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Trade pacts enhance market access for exports
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Wednesday, 04 March, 2026, 16 : 00 PM [IST]
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Arpita Mukherjee & Latika Khatwani
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India is among the top producers of many agri-food products globally and is ranked among the top 10 countries in agri-food exports. The country has a positive trade balance in this sector, exporting a number of processed food products like shrimps, tea, coffee, rice and spices. With a rich domestic resource, it is in the interest of the country to play a major role in global food trade and have more domestic value addition.
Food processing has the potential to generate jobs and exports which will help to increase farmers income and connect the small and medium food processors to the global markets.
At the same time, an open FDI policy has helped to attract foreign investment and many international companies such as PepsiCo Inc., the Coca-Cola Company, McCain Foods Limited, Mondelez International Inc., and Nestlé S.A have invested in Indian food processing sector. They are trying to link India to their global supply chains. With significant government support, the Indian food processing sector, which was valued at US$307 billion in 2023 is expected to reach US$2150 billion in 2047, growing at a compound annual growth rate (CAGR) of 8.45%.
In the financial year (FY) 2025, India’s agri-food exports was US$49.43 billion, accounting for approximately 11.2% of total exports. Within this, the share of processed food exports has increased steadily, rising from 14.9% in FY2018 to 20.4% in FY2025 (Economic Survey, 2025-26). Within processed food, the top products exported include marine products (US$7405 million), rice (US$12,472.18 million), spices (US$4341.26 million), sugar (US$2159.41 million), coffee (US$1805.57 million), processed fruits and juices (US$1005.24 million) and tea (US$933.78 million). Other processed export items include pulses (US$778.17 million, processed vegetables (US$776.83 million) and dairy products (US$721.65 million).
With growing export volumes, agri-food trade has become a key component of India’s trade agreement negotiations. Given our large population and rising per capita income, the domestic demand for agri-food products is also growing, making it an attractive market. The Indian food processing market was US$354.5 billion in 2024 and is expected to grow to US$700 billion by 2030. However, high tariffs in India of up to 150% in products like alcoholic beverages, 110% in sugar and confectionery and meat and 60% in dairy products have made market access difficult for foreign companies, who want to use the FTA route to seek lower tariffs and greater market access.
Until recently, India has been trying to keep agriculture and food products outside its trade agreements citing the exposure of small farmers to imports. There were other concerns. India was exporting mostly fresh and intermediate produce, while importing higher-value processed food products. This is now changing with the share of processed food rising in the export basket. Some of our export markets like the USA, which had low tariffs earlier, have suddenly started imposing random tariffs. It is, therefore, in our interest to protect exports. From a defensive position, India has now shown an offensive interest in agri-food negotiations.
While offering a tariff reduction, India has imposed tariff-rate quotas for certain agri-food imports to safeguard the farmers. By product categories, India showed flexibility in reducing tariffs in processed food products like alcoholic and non-alcoholic beverages, breads, pastries, biscuits, pasta, chocolate, sheep meat, to name a few. For example, under the India-EU FTA, India has offered tariff reductions on wine (150% to 20% for premium range; 150% to 30% for medium range), spirits (up to 150% to 40%), and beer (110% to 50%), fruit juices and non-alcoholic beer (up to 55% to 0%) and processed foods such as breads, pastries, biscuits, pasta and chocolate (from 50% to 0%). With Australia in its mini deal or Economic Cooperation and Trade Agreement (ECTA), duties on wines were cut from 150% to 50% (for bottles above US$5) and to 25% (for bottles above US$15) over nine years. Tariffs on sheep meat (30%) were eliminated at entry into force. Lentils received an immediate 50% tariff reduction within a 150,000-tonne annual quota. Sometimes, tariffs have been liberalised keeping into account the requirement of the trade partners. For example, under the India-European Free Trade Association (EFTA) Trade and Economic Partnership Agreement (TEPA), Norway got a reduced tariff in salmon while Switzerland got a tariff reduction in Swiss chocolates.
A number of processed foods which India exports, face tariffs in key import markets and the tariff reduction under the trade deals is likely to give a competitive edge to our exporters. For example, the UK accounts for 1.7% of India’s exports of coffee and it had a duty of 2-8%, which has now been eliminated under the trade deal. Marine products are other export items which received market access under different trade agreements. These had a duty of 4–12% in the EU and 4.2–8.5% in the UK, which is now duty-free for the UK. The EU also agreed to reduce duty on marine products, however, the exact amount and phasing out will be known once the text of the agreement is made public.
While reducing tariff, India and its trade partners have maintained their red lines and sensitivities. For example, neither the UK, nor the EU or Australia liberalised their regulatory regime to allow dairy exports nor did India reduce tariffs for fresh and skimmed milk. One key export item rice, has been kept out of market access by trade partners like the EU. Apple, wheat, maize, sugar and chicken are mostly in India’s sensitive list.
A core barrier for our exporters is stringent regulatory requirements of key export markets including the EU, UK, Australia and the USA, whose food safety standards are much higher than the international standards such as the Codex Alimentarius. While FTAs tend to address tariff barriers, there is need for a strong commitment on both sides to address regulatory issues. In general, while FTAs create an opportunity for mutual recognition of testing and certification processes, countries don’t lower their food safety standards to trade partners. The chapter on Sanitary and Phytosanitary measures in the trade agreements creates scope for regulatory collaborations and mutual recognition of standards.
To conclude, trade agreements enhance market access for exports through tariff reduction, but countries reserve the right to implement new regulations and food safety standards. Unless the domestic food safety standards are uniformly implemented and focus is on good quality inputs and good agriculture practices, the benefits of trade agreements may not be fully achieved. Food processors have to ensure that they have full supply chain traceability, and products meet the regulatory requirements of the importing countries. They also need to adopt greener technologies to reduce greenhouse gas emissions, which is becoming a key requirement for exporting to markets such as the EU. Labour and environment standards are now key component of the trade agreements and environmental, social and governance audits are becoming prominent. Food processors have to conduct regular labour and environmental audits to identify and mitigate risks in their supply chains and keep records of their processes and measures taken.
(Mukherjee is professor, ICRIER; Khatwani is research assistant,
ICRIER. They can be reached at arpita@icrier.res.in and lkhatwani@icrier.res.in respectively)
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