NEW DELHI: The United States and India have announced an interim framework for a trade deal, paving the way for a pact that lowers tariffs, restructures energy ties and deepens economic cooperation as the two countries seek to reshape global supply chains.
The joint statement by India and the US suggests that New Delhi has pushed back against Washington’s efforts to widen agricultural markets. But India has agreed to lower trade barriers for some agricultural products, drawing criticism from farmers and opposition parties.
Who benefits and who loses from India’s decision to allow imports of DDGS and soybean oil?
India will allow imports of protein-rich distillers dried grain solubles (DDGS), a by-product of ethanol made from corn and other grains, from the US, which is expected to further increase domestic market surplus.
Increasing supplies of DDGS could reduce purchases of expensive feed, benefiting India’s nearly $30 billion poultry sector, where feed costs account for about 60-70% of total production costs.
But domestic oilseed processors and soybean farmers could suffer losses if imports from the U.S. increase.
India already has an oversupply of DDGS, and despite New Delhi’s efforts to promote oilseed cultivation and curb imports, demand for oil meal such as soybean meal has declined, weighing down India’s oilseed prices and prompting farmers to switch from soybeans and groundnuts to corn and rice.
As DDGS supply increases further, Indian ethanol producers, already suffering from idle capacity and slowing demand after achieving the 20% biofuel blending target, may face lower revenues from DDGS sales in the domestic market.
The prospect of duty-free import of soybean oil from the US has raised some concerns in India. However, under the current framework, duty-free imports of soybean oil will only be allowed under tariff quotas. This means that quantities exceeding the quota will be subject to standard tariffs, a measure aimed at protecting domestic producers.
Will duty-free cotton imports impact Indian farmers?
India currently imposes an 11% tariff on cotton imports, and allowing duty-free imports from the world’s largest textile exporter could put pressure on domestic prices.
However, the impact is expected to be limited as the government only allows the import of extra-long cotton, and that too based on quotas.
India is the world’s second-largest cotton producer but is struggling to meet the textile industry’s demand for extra-long cotton, which it imports from the United States, Egypt, Brazil and Australia.
Are concessional imports of apples and dry fruits threatening Indian farmers?
India is the world’s fifth-largest apple producer, but domestic supply is not keeping up with rising demand due to population growth and rising prosperity.
New Delhi imports about 500,000 tonnes of apples annually from Iran, Turkey, Afghanistan, the US and Chile. Under the trade agreement with the US, imports will be allowed at a concessional duty of 25% and a minimum import price of Rs 80 per kg, effectively blocking shipments below Rs 100 per kg, which will help protect Indian farmers.
Consumption of dry fruits such as walnuts, almonds and pistachios is also increasing in India. Domestic production of these products is limited, so concessional imports are unlikely to impact local farmers.
Could Indian farmers benefit from a trade deal?
Indian tea, coffee, spice and fruit producers will benefit from the trade deal as the US has granted duty-free access to these products.
The reduction in rice import duty to 18% is also expected to support exporters of both premium and non-basmati varieties. (Reporting by Rajendra Jadhav and Mayank Bhardwaj; Editing by Anil D’Silva)
