Opening dairy sector in US FTA could cause 1.03 lakh Cr loss

India and the United States are finalizing an interim trade agreement that could lead to significant tariff reductions—U.S. duties on Indian goods may drop from 26% to below 20%. However, agricultural and dairy sectors remain highly contentious. SBI Research warns that opening up dairy to U.S. products might depress domestic milk prices by 15%, eroding ₹1.03 lakh crore in farmers’ incomes and reducing dairy’s GVA by around ₹0.51 lakh crore. With more than 80 million smallholder farmers dependent on 1–2 cows each, such a move threatens rural livelihoods and could destabilize India's cooperative dairy model—mirrored in Milma’s strong resistance to any FTA inclusion of dairy products .

At the same time, SBI Research identifies significant export potential in non-dairy sectors. A U.S. tariff cut could give a competitive edge in chemicals and pharmaceuticals, where India holds a strategic advantage. Capturing just 1–2% of the U.S. market could boost GDP by 0.2–0.3% . Similarly, in textiles and apparel, expanding market share could add another 0.1% to GDP . India's negotiated access to ASEAN markets under FTA reviews can also counteract Chinese dumping and diversify trade flows .

Industry Insights

India must adopt a dual-track strategy: defend dairy to preserve its social-economic ecosystem, while aggressively pursuing gains in high-potential sectors through diversification and deeper FTAs. This balanced approach can protect rural livelihoods and fortify India’s role in global trade amid rising protectionist pressure.The FTA negotiations place Indian dairy at risk, but also unlock strategic export opportunities in chemicals, textiles, and ASEAN trade. 

Source : Dairynews7x7 July 14th 2025