India has completed reviewing the tariff regime in the agriculture sector and will consider rationalising import taxes in areas where domestic farmers would be least impacted and where tweaks would be mutually-beneficial for trade between it and the US, two officials have said, requesting anonymity.
The state-owned Niti Aayog, a policy think tank, assessed the likely impacts of US president Donald Trump’s proposals to slap reciprocal tariffs on the India economy, including in the farming, fisheries and dairy sectors, one of the officials said. According to details from the review, the think-tank has concluded that rationalising tariffs will be beneficial for India and should be done not because of American pressure but “for our own” benefit, a second official said.
“Lowering and rationalising of tariffs on agricultural commodities will increase overall trade and help Indian exports gain better markets in the US and north America,” the review, seen by HT, states.
India mainly exports rice, spices, dairy, and poultry products to the US. The prime farm commodities that are likely to be impacted are seafood, rice (India is the world’s largest exporter) and guar gum (a high-value produce used in the US fracking industry), the review showed.
The weighted average agricultural tariff levied by India is 37.66% versus 2.59% of US, according to the review. A tariff differential of 32% is likely to come under the scrutiny of the Americans.
A January 2025 paper by US trade department on farm-sector exports said the US wants lower tariffs on wheat, corn, nuts, bourbon whiskey and apples. “India, despite its rapidly growing economy and population growth, remains a price-sensitive market. US export growth, without the further removal of tariffs, will remain constrained,” the paper stated.
India lowered some basic customs duties in the Union Budget but a White House statement on reciprocal tariffs earlier this month said Indian tariffs on agricultural goods remain “significantly higher than those imposed by the US on Indian products”.
Economists say India’s higher tariff rate and a $41-billion trade surplus with the US makes it among the most exposed to risks if Trump followed through with tit-for-tat tariffs.
The US is a large importer of India’s seafood, with marine exports in 2023-24 reaching $2.58 billion. “If the US were to impose an additional tariff of 32.4% on seafood imports from India, the exports, especially of shrimp, will be severely impacted,” said Siraj Hussain, a former agriculture secretary. In 2022-23, the export of sea food was even higher at $3.56 billion.
Rice exports, a key earner of foreign exchange, is another area of concern, the first official said. In 2023-24, Indian export of the cereal was worth $304.78 milion for basmati and $ 45.1 million of non-basmati rice, on which the Indian diaspora majorly depends.
Another high-value export item, guar gum, could also face reciprocal penalties, which could hurt farm income. In 2023-24, guar gum exports to US was worth $106 million, according to the review. The gum, used in the US fracking industry, majorly benefits growers in Rajasthan and Gujarat.
“India has dealt with Trump’s tariffs before and that experience will come in handy,” the second official said. In March 2018, during Trump’s first term, the US imposed additional tariffs of 25% and 10% on steel and aluminium.
This cut India’s steel exports to the US by 35% during 2018-19. In retaliation, India imposed an additional duty of 20% on US apples and walnuts and ₹20 on per kg of almonds. “Then too, trade-level talks had helped India and US resolve the issue and the earlier tariff regime had been restored,” the second official added.
According to a recent analysis by the State Bank of India, if the US were to impose a 20% flat tariff on Indian exports, it could result in a loss of 50 basis points to gross domestic product. An average hike of 15%-20% in tariffs could reduce India’s overall exports to the US by 3-3.5%, it said.
