What Happened
- Under the interim trade framework, India agreed to eliminate or reduce tariffs on a wide range of US industrial goods and selected agricultural and food products entering the Indian market.
- Zero-tariff items from the US include DDGS (dried distillers' grains), red sorghum for animal feed, tree nuts (almonds, walnuts, pecans), fresh and processed fruits (cranberries, blueberries), soybean oil, wine and spirits, and select medicines.
- India excluded sensitive items from tariff concessions: dairy products, a comprehensive range of spices, specific grains (rice, wheat, maize, millets), GM food products, meat, poultry, sugar, and select frozen and preserved vegetables.
- The government stated that 90-95% of Indian agricultural products remain excluded from the agreement.
- In return, India secures reduced reciprocal tariffs on its exports to the US, with the rate dropping from 50% to 18%, and zero tariffs on select Indian exports including generic pharmaceuticals, gems, and diamonds.
Static Topic Bridges
Tariff Structure: Applied Rates, Bound Rates, and WTO Commitments
India's tariff policy operates within the framework of its WTO commitments. Applied tariffs are the rates actually charged on imports, while bound tariffs represent the maximum rate a WTO member has committed not to exceed. India retains significant "water" (gap between bound and applied rates) on many agricultural products, giving it policy flexibility.
- India's simple average MFN applied tariff on agricultural products is among the highest globally, ranging from 30-40%
- Bound tariff rates for agricultural products can be significantly higher (e.g., over 100% for some items), providing headroom for negotiations
- Under WTO rules, any bilateral tariff concession must comply with Article XXIV (for free trade agreements) or the Enabling Clause (for preferential agreements among developing countries)
- India can offer zero or reduced tariffs to the US under an interim agreement without extending them to all WTO members, provided the agreement meets WTO criteria for a free trade area or customs union covering "substantially all trade"
Connection to this news: India's decision to offer zero tariffs on specific US goods like tree nuts, soybean oil, and DDGS utilises the gap between its high bound rates and applied rates, allowing tariff liberalisation without breaching WTO ceilings, while keeping politically sensitive items protected.
India's Edible Oil Import Dependence
India is the world's largest importer of vegetable oils, spending approximately $15-20 billion annually on edible oil imports. The country imports over 55-60% of its edible oil requirement, with palm oil, soybean oil, and sunflower oil being the major categories. Domestic oilseed production has chronically lagged behind demand despite government programmes like the National Mission on Oilseeds and Oil Palm (NMOOP).
- India imported approximately 14-16 million tonnes of edible oils annually in recent years
- Palm oil (from Indonesia and Malaysia) constitutes roughly 55-60% of total edible oil imports
- Soybean oil (from Argentina and Brazil) accounts for approximately 20-25% of imports
- India's domestic soybean oil production meets only a fraction of demand; the country produces about 10-12 million tonnes of soybeans but much of it is processed domestically
- Import duties on crude soybean oil were reduced from 44% to 20% under a separate tariff revision in 2024
Connection to this news: Including soybean oil in the zero-tariff list for US imports adds a new source to India's edible oil supply chain, potentially reducing dependence on South American suppliers, but raises concerns about further price depression for domestic soybean farmers already facing below-MSP market prices.
Tree Nuts: US Production and India's Import Market
The United States is the world's largest producer of almonds (over 80% of global supply from California) and a major producer of walnuts and pecans. India is one of the largest global consumers of almonds and cashews, with growing demand for premium dry fruits driven by rising incomes and health consciousness.
- India imports approximately $700-900 million worth of almonds annually, predominantly from the US (California)
- Prior to the deal, India imposed a 42% duty on almond imports from the US; this was a longstanding trade irritant
- The US produces approximately 2.5-3 billion pounds of almonds annually, with California accounting for virtually all domestic production
- India is the largest single-country export market for US almonds
- Walnuts and pecans face similar high tariffs in India, ranging from 30-100%
Connection to this news: Reducing or eliminating tariffs on US tree nuts removes a persistent bilateral trade friction point, lowers consumer prices in India, and could expand the formal market while reducing smuggling through third countries that has historically been used to circumvent high duties.
Key Facts & Data
- 90-95% of Indian agricultural products excluded from the agreement
- Zero-tariff US goods entering India: DDGS, red sorghum, tree nuts, fresh and processed fruits, soybean oil, wine and spirits, select medicines
- Excluded items: dairy, spices, rice, wheat, maize, millets, sugar, GM products, meat, poultry
- India's edible oil import bill: approximately $15-20 billion annually
- India imports over 55-60% of its edible oil requirement
- US supplies over 80% of global almonds from California
- India's almond import duty was 42% before the deal
- India's average MFN applied tariff on agricultural products: 30-40%