India and the United States have reached an agreement that trims reciprocal tariffs on Indian exports to the US to 18 per cent, abolishing previously imposed punitive duties and signalling a reset in bilateral trade relations. This tariff rationalisation promises to lower costs on a wide array of Indian goods entering the US, including agricultural products such as pulses and dairy, thereby enhancing competitiveness in global markets.
However, the dairy sector remains exceptionally sensitive in ongoing negotiations. Historically, dairy products faced extremely high tariffs under the US tariff escalation, with certain items such as milk powder and fermented milk subject to rates exceeding 50 per cent. Although the new 18 per cent tariff potentially reduces these barriers, the deal, as reported, does not automatically open Indian markets to large-scale US dairy imports.
India’s domestic dairy industry,y the largest in the world and a cornerstone of rural livelihoods for over 80 million smallholder farmers, has long been protected by substantial tariff walls and regulatory measures. Experts warn that even modest tariff reductions or market access concessions could undermine local producers due to the US dairy sector’s much higher productivity and subsidised cost base. A shift towards liberalised imports may risk cheaper foreign products displacing Indian milk and milk products, with severe income implications for marginal farmers.
A cultural dimension further complicates the dairy dialogue: India’s regulatory framework insists on stringent health and feeding criteria for imported milk, reflecting both food safety standards and socio-cultural preferences. These requirements, which the US has criticised at the World Trade Organisation, remain a central sticking point, underscoring New Delhi’s emphasis on protecting rural livelihoods and food sovereignty.
In summary, while the tariff rollback can make certain Indian dairy exports more competitive abroad, the domestic dairy market is likely to remain insulated in the near term. India appears determined to maintain protective measures for its dairy producers, even as it pursues broader trade cooperation with the US.
