Context: The imposition of 50% penal tariffs by the United States on Indian farm products in 2025 underlines the structural fragility of Indian agriculture and the asymmetry in global trade.
Relevance of the topic:
Prelims: WTO’s Agreement on Agriculture (AoA); Aggregate Measurement of Support (AMS); MSP, FPOs; PMFBY.
Mains: State of Indian Agriculture, Issues of subsidy.
Asymmetry in Global Trade
- The US and EU’s so-called “Green Box” subsidies, which they claim are non-trade-distorting, effectively grant their farmers an unfair advantage in global markets.
| United States | India |
| As per WTO, the US spends over $48 billion annually on domestic farm support. This includes crop insurance subsidies covering up to 60% of premium. | A large number of our farmers are waiting for compensation for their produce losses under PMFBY (Pradhan Mantri Fasal Bima Yojna). |
| Price guarantees and marketing loans ensure farmers earn above-market rates. | India farmers are waiting for a legal guarantee of MSP. |
| Export-linked supports disguised as food aid and development programmes allow the US’s wheat, corn or dairy farmers to sell abroad at or below cost without losing income. | India’s WTO-notified support (Aggregate Measurement of Support) is less than 5% of production value. It is far below the 10% limit allowed for developing countries. |
State of Indian Agriculture:
Agriculture sustains 42% of our population and employs 46% of our workforce. It contributes less than 20% of the GDP. The recent NABARD (National Bank for Agriculture and Rural Development) Rural Financial Inclusion Survey reveals that:
- Low household income: An average farming household earns Rs 13,661 per month, with a mere Rs 4,476 from actual farming, the rest comes from supplementary work, such as working as labourers or engaging in petty trade.
- Fragmentation of Land: Average farm size has shrunk from 2.28 hectares in 1971 to 0.74 hectares in 2021 which is too small for efficient mechanisation.
- High Input Cost: Input costs (diesel, fertilisers, seeds) have risen faster than crop prices, and are squeezing margins.
- Lack of employment alternatives: A large percentage of India’s population is engaged in agriculture is a symptom not of farming’s attractiveness, but of manufacturing and services failing to create the 7.9 million jobs a year.
The US tariff shock highlights a stark truth- protection alone cannot secure agriculture’s future. The agriculture sector in India needs structural reforms as the long-term strategy. It requires equipping farmers with the essential tools, providing market access, and creating alternative employment opportunities.
Way Forward
India must implement three urgent and decisive shifts.
- Labour Transition (From Agriculture to Manufacturing & Services): India must shift surplus workers from low-yield farming into manufacturing and services by promoting labour-intensive sectors like textiles, food processing, and light engineering, supported by rural skill training and urban job creation.
- Prioritise farm consolidation and mechanisation: Land pooling through cooperative farming, FPOs, and land leasing reforms can enable mechanisation, modern irrigation, and precision farming, thereby raising productivity and reducing costs.
- Need to boost value addition and enhance export competitiveness:
- India’s farm exports, which stand at $48.15 billion for 2023-24, could experience substantial growth through improved logistics, branding, and quality certification.
- Reducing post-harvest losses from the current 15-25% to the global standard of 5% can release vast quantities for export.
Protection serves a purpose, but it is reform that will ultimately secure our agricultural future, and for this the Rashtriya Kisan Kalyan Kosh (a separate budget like defence) is the need of the hour.
Also Read: Needs of Indian Agriculture Sector