India–US trade pact likely to lift farm incomes, expand access to $46 billion US market

The proposed India–US Bilateral Trade Agreement (BTA) is expected to give a significant push to Indian farm incomes by expanding market access and improving price realisation across agriculture and allied sectors.

India already enjoys a strong position in agricultural trade with the United States, with a surplus of around $1.3 billion. In 2024, agricultural exports to the US stood at $3.4 billion, while imports were at $2.1 billion, underlining India’s net export strength in the farm sector. This surplus places India in a favourable position as negotiations move forward, with officials highlighting that the agreement could further expand export opportunities for farmers and agri-based enterprises.

Zero-duty access to $46 billion US import market

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One of the biggest gains under the BTA is zero-duty access to a US agricultural import market valued at nearly $46 billion. Tariff-free product lines already cover about $1.4 billion of US imports from India, including spices, tea, coffee, fruits, processed foods and essential oils.

Elimination of tariffs on these products is expected to directly improve price realisation for Indian farmers by making their produce more competitive in the US market. In addition, India will receive preferential access at a reciprocal tariff rate of 18 per cent to a much larger US import market worth around $160 billion, creating strong near-term export potential for products where India has scale and global competitiveness.

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Marine exports, forestry products key beneficiaries

The marine sector is among the biggest beneficiaries because it now gains access to a US import market worth $25 billion which charges a reduced 18 percent tariff. The US market now receives Indian marine exports worth about $2.45 billion, which indicates that there exists considerable potential for growth that would generate economic benefits for coastal communities.

The agreement establishes three main pillars which include direct export benefits for essential agricultural products and promotion of forestry-related products and development of advanced agricultural products which will provide multiple income streams for farmers.

The first pillar encompasses products which include rice and spices and tea and coffee and fruits which already established a strong presence in the US market. The US currently imports rice worth $389.5 million and spices worth $358.6 million and tea and coffee worth $82.5 million and fruits worth $32.7 million from India which establishes a strong foundation for growth under reduced tariffs.

Focus on livelihoods and future crops

Forestry-linked products form the second pillar, with zero-duty access expected to support tribal and agroforestry incomes. Items such as vegetable saps, bamboo products, vegetable waxes and beeswax already see sizeable imports from India and are closely linked to non-crop rural livelihoods.

The third pillar focuses on futuristic and livelihood crops, including processed fruit products, coconut oil and prepared coconut items. While India’s current exports in these categories are relatively small, the overall US import market runs into hundreds of millions of dollars, highlighting significant growth potential for smallholders and women-led enterprises.

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Reciprocal trade and market opening

According to a fact sheet released by the White House on February 9, US President Donald Trump and Prime Minister Narendra Modi have agreed on a framework for an interim agreement on reciprocal trade, while reaffirming commitment to a broader BTA.

As part of the understanding, Trump has eliminated the 25 per cent import tariff on Indian goods. The US will also lower the reciprocal tariff on India from 25 per cent to 18 per cent. The US will implement this change because India intends to resolve trade discrepancies and protect common national security interests with Washington.

India will decrease its tariffs on American industrial products and various food and agricultural items according to the proposed framework. The agreement requires India to increase its imports of American energy and technology and agricultural items and various other products. The two parties will work together to solve non-tariff obstacles and establish rules for product origins while they build their partnership in digital commerce and technology and supply chain and investment activities. The full and final BTA is likely to be signed by mid-March, as per officials.