India has pursued a wave of Free Trade Agreements (FTAs) with major partners such as the UK, EFTA, and the US. However, the agriculture sector is conspicuously absent or only partially included in these agreements.

About Free Trade Agreements (FTAs)

• A Free Trade Agreement (FTA) is a pact between two or more countries to reduce or eliminate tariffs, quotas, and non-tariff barriers on trade in goods and services among the signatory nations.
• FTAs are a form of economic integration, often including provisions on investment, intellectual property rights (IPR), and technical standards.
• Features of FTAs
  • Tariff elimination: Member countries reduce or abolish import duties on a broad range of goods.
  • Sensitive lists: Each country retains a list of items excluded or given longer transition periods.
  • Trade & investment: Modern FTAs cover services, investment liberalisation, and behind-the-border issues.
  • Rules of origin: Criteria that define which goods qualify for preferential treatment.
  • Safeguard clauses: Temporary protection measures allowed if domestic industries face sudden import surges.

Why Is Agriculture Excluded from India’s FTAs?

• Agriculture Is Politically Sensitive and Electorally Volatile: Agriculture is not just an economic sector in India — it is a source of livelihood for over 50% of the workforce, and deeply tied to identity, culture, and vote-bank politics.
  • Reforms such as the 2020 farm laws triggered mass protests, compelling the government to withdraw them, showing the high political cost of liberalizing this sector.
• Fear of Import Surge and Domestic Market Disruption: India walked out of RCEP in 2019 due to fears of a surge in cheap dairy imports from New Zealand which could undercut smallholder dairy farmers.
  • RCEP withdrawal (2019) was driven by fears of a surge in cheap dairy imports from New Zealand.
• Agriculture Is Over-Subsidised and Non-Compliant with Global Norms: India’s model includes free electricity, subsidised urea, and assured MSP, which violate WTO subsidy norms and cannot be easily continued if agriculture is liberalized under FTAs.
  • The Uruguay Round Agreement on Agriculture (AoA) and WTO commitments demand reduction in such subsidies. India, however, seeks exemptions citing food security and rural employment.
• Non-Tariff Measures (NTMs) Create Additional Barriers: Even when tariffs are lowered in FTAs, Non-Tariff Measures like SPS and Technical Barriers to Trade (TBTs) restrict exports.
  • Developed countries impose strict import regulations, making it hard for Indian producers to comply, especially in agri-exports. 
• Strategic Use of Exclusion Lists in FTAs: India typically places agricultural products in “sensitive lists” during FTA talks — these are excluded from tariff cuts or subjected to long transition periods (e.g., 20–25 years).
  • This is a negotiation strategy to protect key constituencies, but it also prevents India from leveraging the full potential of its agri-sector in global markets.

Implications of Agricultural Exclusion

• Missed Opportunities in High-Value Agri-Exports: Excluding agriculture from FTAs restricts India’s ability to secure preferential market access for its competitive products like Basmati rice, spices, and GI-tagged ODOP goods.
• Delays in Modernizing Domestic Agriculture: Without competitive pressure from FTAs, India lacks strong incentives to upgrade its agricultural practices, infrastructure, and value chains.
  • Countries like Thailand and Brazil reformed their agro-sectors through FTA-linked investment in agro-processing, compliance labs, and logistics, leading to 8% CAGR in Thai agri-exports.
• Imbalanced Trade Gains Across Sectors: FTAs favour industrial and service sectors while agriculture remains excluded, widening disparity between urban-industrial and rural-agricultural economies.
  • Indian FTAs focus on textiles, IT, engineering, etc., but agriculture is either in sensitive lists or offered long transition periods, skewing sectoral benefits.
• Weak Integration into Global Value Chains (GVCs): Without FTA access, Indian farmers are left out of modern export ecosystems, including processing, branding, and quality compliance systems.
• Loss of Buffer Markets for Domestic Shocks: In absence of steady export markets, India cannot use external demand to stabilize domestic prices during bumper harvests or surplus production.
  • India frequently imposes export bans (e.g., on wheat, onions) to contain local inflation, which hurts farmers’ incomes by denying them global price advantages.
• Entrenchment of Middlemen and Low Farmer Bargaining Power: With no direct export pathways through FTAs, smallholder farmers remain dependent on intermediaries who control market access and pricing.
• Erosion of Regional Trade Competitiveness: As India avoids including agriculture in FTAs, competitor countries capture regional agri-markets by building deeper trade linkages.
  • Vietnam and Thailand have become key suppliers to ASEAN and India through aggressive FTA participation, while India has a trade deficit in agricultural imports from ASEAN.

Advantages of Inclusion of Agriculture in FTAs

• Expanded Market Access for Farmers: Inclusion in FTAs provides Indian farmers with access to preferential tariffs and duty-free quotas in foreign markets.
  • This can significantly boost exports of competitive products like Basmati rice, spices, marine products, and tea.
• Incentivises Value Addition and Agro-Processing: Demand from international markets encourages investment in food processing, packaging, and branding.
  • Helps shift India’s agri-exports from low-value raw commodities to processed and higher-margin products, similar to Brazil’s soy-to-oil model.
• Drives Infrastructure and Compliance Improvements: To meet FTA-linked requirements, countries are pushed to invest in cold chains, certification labs, and SPS compliance.
  • Enhances India’s ability to meet global standards, reducing rejections and improving export credibility.
• Strengthens Global Value Chain (GVC) Integration: Inclusion in FTAs facilitates India’s participation in regional and global agri-supply chains.
  • Leads to long-term competitiveness by attracting foreign investment in agri-logistics, warehousing, and contract farming.
• Diversification of Cropping Patterns: Greater demand for horticulture, pulses, oilseeds, and exotic crops in export markets can shift farmers away from overproduced MSP-linked staples like rice and wheat.
  • Encourages more sustainable and market-aligned cropping systems.
• Enhances India’s Bargaining Power Globally: Active agricultural participation in FTAs enhances India’s credibility and voice in WTO negotiations and future trade deals.
  • Demonstrates commitment to global trade norms and builds trust with trade partners.

Structural Challenges in India’s Agri Exports 

• Low Value Addition in Exports: India’s agri exports are dominated by raw commodities, limiting both income and resilience to global price fluctuations.
  • Unlike Brazil which exports soybean oil and processed meats, India continues to export raw rice and pulses. 
  • Lack of nearby agro-processing clusters near APMCs inhibits value addition.
• Fragmented Landholdings and Farmer Base: Small and marginal farmers, who form the bulk of India’s agricultural workforce, are disconnected from global value chains and export systems.
  • Indian farmers struggle to meet export compliance standards. For instance, export rejections due to pesticide residue in mangoes or aflatoxin in peanuts are common because smallholders lack testing and certification access.
• Regulatory Disintegration Between Centre and States: Agriculture is a State subject, while trade is a Union subject, resulting in fragmented and often contradictory policy environments.
  • Pesticide use norms, quarantine rules, and export bans vary across states, delaying or derailing export consignments. This creates confusion for exporters and weakens India’s unified agri-export strategy.
• Inadequate Infrastructure and Logistics: Poor cold chain, storage, and inland connectivity obstruct the movement of perishable produce from farm to port.
  • Coastal states like Gujarat, Maharashtra, Andhra Pradesh lead in agri-exports, but states like Uttar Pradesh and Madhya Pradesh, rich in mangoes and soybeans, face “middle-mile” logistics bottlenecks.
• Non-Compliance with Sanitary and Phytosanitary (SPS) Standards: Indian agri exports often fail to meet international safety and hygiene norms, especially for developed markets.

• • Frequent rejection of consignments due to pesticide residue or aflatoxins. APEDA promotes standards, but outreach to smallholders is minimal.
• Weak Institutional Ecosystem for Exports: Lack of unified export governance and fragmented promotion mechanisms reduce India’s global competitiveness.
  • Currently, export clearances and compliance remain bureaucratic and delayed.
• Overdependence on Subsidy-Driven Production: Input subsidies (electricity, water, fertilisers) and MSPs incentivize traditional crops like rice and wheat instead of high-value or export-competitive ones.
  • India continues to incentivise growing surplus rice with electricity it cannot afford, instead of shifting towards horticulture or industrial crops like in Thailand.
• Subsidy Discourage Innovation: India’s current agri-investment model — free water and electricity, subsidised seeds and urea, and assured MSP — provides safety, but discourages innovation. 
  • Farmers remain locked in legacy crops, disincentivised from experimenting with high-value

Way Forward for Boosting Agri-Exports and Integrating Agriculture into FTAs

• Strategically Integrate Agriculture in FTAs: India should cautiously include select agri-sectors in FTAs — starting with horticulture, marine products, spices, and value-added goods — while protecting sensitive segments through calibrated exclusions.
  • India’s full exclusion approach prevents sectors like Basmati rice (21% of agri-exports) from gaining preferential access.
• Invest in Export-Oriented Infrastructure: Enhance cold chain, testing labs, logistics corridors, and inland depots to make exports viable from landlocked agri-producing states.
  • Uttar Pradesh’s mangoes and MP’s soybeans face logistics bottlenecks, while coastal states (Gujarat, AP) thrive due to better port access. Infrastructure gaps limit inland states’ export participation.
• Promote Agro-Processing Near APMCs: Develop agro-processing clusters close to APMCs to enable value addition before export, reducing post-harvest losses and increasing export margins.
  • India’s exports focus on raw commodities like rice and pulses. In contrast, Brazil exports soybean oil and meal, thanks to strong agro-industrial linkages.
• Institutionalise Unified Agri-Trade Governance: Establish a National Agri Trade Council to harmonise policy among the Centre, States, APEDA, FSSAI, and exporters for cohesive agri-export facilitation.
  • Regulatory dissonance between agriculture (state subject) and trade (central subject) creates confusion over norms, export bans, and compliance enforcement.
• Reform Farm Support: Transitioning from input subsidies (e.g., free electricity, urea) to Direct Benefit Transfer (DBT) will encourage diversification and reduce overproduction of surplus crops.
  • India still incentivises rice production with heavy subsidies despite surpluses. DBT could offer risk capital and empower farmers to choose export-relevant crops.
• Build a Compliance and Traceability Backbone: Strengthen labs, SPS certification mechanisms, and digital traceability to improve market access and reduce rejections due to food safety issues.
  • India faces repeated export rejections (e.g., mangoes for pesticide residues, peanuts for aflatoxins) due to non-compliance with global SPS standards.
• Embed Agri-Tech into Extension Services: Use AI, GIS, and mobile apps to provide vernacular, real-time information on weather, pests, export regulations, and scheme eligibility.
  • Farmers need real-time confidence and decision-making tools, not guesswork. Tech-based services can improve compliance, productivity, and export readiness.
• Build Farmer-Exporter Linkages via FPOs and Aggregators: Facilitate Farmer Producer Organisations (FPOs) and private aggregators to act as bridges between smallholders and global buyers.
  • Small farmers lack access to APEDA’s certification and global trade channels. Organized export aggregators can help reduce these barriers.

Conclusion

India’s exclusion of agriculture from FTAs, driven by political and structural constraints, limits its agri-export potential and global competitiveness. Strategic inclusion of select agri-sectors, coupled with infrastructure, governance, and tech reforms, can unlock growth while safeguarding farmers’ interests.

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