Synopsis

This article explores India’s evolving tax retaliation strategies and trade policies in the agricultural sector, emphasizing their alignment with Sustainable Development Goals (SDGs) across different political regimes. Under the United Progressive Alliance (UPA), India pursued multilateral engagements and protective tariffs to safeguard food and livelihood security. In contrast, the National Democratic Alliance (NDA) adopted an assertive, self-reliant approach, focusing on domestic industry protection under the Atmanirbhar Bharat initiative. The study highlights key sectors like basmati rice, spices, and marine products, which align with SDG goals, alongside challenges in edible oil imports and global trade dynamics. The paper underscores the need for sustainable practices, predictable policies, and collaborative trade approaches to balance domestic priorities with international commitments.

Exposition

India’s tax retaliation strategies have undergone significant evolution through different political regimes, reflecting the interplay between economic growth, sustainability, and global trade dynamics. Analyzing India’s trade policies reveals a nuanced approach to balancing domestic economic interests with global trade commitments. This approach is evident in India’s strategic alignment of commodities with Sustainable Development Goals (SDGs), particularly in sectors like agriculture, spices, and marine products, while managing high-revenue imports such as edible oils.

The export of basmati rice (“Scented Pearl”), a major contributor to India’s foreign reserves, exemplifies this strategy. Despite limited alignment with SDG targets, sustainable cultivation techniques like Alternate Wetting and Drying (AWD) and System of Rice Intensification (SRI) methods enhance its compliance with SDG 2 (Zero Hunger), SDG 13 (Climate Action) and SDG 12 (Responsible Consumption and Production). India’s position as the world’s leading exporter of basmati rice, with over 5.2 million metric tons exported in 2023-24 (APEDA), generating revenue exceeding $4 billion, underscores its importance. Similarly, India’s dominance in the global spice market highlights its alignment with SDG 8 (Decent Work and Economic Growth) and SDG 12, as minimal mechanization in cultivation ensures low carbon footprints. Marine products, particularly shrimp, contribute significantly to export revenues, generating over $7 billion (MoES) annually and aligning with SDG 14 (Life Below Water) by promoting sustainable aquaculture practices.

India’s import dynamics, particularly in edible oils like palm and soybean oil, reveal the challenges of balancing sustainability with economic needs. The reliance on imports, amounting to $17 billion in 2023, reflects a critical gap in domestic production. While palm oil production, concentrated in Indonesia and Malaysia, presents sustainability concerns due to high carbon footprints, efforts to source sustainable palm oil align with SDG 2 and SDG 12. The Ukraine war’s impact on sunflower oil exports further underscored the volatility of the edible oil market, necessitating adaptive strategies to manage supply and demand fluctuations.

India’s tariff strategies have historically been characterized by high bound tariff rates, particularly in the agricultural sector, ranging from 100% to 300%. While these tariffs aim to shield domestic producers, they create an unpredictable trade environment, as seen in the abrupt doubling of tariffs on crude edible oils in 2013. Retaliatory tariffs during the Trump administration, targeting U.S. agricultural exports like almonds and apples, highlighted India’s ability to leverage trade policies for economic advantage. The subsequent lifting of these tariffs under the Biden administration marked an improvement in bilateral relations, emphasizing renewable energy trade and digital taxation policies.

India’s tax retaliation strategies have been marked by distinct approaches under different political regimes. During the United Progressive Alliance (UPA) era (2004–2014), trade policies focused on multilateral engagement while addressing domestic economic priorities. For instance, India opposed agricultural subsidy reductions by developed nations in WTO negotiations, citing their impact on food and livelihood security. Retaliatory measures included imposing higher duties on select processed foods in response to non-tariff barriers on Indian textiles and pharmaceuticals. Relations with the USA saw retaliatory tariffs on American industrial goods in response to protectionist measures like the “Buy American” policy. Similarly, India opposed the EU’s carbon tax on aviation, delaying free trade agreement discussions.

The National Democratic Alliance (NDA) government (2015–present) adopted a more assertive and self-reliant approach under the Atmanirbhar Bharat initiative. Policies emphasized protecting domestic industries while aligning with SDGs. Duties on edible oils and pulses were raised to support domestic farmers, and retaliatory tariffs were imposed on U.S. goods in response to tariffs on Indian steel and aluminum during the Trump administration. The NDA’s emphasis on sustainability is evident in its promotion of renewable energy trade and green trade policies, which align with SDG 13 (Climate Action). India’s recent wheat export surge, driven by the Ukraine war, underscores its role in global food security, aligning with SDG 2.

The post-Brexit era presented opportunities for India to renegotiate trade agreements with the UK, prioritizing high-revenue sectors like pharmaceuticals and IT services. Simultaneously, the Ukraine war underscored India’s role in global food security, as increased wheat exports filled supply gaps caused by the conflict. However, this exposed India to potential risks of retaliatory measures, necessitating a careful balance between domestic needs and global demands.

Examples of retaliation policies illustrate the complexities of global trade dynamics. The EU’s restrictions on Indian agricultural exports, citing quality concerns, were perceived as retaliation against India’s trade policies on European goods. Similarly, Indonesia’s tariff on Indian sugar imports in response to palm oil restrictions highlights the interconnectedness of trade policies and retaliation.

Critics argue that India’s high tariffs stifle competition and innovation, while supporters emphasize their role in protecting domestic industries from global market volatility. Future strategies should prioritize aligning retaliation policies with SDGs, promoting low-carbon commodities like organic tea and certified spices. Diversifying trade partnerships with non-traditional markets, such as Africa and Latin America, can reduce dependency on the USA and EU, ensuring economic resilience. Leveraging digital tax policies to ensure fair revenue from multinational corporations and adopting green trade policies, including carbon tariffs, can further align trade strategies with sustainability goals.

To mitigate retaliation risks, India must adopt collaborative approaches, such as bilateral negotiations to address grievances and gradual reduction of tariff peaks. Predictable trade policies and export diversification can build trust with trading partners while reducing reliance on volatile markets. Export promotion schemes like the Remission of Duties and Taxes on Exported Products (RoDTEP) enhance competitiveness, ensuring long-term economic growth.

India’s tax retaliation strategies must strike a balance between protecting domestic industries and fostering open trade relationships. By aligning policies with SDGs and emphasizing sustainability, India can strengthen its position as a global economic powerhouse while mitigating the risks of trade conflicts. The challenge lies in fostering a predictable and collaborative trade environment, ensuring that domestic interests align with international commitments for sustainable and inclusive economic growth.

References

APEDA. (2023). Basmati rice export statistics. Agricultural and Processed Food Products Export Development Authority. Retrieved from  https://www.apeda.gov.in/

Ministry of Earth Sciences (MoES). (2023). Marine product export trends. Government of India. Retrieved from https://www.moes.gov.in/

World Trade Organization (WTO). (2023). India’s trade negotiations and agricultural policies. Retrieved from https://www.wto.org/

---

Declaration:
We hereby declare that the manuscript titled “Tax Retaliation and Trade Policies in India’s Agricultural Sector: Balancing Protectionism and SDGs” is our original work and has not been published elsewhere or submitted for consideration to any other journal or conference. All sources used have been duly acknowledged, and there are no conflicts of interest related to the content presented.