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India-US trade deal: Industry awaits clarity on agri products tariff cuts

February 08, 2026 5 min read Economics International Relations GS2 (International Relations) GS3 (Indian Economy Agriculture)
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What Happened

  • India and the US announced an interim bilateral trade agreement framework on February 7, 2026, under which the US will reduce reciprocal tariffs on Indian goods from 50% to 18%, while India will eliminate or cut import duties on a range of US industrial goods and agricultural products.
  • Agricultural products covered include soybean oil, distillers dried grains with solubles (DDGS), red sorghum for animal feed, tree nuts, fresh and processed fruits, wine, and spirits.
  • The edible oil and soybean processing industry has cautiously welcomed the deal but is awaiting clarity on tariff cut levels, quota mechanisms, and quality specifications.
  • India imported a record 5.47 million tonnes of edible oils in 2024-25, primarily from Argentina and Brazil, with only 150,000-200,000 tonnes from the US. US-origin soybean oil is typically $30-40 per tonne more expensive than competing origins.
  • Concerns have been raised about GM-DDGS imports, as India currently prohibits genetically modified DDGS, and it remains unclear which varieties will be permitted under the deal.

Static Topic Bridges

Interim Trade Agreements under WTO Rules

An interim trade agreement is a transitional arrangement between two or more WTO members that serves as a stepping stone toward a full free trade agreement (FTA) or customs union. Under Article XXIV of the GATT, such interim agreements are permitted as exceptions to the Most Favoured Nation (MFN) principle, provided they include a plan and schedule for forming a complete FTA within a "reasonable length of time" -- generally not exceeding 10 years.

  • Article XXIV of GATT 1994 allows members to form FTAs and customs unions as exceptions to MFN (Article I)
  • Interim agreements must cover "substantially all trade" between the parties and include a roadmap to full liberalization
  • The India-US deal is distinct from India's existing CEPAs (India-UAE CEPA signed February 2022, entered into force May 1, 2022; India-UK CETA concluded 2025) which are comprehensive agreements covering goods, services, investment, and digital trade
  • India has operational FTAs/CEPAs with ASEAN, Japan, South Korea, Singapore, UAE, and EFTA (entered into force October 1, 2025), among others
  • A Preferential Trade Agreement (PTA) covers select tariff lines via a positive list; an FTA eliminates duties on substantially all trade via a negative list; a CEPA additionally covers services, investment, IPR, and government procurement

Connection to this news: The India-US interim agreement is not a full FTA but a phased arrangement, which is why industry awaits clarity on final tariff schedules, quota mechanisms, and product-specific exclusions.

India's Edible Oil Import Dependency

India is the world's largest importer of edible oils, meeting approximately 55-60% of its domestic requirement through imports. Domestic oilseed production covers only about 40-45% of the country's edible oil demand. The government has launched two major missions to address this structural deficit: the National Mission on Edible Oils-Oil Palm (NMEO-OP), launched in 2021 with an outlay of Rs 11,040 crore focused on oil palm cultivation in northeast India and Andaman & Nicobar Islands, and the National Mission on Edible Oils-Oilseeds (NMEO-OS), approved in October 2024 with a budget of Rs 10,103 crore, targeting oilseed production increase from 39 million tonnes (2022-23) to 69.7 million tonnes by 2030-31.

  • India imported approximately 16 million tonnes of edible oils worth Rs 1.61 lakh crore in 2024-25 marketing year
  • Palm oil accounts for over 37% of India's edible oil consumption, followed by soybean oil (20%), mustard (14%), and sunflower (13%)
  • Per capita annual consumption of edible oil has risen from 8.2 kg in 2001 to approximately 23.5 kg -- nearly double the ICMR-recommended limit of 12 kg
  • Current tariff structure (as of May 2025): basic customs duty on crude edible oils at 10% (effective duty ~16.5% including 5% AIDC); refined oils at 32.5% BCD (effective ~35.75%)
  • The tariff structure is designed to discourage refined oil imports and protect domestic refining capacity

Connection to this news: The industry's concern centers on whether US soybean oil will receive quota-based zero BCD access and whether the 6.5% agriculture and education cess will be waived, which would significantly undercut the existing tariff protection framework.

Agricultural Subsidies and WTO Agreement on Agriculture

The WTO Agreement on Agriculture (AoA), part of the Uruguay Round outcomes (1995), governs international agricultural trade through three pillars: market access, domestic support, and export subsidies. Market access provisions require tariffication (converting non-tariff barriers to tariffs) and binding tariff ceilings. The AoA also allows developing countries to maintain Special and Differential Treatment (S&DT) provisions, including higher bound tariff rates and longer implementation periods.

  • India's bound tariff rates on agricultural products at WTO are significantly higher than applied rates (e.g., bound rate on edible oils is 45-300%, applied rate is 10-32.5%)
  • The "policy space" between bound and applied rates allows India to raise duties without violating WTO commitments
  • Special Safeguard Mechanism (SSM) allows developing countries to impose additional duties if import volumes surge or prices fall below a trigger level
  • The Commission for Agricultural Costs and Prices (CACP) recommends MSP; the Cabinet approves it for 22 mandatory crops plus sugarcane (FRP)
  • GM crop regulation in India falls under the Environment Protection Act 1986, with the Genetic Engineering Appraisal Committee (GEAC) under MoEFCC being the apex body for approvals

Connection to this news: The concern over GM-DDGS imports reflects the tension between trade liberalization commitments and India's domestic biosafety regulatory framework. Any concessions on GM products would require GEAC clearance, creating a potential regulatory bottleneck.

Key Facts & Data

  • US reciprocal tariff on Indian goods reduced from 50% to 18% (effective February 7, 2026)
  • India's edible oil imports in 2024-25: approximately 16 million tonnes worth Rs 1.61 lakh crore
  • US share of India's soybean oil imports: 150,000-200,000 tonnes out of 5.47 million total
  • US soybean oil price premium: $30-40 per tonne over Argentine/Brazilian origins plus higher logistics cost
  • India's bound tariff on edible oils at WTO: 45-300%; current applied BCD on crude oils: 10%
  • NMEO-OS target: raise oilseed production from 39 MT to 69.7 MT by 2030-31 (budget Rs 10,103 crore)
  • India committed to purchasing $500 billion of US goods over 5 years ($100 billion annually) under the broader deal framework
  • India-US bilateral trade in FY25: record $132.2 billion; India's trade surplus with US: $40.82 billion