India Eyes “Low-Hanging Fruit” in US Trade Talks as Agriculture and Dairy Remain Red Lines
India is pursuing a scaled-down trade deal with the US, focusing on non-sensitive sectors while keeping agriculture and dairy off-limits. Here's what the 'low-hanging fruit' strategy means for exports, tariffs, and diplomacy.
NewsSutra
New Delhi, July 16, 2025 – In a pivotal shift, India is steering its latest trade negotiations with the United States toward a “low-hanging fruit” approach—a scaled-down deal centered on non-sensitive sectors. The move comes as Washington presses ahead with looming tariffs, yet New Delhi remains unwavering in safeguarding its core farming and dairy interests. As talks intensify, both sides appear poised for a partial breakthrough that could sidestep contentious issues and lay the groundwork for a broader agreement.
1. Strategic Shift Toward a Lite Deal
According to recent analysis by the Financial Times, India and the US are pursuing an interim agreement aimed at avoiding an impending 26% tariff scheduled for August 1. This deal will exclude politically sensitive areas—like grain and dairy—and instead focus on easing barriers in sectors such as automobiles, dry fruits, nuts, and select industrial goods Financial Times+1Financial Times+1.
A senior trade advocate, Biswajit Dhar, remarked this approach will allow both nations to address key grievances without forcing difficult commitments. It’s a strategy designed to defer the toughest challenges to later stages and protect Indian farmers from potential economic fallout .
2. Agriculture and Dairy: India’s Irreducible Minimum
Despite wide-ranging concessions, agriculture and dairy remain firmly off the table for India. At issue is not only economic vulnerability but also deep-rooted cultural sensitivities—such as the “non-veg milk” controversy, where US cattle are often fed animal-based proteins India Today+1India Today+1.
Analysts warn that opening dairy markets could cost India’s economy up to ₹1.03 lakh crore annually and threaten the livelihoods of over 80 million small dairy farmers The Financial Express+5India Today+5India Today+5. Reflecting this, farm unions such as ICCFM have formally urged New Delhi to exclude both agriculture and dairy from any trade pact Politico+4ThePrint+4The Economic Times+4.
3. Momentum Builds in Washington
Despite the impasse on farming issues, recent signs suggest progress on other fronts. President Trump has held off sending tariff warning letters to India—to countries like Canada, EU, and Mexico—signaling special treatment or a pending deal with India .
A high-level Indian delegation led by Commerce Ministry officials, including Rajesh Aggarwal, has already arrived in Washington to wrap up a mini-deal. ThePrint reports final negotiations focus on agriculture and dairy, but only for limited, controlled inclusion—not full-scale market opening The Economic Times+14ThePrint+14YouTube+14.
4. Industry Response: Balancing Gains and Risks
Indian importers have begun delaying customs clearance of American goods like dry fruits, banking on reduced tariffs if a deal materializes. According to The Times of India, importers see this as a calculated risk, willing to incur penalties now to benefit later The Times of India.
Meanwhile, analysts like those from The Financial Express believe even a partial deal could boost exports significantly in chemicals, pharmaceuticals, auto components, and textiles—segments where India holds competitive advantage and could gain up to 0.2% of GDP from chemicals alone The Financial Express.
5. Key Roadblocks That Remain
Even as momentum builds, several sticking points persist:
-
Dairy certification requirements: U.S. trade officials have criticized India’s restrictions at the WTO, seeing them as protectionist measures India Today+2India Today+2The Times of India+2. India holds firm, citing cultural and health concerns tied to bovine feed practices India Today+2India Today+2Reuters+2.
-
Agricultural subsidies and food security mechanisms, especially India's MSP and procurement norms, remain major political touchpoints .
-
Other sectors like steel, auto parts, ethanol from U.S. grains, and genetically modified grains are still under intense scrutiny The Financial Express+7Reuters+7The Economic Times+7.
6. Indian Political Calculus
Domestic politics play a critical role in India's bargaining stance. With nearly half the population reliant on agriculture, any concession could trigger rural backlash—as seen during the 2020 farm protests The Times of India+5Reuters+5Financial Times+5.
Finance Minister Nirmala Sitharaman termed agriculture and dairy “red lines,” and Prime Minister Modi—labeled “a great friend” by Trump—must balance strategic ties with electoral viability Financial Times.
7. U.S. Motivations Behind the Deal
For Washington, securing the trade pact helps mitigate growing trade tensions and align strategically with India in an evolving global order. A partial deal crafted along the lines of the recent U.S.–Indonesia agreement signals a flexible, phased approach to global trade—benefiting both economies in manageable steps .
Trump, in particular, seeks a U.S. victory narrative heading into the November elections. A headline deal, even a modest one, could demonstrate his administration's ability to revive manufacturing and exports.
8. What a “Mini Deal” Could Look Like
Likely components:
-
Reduction of additional 26% tariffs on auto parts, steel, chemicals, and pharma.
-
U.S. concessions on agricultural commodities like dry fruits, almonds, apples, with limited quotas.
-
No tariff change or regulatory relief for sensitive sectors like dairy, poultry, or wheat.
Unlikely:
-
Removal of India’s strict dairy certifications or MSP protections.
-
Inclusion of genetically modified grain imports.
-
Broad reductions in tariff covers across vulnerable sectors.
9. Long-Term Payoffs and Future Rounds
Even a limited agreement would lock in India’s tariff gains and potentially shift trade flows away from current high-tariff zones. SBI research suggests India could deepen export penetration into chemical and apparel markets in the U.S., bolstering growth even beyond the deal The Times of IndiaThe Times of India+3India Today+3India Today+3The Financial Express.
However, sources from Politico and The Economist caution that without resolving core agricultural disputes, tensions could resurface—leading to renewed uncertainty or tariff swings in future rounds .
10. The Road Ahead: Key Timelines
-
August 1 Tariff Deadline: The window closes unless agreement on a mini-deal is reached.
-
Fall 2025: Final phase negotiations aiming for comprehensive agreement.
-
Ongoing WTO Engagements: U.S. objections at WTO level over dairy remain active despite bilateral coordination Financial Times+1The Times of India+1The Times of India.
Final Take
India’s strategy to go for the “low-hanging fruit” reflects pragmatic diplomacy—securing immediate trade relief while preserving core domestic safeguards. The likely interim deal smartly addresses tariff pressures on sectors such as automobiles, chemicals, and dry fruits, while postponing politically sensitive concessions.
For India, it buys breathing space; for the U.S., it delivers a trade win. Beyond that, it sets the stage for broader negotiations later in the year that could attempt more ambitious goals.
In the longer run, the success of this approach depends on whether both nations can effectively manage political sensitivities, walk the planned roadmap, and balance strategic gains with public accountability. For now, the market and industry watchers will closely track the fine print when the mini-deal rolls out—anticipating the first tangible fruits of India’s strategic “low-hanging” approach.
