Challenges and Opportunities in Agricultural Trade for India

India is one of the world’s largest agricultural producers, with the sector accounting for around 18-19% of GDP and supporting the livelihoods of nearly 42% of its population. Yet when it comes to global trade, the country’s agricultural sector operates in a complex and often uneven playing field. From WTO subsidy disputes to export rejections over food safety standards, the challenges are real – but so are the opportunities. Understanding the key issues in agricultural trade is essential for India to strengthen its position in the global market.

India’s agricultural trade: a quick overview
Trade distortions: the subsidy imbalance
India’s MSP and the amber box dilemma
The rich-country subsidy problem
Tariff structures and non-tariff barriers
India as a target of non-tariff barriers
SPS measures: both a challenge and a tool
Export restrictions and their trade-off
Geopolitical pressures and new trade realities
Pathways to greater competitiveness

India’s agricultural trade: a quick overview

India has historically shaped its agricultural trade policy around two priorities: food security and self-sufficiency. Since the 1960s, policies like minimum support prices and input subsidies were introduced at the cost of trade distortion to support domestic production and price stabilisation. While the 1991 economic liberalisation opened up many sectors, agricultural trade liberalisation gained momentum only after the 1994 WTO Uruguay Round Agreement on Agriculture (AoA).

Despite these shifts, India’s agricultural exports have shown considerable resilience. Agricultural exports hit USD 36.26 billion between April and December 2024, with rice exports alone projected at USD 10 billion for FY2024-25. India also achieved a record high of USD 12.5 billion in rice exports in FY 2024-25, and exports of spices, coffee, and tea have also grown steadily. The country now targets USD 100 billion in agricultural exports by 2030. Reaching that target, however, requires confronting several structural and policy-level trade issues head-on.

Trade distortions: the subsidy imbalance

One of the most debated issues in India’s agricultural trade is the role of subsidies – both domestic and international – in distorting global markets. Under the WTO Agreement on Agriculture (AoA), domestic support measures are classified into three categories – the Green Box (non-trade-distorting, like research and infrastructure), the Blue Box (linked to production-limiting programmes), and the Amber Box (trade-distorting measures subject to reduction).

India’s MSP and the amber box dilemma

India’s Minimum Support Price (MSP) system – through which the government procures crops like rice and wheat at guaranteed prices to run the Public Distribution System – falls under the Amber Box. Amber Box subsidies must be capped at 10% of total production value for developing countries (the de minimis level) under WTO rules. India has breached this limit for rice, reporting subsidies worth USD 6.31 billion against a rice production value of USD 46.07 billion in 2019-20 – equivalent to 13.7% of production value.

India invokes the Bali Peace Clause (2013) to shield its public stockholding programme from WTO disputes, which allows developing countries to exceed the 10% ceiling without facing legal action, provided the programme doesn’t distort global trade or affect the food security of other members. However, the Peace Clause is temporary and conditional. India argues that the method of calculating the Aggregate Measurement of Support (AMS) in the AoA is flawed, particularly because it uses the outdated 1986-88 fixed external reference price, which has not been revised in decades – artificially inflating India’s apparent subsidy levels. India continues to push for a permanent solution at WTO ministerial conferences, but no consensus has emerged.

The rich-country subsidy problem

While India faces WTO scrutiny over its MSP programme, the other side of the coin is equally important: developed countries continue to provide enormous agricultural support. In a joint 2017 paper, India and China highlighted that developed countries had cornered 90% of global farm subsidy entitlements – amounting to USD 160 billion annually. Much of this support is channelled through Green Box measures, which are theoretically non-trade-distorting but can still affect global markets. Massive developed-country agricultural subsidies, including Green Box subsidies, have often led to dumping in global markets, hurting farmers in developing countries like India. For example, artificially cheap US and EU exports can undercut Indian produce in third-country markets, effectively negating the comparative advantage Indian farmers may otherwise hold.

Tariff structures and non-tariff barriers

India’s own tariff architecture is another layer of complexity. India’s average Most-Favoured Nation (MFN) rate on agricultural goods stood at nearly 37% in 2024, making it one of the highest among G20 nations. While high tariffs protect domestic producers from cheap imports, they limit consumers’ choices, raise input costs for food processors, and make it harder for India to negotiate meaningful concessions in free trade agreements.

India has over a dozen FTAs, but agriculture in these deals remains largely protected, with staples like rice, wheat, pulses, sugar, and dairy excluded from deep tariff cuts. This cautious approach has restricted export diversification and reduced trade competitiveness. At the same time, non-tariff barriers like import bans, quality standards, and labelling rules further limit India’s ability to import agricultural products, keeping per capita agricultural imports artificially low.

India as a target of non-tariff barriers

Indian exporters face a mirror-image problem in global markets: they encounter significant non-tariff barriers in the form of Sanitary and Phytosanitary (SPS) measures and Technical Barriers to Trade (TBT) imposed by importing countries. Despite tariff reductions under WTO frameworks, stringent SPS measures imposed by developed countries frequently act as non-tariff barriers, requiring costly compliance procedures for Indian exporters.

The consequences are real. India’s agricultural export commodities continue to face rejection in international markets, including the US, due to non-compliance with stringent regulatory standards. Information asymmetry and lack of technologies are among the major factors behind compliance failures. According to the same study, the US FDA recorded that India had the highest number of pathogen-related violations among 110 countries during 2002-2021, with Salmonella being the primary cause of shipment refusals. These rejections not only cause direct financial losses but also damage brand reputation for high-value exports like mangoes, grapes, and spices.

SPS measures: both a challenge and a tool

The WTO’s Agreement on Sanitary and Phytosanitary Measures (SPS Agreement), in force since January 1995, provides the international framework for food safety and animal and plant health measures in trade. Its core principle is that SPS measures must be based on scientific evidence and must not be used for protectionist purposes. For developing countries, the agreement offers a degree of protection – it requires that imported products meeting a country’s safety requirements be accepted regardless of the production technology used.

However, in practice, compliance with SPS rules imposes excessive costs on exporters, particularly in developing countries, and limits market access. A particular concern for India is the moving-goalposts problem: by the time exporters are prepared to meet a specific standard, developed countries may shift to a new standard – and adjusting to the revised requirement involves substantial additional costs. This dynamic is especially disruptive for small and marginal farmers who lack the resources to continuously upgrade their practices.

There are signs of progress, though. In India, a WTO Standards and Trade Development Facility (STDF) project improved safety and quality for spices, enabling over 80% of tested spices to meet Codex Alimentarius Maximum Residue Limits (MRLs) for increased access to premium markets. On the institutional side, the number of ISO 17025-accredited laboratories recognised by India’s Export Inspection Council (EIC) grew from 21 in 2013-14 to 78 in 2024-25, and approved export establishments increased by 82% during the same period. These are meaningful gains, but the scale of the challenge requires much deeper investment.

Export restrictions and their trade-off

India has at times also imposed its own export restrictions as a domestic price-management tool – a policy that creates friction in trade relationships. Over the course of 2024, India gradually removed most export restrictions on rice – including bans, duties, and minimum export prices – that had been introduced in 2022-23, with the last remaining export ban on broken rice lifted in March 2025. While such restrictions can stabilise domestic food prices in the short term, they create uncertainty for international buyers and signal unreliability as a trading partner. Predictability is a key factor in long-term trade relationships, and frequent policy reversals can erode India’s export market share.

Geopolitical pressures and new trade realities

India’s agricultural trade is now navigating fresh geopolitical headwinds. India maintains one of the highest tariff structures on agricultural imports, with key commodities such as coffee, tea, and palm oil facing duties of up to 100% – a point of contention in US-India trade negotiations, where India’s trade surplus of USD 45.7 billion with the US has drawn calls for duty reductions in agricultural trade. The imposition of reciprocal tariffs by the US administration poses direct risks: increased tariffs on Indian agricultural exports could impact major sectors, from seafood and rice to processed foods, while stricter SPS regulations could add further compliance burdens.

At the same time, India’s shift toward FTAs with the UK and the European Free Trade Association (EFTA) targets agricultural trade expansion worth USD 34.29 billion, suggesting a strategic pivot toward negotiated access rather than unilateral protectionism. These agreements, while potentially beneficial, also carry risks – India’s FTA with Southeast Asian countries already saw agricultural imports, led by vegetable oils, far exceed exports, causing a significant negative impact on rural livelihoods and food security.

Pathways to greater competitiveness

The strategic response to India’s agricultural trade challenges must operate on multiple fronts. First, India needs to invest heavily in SPS compliance infrastructure – testing laboratories, cold chain networks, and farm-level training – so that quality becomes a built-in feature of production rather than an afterthought. Policy decides whether India can export; compliance and quality decide whether it can keep exporting.

Second, at the multilateral level, India must maintain its advocacy for Special and Differential Treatment (S&DT) under the WTO framework, push for a permanent solution on public stockholding, and demand a revision of the outdated AMS calculation formula. India has consistently demanded the implementation of a Special Safeguard Mechanism (SSM), which would allow developing countries to temporarily raise tariffs on agricultural products in response to import surges or price declines, protecting domestic farmers.

Third, improving domestic competitiveness is non-negotiable. India’s agricultural investment currently remains below 0.5% of agricultural GDP – far behind global benchmarks. Rationalising subsidies and investing in mechanisation, irrigation, and high-yield crops can improve competitiveness. Improving logistics infrastructure, particularly cold storage and export processing zones, can further enhance India’s agricultural export performance. The Agricultural and Processed Food Products Export Development Authority (APEDA) has a central role to play in transforming key production clusters into agri-export hubs.

Finally, policy consistency matters. Abrupt export bans or sudden tariff changes send confusing signals to global markets and undermine the trust that bilateral and multilateral trade partnerships depend on. A stable, transparent, and rules-based domestic trade policy framework is just as important as any negotiation held at Geneva.

What do you think? Given that India’s MSP system is essential for farmer welfare and food security, how should the WTO’s subsidy rules be reformed to make them fairer for developing nations? And as India targets USD 100 billion in agricultural exports by 2030, which challenge – SPS compliance, trade distortions, or infrastructure gaps – do you consider the most urgent to address first?

References

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Table of Contents

India’s agricultural trade: a quick overview 🔗

Trade distortions: the subsidy imbalance 🔗

India’s MSP and the amber box dilemma 🔗

The rich-country subsidy problem 🔗

Tariff structures and non-tariff barriers 🔗

India as a target of non-tariff barriers 🔗

SPS measures: both a challenge and a tool 🔗

Export restrictions and their trade-off 🔗

Geopolitical pressures and new trade realities 🔗

Pathways to greater competitiveness 🔗