Prime Minister Narendra
Modi on Thursday gave his first formal response to the US tariff dispute at the
M.S. Swaminathan Centenary International Conference. Without naming the US or
former President Donald Trump, he clearly said that India will not compromise
with the interests of farmers, livestock farmers and fishermen at any cost.
This statement of the Prime Minister was not just a political declaration, but
a clear message that India's agricultural economy is not just a subject of
trade bargaining, but is the basis of national socio-economic security.
In fact, India has
already described America's 50% import duty as unfair,
unjust and irrational. This move did not come suddenly from Washington. There
are many layers behind it, which mainly include global inflation, domestic
political pressure, unsuccessful trade negotiations and failure to stop the Ukraine
war. Trump has recently expressed his disagreement by naming Russia several
times, but it is not difficult to understand that a major reason for his real
disappointment is the stalled trade deal with India.
The Trump administration
wants India to completely open its market to US agricultural and dairy
products. From the US point of view, this is a profitable deal; their farmers
will get a huge consumer base, while India will get supposedly 'quality and
competitively priced' products. But from the Indian point of view, the matter
is not so simple. More than 55% of India's population is
directly or indirectly dependent on agriculture. Most farmers are small and
marginal, with the average landholding size coming down to 1.08
hectares. Such farmers are already under pressure due to cost, weather and
market fluctuations. If heavily subsidized US agricultural products enter the
Indian market, domestic farmers will not be able to survive the price
competition.
Remember that the level
of government subsidy on agricultural production in the US is extremely high.
The farmer not only gets help in production costs, but exports are also given
direct-indirect incentives. This situation will create an unequal competitive
environment for Indian farmers, in which they are bound to lose. This is why
the Modi government is taking a tough stand on this front. Indian agriculture
is not just an economic sector, but the axis of socio-political stability. In
the rural areas here, agricultural income is the main source of consumption and
employment. Any such agreement will not only affect the farmers, but the entire
rural economy and political equations. In India, the vote bank of farmers is
decisive in electoral politics. In the last decade, farmer movements in states
like Maharashtra, Punjab, Haryana, Uttar Pradesh and Karnataka have forced
governments to change their policies. In this background, bowing to American
pressure would be a political suicidal step for any government. Trump's current
stance is not limited to agricultural trade only. He wants to increase economic
pressure on Russia, because he believes that Russia is raising financial
resources for the Ukraine war through its oil exports. But there are many
contradictions in this logic.
First, Russia's largest
trading partner is not India, but China. Second, many countries in the European
Union and even the US itself continue to trade with Russia in various
commodities. Third, India's crude oil imports from Russia are not just a matter
of meeting its energy requirements, but also a factor in maintaining price
stability in the global oil market. India imports about 85%
of its oil needs. If oil is not available from Russia at subsidized rates, not
only will domestic inflation increase, but prices may also jump in the global
market. This is why the Biden administration has also praised this policy of
India in the past. Trump has previously tried to put pressure on China. But
when China cut the supply of 'rare earth minerals', American industries
suffered a setback. Now the Trump administration feels that it can improve its
domestic and international image by putting pressure on India and Russia.
Their expectation
regarding India is that New Delhi should change its trade and energy policy in
line with American strategic interests, but India has made it clear that it
will not compromise on its economic sovereignty and energy security. The US
trade negotiating team is visiting India this month. It is expected that the
two sides will arrive at a workable solution, perhaps in the form of limited
market access, phased tariff reduction or an agreement on non-tariff barriers,
but it is not enough for India to focus only on the US. The pending free trade
agreement with the European Union will have to be given priority. Apart from
this, multilateral agreements with Australia, UK, Japan, and Asian countries
will have to be taken forward, this will not only open new export opportunities
but will also reduce dependence on any one country. Overall, India-US trade
tension is not a new story, but the current global conditions have made it more
sensitive. Trump's aggressive tariffs and pressure on the agricultural market
are not only an economic challenge for India, but also a political and social
question.
The Modi government has
currently given the right message that the protection of farmers and
agricultural economy is the top priority, but the real test in the coming
months will be whether this stance is maintained at the negotiating table or
not. India will have to adopt a policy of diversification, self-reliance and
balanced agreement with partner countries in its trade strategy. This is the
way through which it can not only resolve the dispute with America but also
strengthen its position on the global trade platform.
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