India: Effects of Tariffs and Nontariff Measures on U.S. ... - USITC

U.S. agricultural products face strong competition in the <strong>India</strong>n import market
from low-cost international suppliers.
For certain products, limited <strong>India</strong>n imports from the United States reflect market
competition from other global suppliers. <strong>India</strong>n traders <strong>and</strong> consumers are reportedly very
price sensitive <strong>and</strong>, in many cases, will not pay a premium for higher-quality U.S.
products.
<strong>India</strong>n Agricultural Policy Objectives
Restrictive <strong>India</strong>n agricultural trade policies should be viewed in the context <strong>of</strong>
three core domestic policy objectives: food security, food self-sufficiency, <strong>and</strong>
income support for farmers.
<strong>India</strong>n agricultural trade policies are consistent with the government’s long-st<strong>and</strong>ing
policies <strong>of</strong> protecting domestic producers from foreign competition <strong>and</strong> consumers from
domestic <strong>and</strong> global price fluctuations for food staples such as wheat, rice, <strong>and</strong> vegetable
oils. The <strong>India</strong>n government explicitly links tariffs <strong>and</strong> NTMs to its domestic policies to
meet these objectives. The tension between the desire to raise food prices for the benefit
<strong>of</strong> farmers <strong>and</strong> the desire to lower them for the benefit <strong>of</strong> consumers has caused the
<strong>India</strong>n government to intervene heavily in the farm sector with multiple policy
instruments.
Broad government intervention in the agricultural sector responds to current <strong>and</strong>
historical challenges faced by <strong>India</strong>n policymakers <strong>and</strong> contributes to the low level
<strong>of</strong> U.S. agricultural exports.
Significant challenges faced by <strong>India</strong> include a history <strong>of</strong> food shortages, a large segment
<strong>of</strong> the population dependent on the agricultural sector for its livelihood, <strong>and</strong> hundreds <strong>of</strong>
millions <strong>of</strong> poor <strong>India</strong>ns who spend most <strong>of</strong> their incomes on food. More than one-third
<strong>of</strong> the population, mostly rural <strong>India</strong>ns, still lives on less than $1 per day. <strong>India</strong>n farmers
are a politically powerful voting bloc that has a major influence on <strong>India</strong>n domestic <strong>and</strong>
international trade policies.
<strong>India</strong>n agricultural support policies promote domestic production at the expense <strong>of</strong>
imports. These policies include input support programs, output price support programs,
<strong>and</strong> farmer income programs. Input supports focus primarily on fertilizer, irrigation water,
electricity, diesel fuel, <strong>and</strong> seeds. Output price supports consist largely <strong>of</strong> minimum
support prices for certain staple crops. Farmer income programs lower the cost <strong>of</strong>
borrowing to farmers <strong>and</strong> boost wages for farm laborers.
Agricultural Consumption
<strong>India</strong>n per capita caloric consumption, centered on staple foods, is low compared to
that <strong>of</strong> other developing countries, but is rising with income growth.
<strong>India</strong>n food consumption primarily consists <strong>of</strong> grains (wheat <strong>and</strong> rice), pulses, edible oils,
<strong>and</strong> potatoes. Grains account for almost two-thirds <strong>of</strong> <strong>India</strong>n daily caloric intake. In
recent years, per capita consumption <strong>of</strong> many food products has risen owing to GDP
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