India's Agriculture Trade Strategy
India's agricultural trade policy needs a commodity-specific approach in light of new US tariffs, according to a policy paper by economist Ashok Gulati. The paper, developed for the Indian Council for Research on International Economic Relations, suggests several strategic actions to enhance India's trade benefits.
Tariff Rationalization
- India should rationalize "outlier tariffs" that exceed 50% on agricultural items.
- Consider implementing tariff quotas on sensitive items like wheat and dairy to protect domestic industries while maintaining trade relations.
Market Access and Export Strategy
- Push for preferential market access in the US for high-value Indian agri-exports like mangoes, grapes, and bananas.
- Streamline the export supply chain to enhance competitiveness.
- Diversify export markets towards regions such as the European Union, which accounts for 28.42% of global imports.
Global Trade Dynamics
The impact of new US tariffs should be assessed in the context of competitors like China, which faces a 54% tariff. This opens strategic opportunities for India in sectors vacated by China.
- In textiles, where India's exports to the US stand at $9.5 billion, there's potential growth if India can fill the gap left by China and others.
Opportunities in Other Sectors
- India has a better tariff position in machinery, smartphones, and other sectors, presenting strategic opportunities for growth.
- A constructive, forward-looking approach is recommended for bilateral talks with the US, aiming to double trade to $500 billion by 2030.
Agriculture Export Challenges
- Shrimp and prawn products, India's largest agricultural export to the US, will face a 26% tariff, potentially reducing market share in favor of countries like Ecuador and Argentina.
- For rice, with an existing 11.2% tariff, a reciprocal 26% tariff would further constrain competitiveness against Thailand.
- India needs to improve branding of rice varieties like basmati and 'Sona Masuri' to capture market share from Thai rice.
Impact on Other Products
- Products like vegetable saps and extracts, currently holding 30% market share with zero tariffs, will become more expensive with new tariffs, impacting competitiveness against Mexico, France, and Spain.
