Representative’s National Trade Estimate considers India’s agricultural tariffs to be one of the highest in the world, with bound rates reaching 100 per cent and some products approaching 300 per cent. Washington continues to consider this asymmetry: While India has large access to foreign markets, it has kept its own agricultural sector relatively closed, highlighting its key objective of securing access for its agricultural products, such as soy, poultry, and corn, among others. India resists by stating the obvious: opening up would undercut millions and cause further impoverishment.

Furthermore, in early December 2025, US President Donald Trump again hinted at new tariffs on rice imports from India, following a statement that New Delhi shouldn’t dump its rice in the American market, thereby pulling Indian agriculture into this tariff conflict. Clearly, the US has used Indian agriculture as both a target and a bargaining chip in the ongoing US-India trade discussions.

Tariffs are only one side of the story. The US, Argentina, Canada, Ukraine and Australia have legally challenged India’s market price support for rice and wheat, stating that it is around 87 per cent of the production value between 2021-23, which is well above the WTO’s 10 per cent limit through counter-notification filing at the WTO. India had invoked the WTO’s peace clause, arguing for its public stockholding programmes (PDS), which subsidise procurement and distribution, critical to the country’s food security.

Outdated Farm Policies

If viewed together, US tariffs, WTO notifications, and increasing demand for access to the Indian agricultural and dairy sectors aren’t just foreign irritants but catalysts for higher fragilities and vulnerabilities in the Indian agricultural sector, particularly when they intersect with India’s inherent structural vulnerabilities. First, a higher proportion of farm-generated income comes from low-value cereals; however, a very small fraction of this is processed or branded, which cuts short the producer’s margins. Second, climate shocks and outdated farm policies have led to poor soil and groundwater quality. Third, and most importantly, small and marginal farmers, which constitute an overwhelming proportion of total farmers in the country, face highly uneven and inequitable access to credit, input markets, and procurement. Thus, from an Indian perspective, granting market access to both these sectors would have long term and irreversible negative consequences for employment, food security and price stability.

While the US demand for market access in the agricultural and allied sectors seems problematic, the impact of the US tariff escalation, particularly on agricultural goods, is expected to be significant as the US is one of the largest importers of Indian agricultural products in FY25 (US$ 5.62 billion), accounting for 10.98 per cent of total Indian exports. While seafood (primarily frozen shrimp) has been the top item, there are others as well, including spices and essential oils, basmati rice, processed fruits and vegetables, and baked foods. These are directly linked to the livelihood of Indian farmers. Prior to the imposition in late July and early August, India had experienced sustained growth in the export of agricultural commodities, with the US being the primary destination for exports originating from the agricultural sector.

Are Reforms Possible?

Clearly, India’s agriculture has been shaped by external forces. It is possible that some of these challenges regarding tariff and non-tariff matters may be partly addressed by India; nevertheless, internationally induced uncertainties are unlikely to fade soon. Thus, in the uncertain world, Indian agriculture needs a complete overhaul. Some of the strategies at hand include an immediate need to diversify the export destinations of agricultural goods away from the US, a shift in the value-added chain from raw goods to processed goods, with a sustained focus on food processing industries and a comprehensive support system for small and marginal farmers. 

Reorientation of fiscal and monetary policies to target the enhancement of domestic demand could be instrumental in substituting foreign demand with domestic demand, thereby leading to a reduced reliance on export demand for the sector. In this regard, stepping up public investment and support for the sector is crucial, considering that a single sector supports nearly half of the country's population.

A difficult future

In recent years, the progress towards achieving structural transformation, specifically raising the share of employment in the secondary and tertiary sectors, has halted, if not reversed, in India. Thus, it is likely that in the near future, this sector will continue to support a sizeable proportion of the Indian population. Thus, there is no alternative to prioritising the agriculture sector in policy discourse.

(Avanindra Nath Thakur is a Professor of Economics at Jindal School Of Government And Public Policy,  Jindal Global University, Sonipat, India and Amartya Jha is an economics student and a Teaching Assistant at the same school. Views expressed are personal. They can be contacted at anthakur@jgu.edu.in. This series is curated by Prof Avinash Godbole and Prof Sreeradha Datta, JGU)