A Firm Stand for the Farm: Why India’s Agro-Dairy sector is both cause and cure for tariff tensions

Prof. Dinesh Chandra Rai
The recent imposition of tariffs by the United States on India has put a spotlight on the often-complex dynamics of international trade. While the public narrative may point to broad political and economic differences, a closer examination reveals that a key factor-perhaps the central one-is India’s steadfast refusal to open its vast agro-dairy sector to U.S. products. This position, far from being a weakness, is a strategic choice. It protects India’s millions of farmers and its cultural values, and it positions the country’s own robust agricultural and dairy industries as the very engine that can overcome the economic challenges posed by these trade disputes.
India’s agricultural and dairy economy is more than just a source of food; it’s a massive network of small-scale farmers who form the backbone of the rural economy. With more than 86% of farmers owning small plots of land, this sector is a major source of employment and a crucial part of the nation’s food security. This context explains why the Indian government has stood firm. During the Trump administration, the U.S. pressed for greater market access for its heavily subsidized agricultural products, including genetically modified (GM) crops and dairy from cows fed animal by-products. India’s government drew a clear line, prioritizing the welfare of its domestic farmers and the unique social and cultural fabric of the nation.
The arguments for this decision are strong. On an economic level, allowing a flood of cheap, subsidized U.S. goods would be disastrous for India’s domestic producers. Estimates from the State Bank of India (SBI) suggest that unrestricted U.S. dairy imports could lead to an annual loss of over ?1.03 lakh crore for the local dairy sector. Such an outcome would not only jeopardize the livelihoods of millions but also dismantle a sophisticated, decentralized supply chain that has been built over generations.
Culturally and religiously, the issue is equally significant. India has strong, widely held beliefs about the welfare of cows. The government has openly expressed concerns about importing U.S. dairy products, which are often sourced from cattle that have been fed animal-based feeds. This practice is culturally and religiously unacceptable to a large portion of the Indian populace. This specific detail serves as a powerful defense, allowing the government to protect its economy while also respecting the deeply held values of its citizens.
This year, designated as the International Year of Cooperatives, India’s government is doubling down on its commitment to its cooperative-based agricultural model. The National Cooperative Development Corporation (NCDC) is leading a major new push, backed by a ?2,000 crore grant from the Union Cabinet. This grant will enable the NCDC to raise an additional ?20,000 crore from the open market. These funds are slated to provide loans to cooperatives for building new projects, modernizing facilities, and meeting working capital needs.
These initiatives are part of a broader strategy to empower the sector from the ground up, with projects like the Rashtriya Gokul Mission and the National Programme for Dairy Development also playing a vital role. By supporting the cooperative movement, the government is not only providing a safety net for farmers but also actively building a more resilient, self-sufficient economic engine. This approach is generating jobs, improving local productivity, and creating a strong internal market less reliant on the unpredictability of international trade.
The tariffs from the U.S., while presenting a challenge to certain export-oriented industries like textiles and leather, are not a fatal blow. By focusing on the strength of its agro-dairy and other domestic-facing sectors, India can mitigate these losses. The performance of these industries, bolstered by new cooperative-focused initiatives, shows they have the potential to compensate for any short-term export hurdles.
The Road Ahead: Fortifying India’s Agricultural Future
India’s forward-looking approach to its agro-dairy sector goes beyond just reacting to trade disputes. The country is charting a course toward a digitally integrated, value-added, and globally competitive agricultural future. The “Digital Agriculture Mission” is already leveraging technologies like AI, drones, and satellite imagery to provide real-time data to farmers, improving crop management and yields. For the dairy sector, revised schemes like the National Programme for Dairy Development are focusing on advanced quality control, value addition, and building a more efficient supply chain.
The government is also actively promoting a shift from raw agricultural exports to high-value, processed food products. By providing incentives and financial support through the PM Formalisation of Micro Food Processing Enterprises (PMFME) scheme and the Production Linked Incentive (PLI) scheme, India aims to become a major hub for food processing. This strategy not only increases profit margins for producers but also opens up new markets in regions like the Middle East and Africa. By diversifying its export basket to include millets, organic goods, and various processed foods, India is ensuring its economic stability is not dependent on a few key trading partners.
The trade tensions with the U.S. have exposed India’s strategic resolve. By steadfastly protecting its agro-dairy sector, India has shown that its economic policy is guided not by short-term trade-offs but by a long-term vision of food security and farmer welfare. The challenge of the tariffs is also an opportunity for India to build on its fundamental strengths. The same sectors at the heart of the trade conflict-agriculture and dairy-are exactly the ones that will drive India’s economic stability and growth, proving that a strong stand for the farm is the most prudent and profitable path forward.
(The writer is Vice Chancellor, BRA Bihar University, Muzaffarpur)