United States President Donald Trump has mentioned his administration goes to signal “a really large” commerce deal “to open up India”, “the place we’re capable of go in and compete (with) a lot much less tariffs”.
India has maintained that agriculture and dairy are its “crimson traces” in its ongoing negotiations with the US. “There’s no method we may do something that will weaken our agriculture, our farmers’ positions,” Finance Minister Nirmala Sitharaman mentioned in an interview with the Monetary Categorical.
What are these “crimson traces” that the US is testing and driving a tough discount to bypass, if not take away?
It principally reduces to 4 farm merchandise: corn (maize), ethanol, soyabean and dairy.
On these, India imposes each tariff and non-tariff restrictions, and the US is pushing for better market entry.
The primary is corn
The US is the world’s greatest maize producer and exporter, with an estimated 377.6 million tonnes (mt) output, as in opposition to India’s 42.3 mt, in 2024-25.
As a lot as 94% of the overall space planted to corn within the US final yr was beneath genetically modified (GM) varieties. These incorporate alien genes from micro organism that code for proteins enabling the crop to “tolerate” software of herbicides similar to glyphosate and glufosinate or resist assaults by particular insect pests.
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India fees 15% obligation on maize imports of as much as 0.5 mt yearly, with portions past that attracting the next 50% fee. Furthermore, it neither grows nor permits import of GM maize.
One proposal mooted is to allow import of GM maize completely to be used as a feedstock to fabricate gas ethanol. Over 46% of the ethanol being made accessible by Indian distilleries for mixing with petrol is, in truth, presently coming from maize.
That’s greater than the share of different feedstocks: Sugarcane juice/molasses (32%) and surplus/damaged rice (22%).
Maize is basically a feed grain supplying carbohydrates, the principal supply of vitality for poultry and livestock. Limiting using imported GM maize solely to milling and the fermentation of its starchy carbohydrates into gas ethanol is supposed to stop this materials from coming into the meals chain. The milk, egg or hen consumed in India will, then, not come from cattle and birds consumed GM maize, whether or not imported from the US or Brazil.
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However the proposal faces resistance from sugar mills. The share of ethanol equipped from grain-based feedstock has risen from zero to 57% between 2017-18 and 2023-24. The mills worry that imported GM maize will result in the additional marginalisation of sugarcane within the ethanol-blended petrol (EBP) programme.
Opening the doorways for GM maize imports may encounter political roadblocks, forward of the Bihar Meeting elections: The state is India’s third largest maize producer after Karnataka and Madhya Pradesh.
The problem
Opening up imports of the 4 farm merchandise is politically fraught: it includes farmers throughout a number of states, and requires a relook at key insurance policies concerning regulation round genetically modified crops.
The second is ethanol
The US is the world’s greatest producer and exporter of ethanol too. In 2024, it exported $4.3 billion price of ethanol, with India being the third largest market (at $441.3 million) after Canada ($1.5 billion) and United Kingdom ($535.1 million).
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India now permits ethanol imports solely in opposition to “precise consumer” licence for non-fuel industrial functions. Imports could be for manufacturing alcohol-based chemical substances, medicines or drinks, however not for mixing in petrol and diesel.
Given India’s complete projected ethanol consumption of 11,350 million litres in 2025, with gas’s share at 9,650 million and industrial use at simply 1,700 million litres, the US would need a gap up of the market.
However import of ethanol for gas use is prone to be a “crimson line” for India. It might be seen as undermining the EBP programme’s main goal — to scale back dependence on imported fuels and create a marketplace for surplus home agricultural produce, notably sugarcane and cereal grains.
The third is soyabean
US is the second greatest producer and exporter of soyabean after Brazil. With 96% of acreage within the US and 99% in Brazil beneath herbicide-tolerant GM varieties, the common per-hectare yields of three.4-3.5 tonnes in these two international locations are method above India’s 0.9 tonnes.
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India permits import of GM soyabean oil. Nevertheless, imports of each complete GM soyabean and the residual de-oiled cake (DOC) after extraction of oil are prohibited. The rationale: The GM protein matter is current solely within the uncooked bean and DOC, not the oil.
A latest NITI Aayog working paper (subsequently withdrawn) had known as for exploring the choice of importing GM soyabean, in order that the oil extracted could be bought within the home market and the DOC exported to different international locations. This might make sure that solely the oil will get consumed regionally and the imported soyabean is neither planted by Indian farmers nor used as an animal feed ingredient.
However soyabean is grown in some 13 million hectares of the nation — primarily the BJP-ruled Madhya Pradesh, Maharashtra and Rajasthan. That, plus the crop promoting at properly beneath the federal government’s minimal assist worth, might not make it politically straightforward to allow imports of GM soyabean.
The final is dairy
The US isn’t as large a participant as New Zealand and the European Union in dairy, in the case of the worldwide milk powder and butter commerce.
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The duties that India presently levies — 30% on cheese, 40% on butter and 60% on milk powder — render imports from even low-cost producers similar to New Zealand and Australia unviable. On prime of that’s the requirement — which, the US claims, is only “premised on spiritual and cultural grounds” — for all imported dairy merchandise to be derived from animals not consumed any formulation produced from the interior organs, blood meal or tissues of bovines.
Whereas dairy is clearly a “crimson line” on which India is unlikely to yield a lot floor, it could additionally grow to be a leveraging level that the US would use to extract concessions within the different agricultural commodities.