What Happened
- Opposition leaders, farmers, and trade experts have raised concerns about the interim India-US trade agreement
- Key unanswered questions centre on three areas: the fate of Russian oil imports, future tariff trajectories, and potential impact on Indian agriculture
- The White House fact sheet was revised to soften language — from India "committing" to buy $500 billion to "intending" to buy up to $500 billion
- Agricultural goods were removed from the revised fact sheet, but concerns persist about future pressure to open farm markets
- Parliamentary committee briefings on the trade deal with the EU and US are scheduled
Static Topic Bridges
Parliamentary Oversight of Trade Agreements in India
India's constitutional framework assigns trade policy powers to the executive, but parliamentary scrutiny of trade agreements has been a subject of debate, especially for agreements with significant domestic impact.
- Article 246 of the Constitution places foreign trade in the Union List (Entry 41), giving Parliament legislative authority
- In practice, trade agreements are negotiated and signed by the executive (Ministry of Commerce and Industry, led by the Trade Minister)
- India does not have a formal legislative requirement for parliamentary ratification of trade agreements — unlike the US where the Senate must ratify treaties
- Parliamentary Standing Committees on Commerce and External Affairs review trade policies and can summon officials for briefings
- The Rajya Sabha debated India's withdrawal from RCEP (2019), but the decision was taken by the executive
- In 2024-25, opposition parties have demanded that major trade agreements be placed before Parliament for debate before signing
Connection to this news: The scheduled parliamentary committee briefing on the India-US and India-EU trade deals reflects growing demand for legislative scrutiny of trade agreements, though the executive retains exclusive authority to negotiate and sign such deals.
India's Tariff Policy and Most Favoured Nation Principle
India's tariff structure is one of the highest among major economies, and the interplay between bilateral tariff concessions and WTO Most Favoured Nation (MFN) obligations is a critical trade policy consideration.
- The MFN principle (GATT Article I) requires WTO members to extend the same tariff treatment to all WTO members — any concession given to one must be given to all
- Exception: Free Trade Agreements (FTAs) under GATT Article XXIV allow preferential tariffs between partners without extending them to all WTO members, provided they cover "substantially all trade"
- India's simple average MFN applied tariff: approximately 17%
- India's bound tariff rate (maximum allowed under WTO commitments): much higher than applied rates for most products — giving India significant policy space to raise tariffs
- India has raised tariffs significantly since 2014, reversing the post-1991 liberalisation trend — customs duty on over 3,200 items was increased between 2014-2023
- The India-US interim deal's tariff concessions raise questions about WTO compatibility if they are bilateral without an FTA framework
Connection to this news: The uncertain trajectory of tariffs in the India-US deal is complicated by WTO rules — if the US removes the additional 25% tariff on India specifically (conditional on Russia oil commitments), the legal basis under WTO norms requires careful structuring to avoid MFN violation challenges from other members.
Food Security and Agricultural Trade Liberalisation Debate
India's resistance to agricultural trade liberalisation is rooted in food security concerns, the political economy of farming, and the structural characteristics of Indian agriculture.
- India has approximately 146 million agricultural holdings, with 86% being small and marginal (less than 2 hectares)
- The National Food Security Act (NFSA), 2013 covers approximately 81.35 crore (813.5 million) beneficiaries with subsidised foodgrains
- Public Distribution System (PDS) relies on domestic procurement at MSP — opening markets to cheaper imports could undermine procurement and PDS viability
- India's agricultural exports in FY2024-25: approximately $48-50 billion (rice, marine products, spices, sugar, cotton)
- The WTO Agreement on Agriculture's "peace clause" (Bali Ministerial, 2013) provides interim protection for India's public stockholding programmes from legal challenges
- India has argued at WTO that food security programmes for 800+ million people cannot be equated with trade-distorting subsidies
- Previous FTA experience: India-ASEAN FTA (2010) led to increased palm oil imports that impacted domestic oilseed farmers
Connection to this news: Though agricultural goods are currently excluded from the purchase list, farmers and opposition leaders fear that future phases of the trade deal could pressure India to reduce agricultural tariffs, potentially impacting subsistence farmers and the food security architecture.
Key Facts & Data
- India's agricultural holdings: 146 million, of which 86% are small and marginal (less than 2 hectares)
- NFSA coverage: ~81.35 crore beneficiaries
- India's average agricultural tariff: ~39% (vs US: ~5%)
- India's simple average MFN applied tariff: ~17%
- WTO peace clause for public stockholding: Agreed at Bali Ministerial 2013
- India's agricultural exports: ~$48-50 billion (FY2024-25)
- White House fact sheet revision: Changed from "committed" to "intends to purchase up to" $500 billion
- Parliamentary oversight: Standing Committees on Commerce and External Affairs have review authority