Unlike the India-EU trade deal, details of which have been extensively analysed, the details of the India-US agreement remain eagerly awaited despite the announcement of an interim trade deal framework having been agreed upon on Saturday.
As with all such agreements, the caveat of renegotiation always applies; trade deals are living documents, not carved in stone. It goes without saying, however, that having a deal is significantly better than not having one, and congratulations are in order as India sheds its legendary trade orthodoxy.
In this article, we focus instead on agricultural trade between India and the US as it exists rather than speculate on what might have been negotiated in any trade deal. The story of India-US agricultural trade is one of transformation, from necessity to choice. What began with food aid in 1954 has evolved into an $8.1 billion relationship built on comparative advantage and consumer preferences.
Indian agricultural exports to the US were $6 billion while imports rose to $2.1 billion in 2024. This reflects a $3.9 billion trade surplus that India enjoys just from agricultural products. What does India provide that appeals to the American palate? Of the $6 billion exports, seafood reigns supreme with fish and crustaceans accounting for nearly $2 billion exports. That amounts to a third of all agricultural exports of India. Among the other items, cereals amount to $396 million and coffee, tea and spices account for another $449 million worth of exports in 2024.
While India sends products of sun and soil, it receives products of American affluence and innovation. Tree nuts and fruits, primarily California almonds and walnuts dominate imports at $1.1 billion. Aspirational India’s Gajar ka halwa may be made from Indian carrots but it is garnished by American nuts. Alcoholic beverages reveal a similar tale as Indians enjoy Kentucky bourbon or California wine (worth $452 million of imports). The palates of Americans and Indians are intertwined due to expanding agricultural trade between both the countries.
In fact, agricultural trade between these two countries dates back to 1783, starting with cotton and silk. The irony is delicious: in 1783, India exported cotton to America. In 2024, India imported $199 million worth of American cotton while exporting only $103 million. This even as India exported $6.4 billion worth of cotton globally in 2024, making it one of the world's largest exporters. This raises the question: why import cotton while supplying it to the world? The answer lies in quality. India imports American extra-long staple cotton for its premium quality and machine-picked cleanliness, which Indian textile mills need for high-end exports. The US now holds a 50% market share of India's cotton imports, with these premium fibers re-exported as high-value Indian textiles and garments.
Even as trade in agriculture expanded, the sector remained a contentious issue for trade negotiations. There were concerns regarding the redistribution consequences of opening of agricultural sector to international competition. To be fair, the rising skepticism toward the adage that ‘trade benefits everyone’ is well-founded. For instance, one of us in our book Confronting Inequality discusses how trade policy inherently carries distributional consequences that cannot be ignored. Be that as it may, economic considerations have ensured that despite the presence of protectionist policies, farmers in both countries can complement each other as food on our plate is increasingly sourced from different parts of the world. Indian consumers are already choosing to import $2.1 billion worth of American agricultural products even with tariffs and barriers. The tariffs merely transfer money from Indian consumers to the Indian treasury while making almonds, wine, and specialty products more expensive. The consumption happens regardless. As it happens, in recent trade negotiations, India has already provided greater access to Australian wines and British scotch. The same may well be extended to California and Kentucky.
Agriculture was termed the most contentious issue in trade negotiations, yet the market had already rendered its verdict: Indian seafood and spices complement American almonds and bourbon. The bilateral trade grew 13.6% in exports and 28.4% in imports even as negotiators debated terms. Perhaps the lesson is simple; when economic logic is sound, trade finds a way.
(Prakash Loungani is Programme Director in the Master’s in Applied Economics at Johns Hopkins University. Karan Bhasin is a New York-based economist and Non-Resident Fellow at ORF America. They co-teach a course on economic growth at Johns Hopkins University.)
