In his first formal government briefing on the newly announced India–US trade agreement, Union Minister for Commerce and Industry Piyush Goyal underscored that India’s core sensitivities in agriculture and dairy remain fully protected, a strategic success amidst intense parliamentary scrutiny and opposition criticism.
Addressing Parliament, Goyal reiterated that during protracted negotiations with the United States, Delhi held firm on its “red lines”, ensuring that sectors characterised by deep socio-economic and political significance were excluded from liberalisation commitments. His account emphasised that this outcome was not incidental, but a deliberate policy position reflecting India’s structural priorities.
The agreement itself, reached after a pivotal telephonic conversation between Prime Minister Narendra Modi and US President Donald Trump on 2 February, marks a de-escalation of tariff tensions that had peaked with reciprocal duties near 50 per cent. Under the current understandings, the United States has agreed to reduce effective tariffs on Indian exports to 18 per cent, significantly improving market access; this includes the removal of a punitive 25 per cent tariff previously levied in response to India’s energy trade decisions.
Strategic Protection of Agriculture and Dairy
Agriculture and dairy are among India’s most politically sensitive and socio-economically embedded sectors, employing hundreds of millions of smallholders and informal workers. In international trade negotiations, concessions here carry disproportionate domestic risks, including rural livelihood disruptions and political backlash. By exempting these sectors from tariff reductions or market access commitments, India has mitigated potential adverse impacts on farm incomes and food security.
Analysts note that India’s refusal to liberalise dairy reflects the comparative disadvantage its smallholder-dominated industry faces against the large-scale, highly subsidised agribusiness typical of developed economies, particularly the United States. The average Indian herd size is orders of magnitude smaller than in the US, making cost structures and competitive dynamics fundamentally mismatched.
Balancing Competitiveness with Protection
While sensitive sectors were shielded, the agreement places Indian exporters in an improved competitive position in the US market, particularly relative to peers such as Vietnam, Bangladesh and China, which still face higher effective duties. This tariff alignment is expected to support labour-intensive industries and create new opportunities for MSMEs, skilled labour and technology-driven sectors.
The government’s position is that safeguarding agriculture and dairy does not entail turning inward; rather, it signals targeted engagement that leverages India’s export strengths without undermining large constituencies dependent on primary production. Critics in opposition parties, however, have raised concerns about transparency and long-term impacts, especially if specific product lists and tariff lines are negotiated beyond publicly stated assurances.
Sectoral Implications and Future Outlook
From an analytical standpoint, the deal reflects a pragmatic calibration of trade openness and domestic protection. For export sectors such as textiles, leather, gems and jewellery, and engineered goods, lower tariff barriers are likely to enhance competitiveness and integration into US supply chains. Meanwhile, the sustained exclusion of dairy and key agricultural products offers policy continuity and shields rural livelihoods, albeit at the cost of potential export diversification in food processing segments.
Moving forward, the product-wise contours of the pact, particularly around quotas, sanitary and phytosanitary standards, and non-tariff barriers, will be decisive in assessing how well this balance is maintained between integration and protection. Tags: India-US trade deal, agriculture protection, dairy sector, Piyush Goyal, tariffs, export competitiveness, MSMEs, trade negotiations, rural economy, Make in India, bilateral trade agreement.
