india-us-trade-deal-farmer-concerns-and-impact-on-agriculture

The India-US trade deal announced in early 2026 is a major agreement between two of the world’s largest economies (US, the top-ranking world economy and India, the world’s third largest consumer and fourth economic power). Both countries want to improve trade, create more jobs, and strengthen economic cooperation. The United States is an important partner for India because it buys a large amount of Indian goods and sells many products to India. Likewise, India is a key market for American goods and services. The new agreement is not a complete Free Trade Agreement (FTA), but it sets the stage for a deeper bilateral trade relationship and includes changes to tariffs (taxes on imports) and market access for many products.

 

This trade deal has been welcomed by some business groups as a step toward bigger economic opportunities. However, it has also raised serious concerns among many Indian farmers, especially in farming states such as Punjab. Farmers fear that reducing tariffs and opening the Indian market to certain US agricultural products could hurt their incomes and livelihoods. These worries have led to protests and heated political debates across India.  

 

The India–US trade deal involves several key areas:

 

1. Reduction of tariffs on industrial goods and services

 

India has agreed to reduce or eliminate tariffs on many US industrial products. These include machinery, electronics, transport equipment, and specialty items that were previously taxed at significant rates. In return, the United States has agreed to cut tariffs on several Indian exports such as textiles, leather goods, pharmaceuticals, and other manufactured products. This change is expected to boost trade between the two countries and help industries that export goods internationally.  

 

2. Selective opening of agricultural markets

 

Agriculture has been the most sensitive and controversial part of the deal. Instead of a wholesale opening of agricultural markets, India has agreed to reduce tariffs on specific agricultural products. For example, the deal may include zero or lower tariffs on some animal feed products (like dried distillers’ grains with solubles or DDGS), soybean oil, red sorghum (often used as animal feed), tree nuts, some fresh and processed fruits, and wine and spirits. These products are typically ones on which India already depends on imports or where domestic demand cannot be fully met by local production.  

 

3. Protection of sensitive farm sectors

 

India’s government has repeatedly stated it will not allow unrestricted imports of sensitive staples such as wheat, rice, corn, dairy products, poultry, and other major commodities. Officials say these core items remain protected and will not be included in tariff concessions. However, critics point out that the agreement is not fully clear on how “sensitive” products are defined and how easily the list could be expanded later.

 

Many farmers and farmer organisations across different states are worried about the trade deal. Their concerns mainly revolve around the fear that cheap and subsidised US agricultural imports will make it hard for Indian farmers to compete.

 

There are several reasons for farmers’ concern:

 

1. Small-scale producers: Most Indian farmers are small-scale producers with limited land, limited mechanisation, and limited access to capital. Many depend on government input subsidies, direct cash payments (Rs 6,000 per year as PM KISAN), market support like the minimum support price (MSP) and local procurement systems that guarantee a certain price for staple crops. India’s government subsidies per farmer average $60 to $424 per year). In contrast, US farmers typically operate large mechanised farms with heavy government subsidies (minimum average of $66,000 per year) and advanced technologies that allow them to produce crops at lower cost. If American agricultural products enter India at low or zero tariffs, farmers fear the imported goods will be cheaper than local produce, leading to price falls that hurt small farmers’ earnings.  

 

2.  GM crops: A major point of concern is the possible entry of products linked to genetically modified (GM) crops. The US grows a very high share (over 90 per cent) of corn, soybeans, and other commodities that are genetically engineered. India’s regulations currently do not allow unrestricted import of GM food crops, and there are strict rules and processes for approving such crops and labelling them. Many farmers and activists fear that allowing products like DDGS, which are derived from GM corn or soybeans, could weaken India’s regulatory stance and indirectly introduce GM material into the food chain. Ensuring segregation and certification of non-GM products is complicated and politically sensitive.  

 

3. Price declines and market uncertainty: Even the expectation of tariff cuts and increased imports has already affected market prices for some crops. For example, prices for soybeans and cotton have fallen in recent weeks because traders expect cheaper imports under the trade deal framework. When crop prices fall below the MSP or expected levels, farmers’ incomes can shrink quickly, especially when input costs (fertiliser, seeds, diesel) are increasing. This economic instability heightens anxiety among farming communities.  

 

4. Fear of future market opening: Many farmers fear that, although sensitive products are currently said to be protected, future versions of the trade deal could expand the list of imported agricultural goods. Once tariffs are reduced and imports enter the market, reversing these measures is politically and economically difficult. This fear is strong enough that some farmer unions and political parties warn of protests similar to those seen in 2020-21, when proposed farm laws sparked widespread demonstrations.  

 

Also read: A firm Modi strikes pragmatic deal with US

 

Political and social responses

 

The trade deal has triggered wide political debate in India. Several opposition parties, including the Congress, have strongly criticised the government’s handling of the negotiations. Leaders argue that the deal could harm farmers, small businesses, and domestic industries, and have demanded greater transparency and clarity on the details. In several states, political leaders have organised conferences and public meetings to raise awareness and opposition to the deal.  

 

At the same time, government and allied leaders, including some from Punjab, have claimed that the trade deal does not wilfully harm farmers, and that agriculture and dairy sectors remain protected. They argue that trade liberalisation can open new export markets for Indian agricultural products like spices, tea, coffee, and processed foods, which could benefit certain farming sectors. However, many farmers remain unconvinced by these assurances.  

 

How the deal could affect Punjab’s farmers

 

Punjab is one of India’s most important farming states. A large part of its economy depends on agriculture, especially crops like wheat and rice, which are staples for both domestic consumption and export. Farmers in Punjab are particularly sensitive to trade changes because agriculture defines the livelihoods of millions of people in the state.

 

1. Exposure to import competition

 

While the deal is designed to protect core staples like wheat and rice from tariff cuts, the inclusion of related products like soybean oil, animal feed grains, and processed fruits could still affect Punjab’s agricultural economy. Some farmers rotate crops or diversify into oilseeds and horticulture. If imports of oilseeds or fruit products become cheaper, local prices could fall, reducing farm profits.  

 

2. Impact on prices and farmer income

 

If imported agricultural products enter markets at lower tariffs, they could replace or compete with locally grown substitutes. For example, cheaper animal feed could reduce costs for livestock farmers, but it could also reduce demand for locally grown soybeans or other inputs. Declines in crop prices, even small ones, matter for farmers who already operate on thin income margins.  

 

3. Psychological and social stress

 

Beyond economics, the trade deal has emotional and social impacts. Farmers in Punjab remember past protests and the policies that caused long standoffs with the government. The fear of losing farming autonomy and being unable to protect local markets has led to protests and strikes, with some farmer groups calling the deal “dangerous” or “anti-farmer.” These tensions show how trade policy can stir deep anxiety in rural communities.  

 

4. Export opportunities and mixed outcomes

 

It is also possible that some farmers in Punjab could benefit from expanded export markets. If products such as spices, processed foods, or horticultural items gain easier access to the US market, some growers in Punjab might see new opportunities. However, this benefit is not guaranteed and will depend on market linkages, quality standards, and the ability of farmers to tap into export supply chains.  

 

Major step in global economic relations

 

The India-US trade deal represents a major step in international economic relations. On one hand, it has the potential to increase trade, reduce tariffs on manufactured goods, and expand market opportunities. On the other hand, the agricultural provisions—even if limited in scope—have sparked real fear and opposition among farmers. Although the government insists that sensitive sectors are protected, the lack of transparency and the general distrust among farmers have amplified anxieties.

 

For farmers in Punjab, the trade deal symbolises not just an economic agreement between countries, but a possible shift in their future livelihood patterns. The final impact will depend on how the deal is implemented, what products are included, and the strength of domestic policies that support farmers in a changing global market.

 

By Dr Rachhpal Singh Bajwa

Former Technical Advisor and founder member of BOM, GADVASU, Ludhiana.