Whalesbook
Export Boom Fueled by Trade Deals
India's strategy to broaden trade pacts is boosting food and agricultural exports. The expanding network of Free Trade Agreements (FTAs) is connecting domestic businesses to global value chains, reaching 38 developed nations and about two-thirds of world trade. Annual exports from the food, agriculture, and fisheries sectors are estimated at ₹5 lakh crore (over $55 billion), making India the seventh-largest global exporter. Driven by these agreements, processed food exports have quadrupled, while fruits, pulses, and cereals have tripled and doubled respectively over the past eleven years. Rice exports alone saw a 62% increase.
These gains are happening as agricultural exports drive India's overall trade performance, even while merchandise exports remain flat. Agreements like the India-EFTA Trade and Economic Partnership Agreement (TEPA), effective October 2025, offer market access and include substantial investment commitments. The India-EU FTA, finalized in early 2026, is expected to be a major turning point, improving access to the European market for products such as basmati rice and high-value fruits and vegetables.
Trade Balance Shifts Amid Import Rise
Despite the positive export trend, pressures are mounting on India's agricultural trade balance. While agricultural exports rose 6.4% to $51.9 billion in 2024-25, agricultural imports surged 17.2% to $38.5 billion during the same period. This gap has narrowed the agricultural trade surplus significantly, from over $27 billion in earlier years to an estimated $13.4 billion by 2024-25. The faster growth in imports, driven by staples like vegetable oils and pulses due to domestic yield issues and lower Minimum Support Prices (MSP) for some crops, shows growing reliance on imports for key goods. Historically low global commodity prices made Indian exports less competitive, and a similar issue could arise if domestic production costs stay high, increasing vulnerability to cheaper imports.
Internationally, Indian food exporters face stricter global regulations and higher standards. Developed nations prioritize food safety, leading to increased scrutiny. Concerns over food fraud, such as ethylene oxide in spices or formaldehyde in fish, have caused higher rejection rates and compliance burdens. Adhering to global standards like ISO, FSSAI, and HACCP is essential, but often technically difficult and expensive for exporters, particularly small and medium-sized businesses (SMEs).
Risks to Farmers and Food Security
The push for FTAs, aimed at boosting exports, also risks undermining domestic food security and farmers' livelihoods. Past trade liberalization in the 1990s saw a decline in agriculture's terms of trade, harming farmers' conditions. There are concerns that FTAs could expose India's sector, especially dairy, to intense competition from countries with advanced farming systems and subsidies, potentially causing job losses and rural hardship. While agreements like the India-EU and India-EFTA FTAs reportedly protect sensitive sectors, the long-term impact on the agrarian economy is debated. Furthermore, the rising volume of imports and duties suggest benefits may not reach small farmers, favoring larger companies instead.
Negotiations for a GCC FTA, though early, present a similar situation. While fostering economic cooperation and food security for the GCC, it requires a careful balance to protect India's farms, a major employer and economic cornerstone. Past FTAs, like the India-Singapore CECA and India-Sri Lanka FTA, were disadvantageous for certain sectors, serving as a caution. The success of new agreements will depend on India improving infrastructure, logistics, and quality control, and ensuring domestic policies adequately support farmers and vulnerable sectors.
Balancing Export Goals with Domestic Needs
Looking ahead, expanding India's FTA network offers both greater market access and fiercer competition. While agreements are expected to boost exports and attract investment, their success will depend on overcoming operational challenges. The government's focus on creating a robust food export ecosystem through technology and collaboration is vital. However, current trends of rising imports and a shrinking trade surplus, alongside the need to uphold food safety and farmer welfare, mean proactive policies are essential. The goal of becoming the 'food basket of the world' requires not only market access but also strengthening its farms to handle global market swings and ensure fair benefit sharing.