United States International Trade Commission

Investigation No. 332-504

USITC Publication 4107

November 2009

India: Effects of 

Tariffs and Nontariff 

Measures on U.S. 

Agricultural Exports 
Address all communications to 

Secretary to the Commission 

United States International Trade Commission 

Washington, DC 20436

U.S. International Trade Commission

Director, Office of Industries

Karen Laney-Cummings

Director of Operations

Robert A. Rogowsky

COMMISSIONERS 

 

Shara L. Aranoff, Chairman 

Daniel R. Pearson, Vice Chairman 

Deanna Tanner Okun 

Charlotte R. Lane 

Irving A. Williamson 

Dean A. Pinkert
U.S. International Trade Commission

Washington, DC 20436 

www.usitc.gov

Publication 4107 November 2009

India: Effects of Tariffs and Nontariff 

Measures on U.S. Agricultural Exports 

Investigation No. 332-504
This report was prepared principally by the Office of Industries

Project Leader

George S. Serletis 

George.Serletis@usitc.gov 

Deputy Project Leader

Brian Allen 

Brian.Allen@usitc.gov 

 Laura Bloodgood, Joanna Bonarriva, John Fry, John Giamalva, 

Katherine Linton, Brendan Lynch, and Marin Weaver 

Primary Reviewers 

Alexander Hammer and Deborah McNay 

Office of Economics

Michael Ferrantino, Jesse Mora, Jose Signoret, 

and Marinos Tsigas 

Administrative Support 

Phyllis Boone, Monica Reed, 

and Wanda Tolson 

Under the direction of

Jonathan R. Coleman, Chief

Agriculture and Fisheries Division
1

Abstract 

This report describes and analyzes policies and other factors that affect U.S. agricultural 

exports to India. The findings suggest that India’s high agricultural tariffs are a 

significant impediment to U.S. agricultural exports and that certain Indian nontariff 

measures (NTMs), including sanitary and phyosanitary measures, substantially limit or 

effectively prohibit certain U.S. agricultural products. Agriculture is vital to India’s 

economy, accounting for a substantial share of employment (60 percent) and GDP 

(17 percent). Since India is largely self-sufficient in agricultural production, agricultural 

imports represent a small share of Indian consumption and are concentrated in a few 

products. Broad intervention by the Indian government in the agricultural sector, 

including restrictive and variable trade policies, are designed to protect domestic 

producers and consumers. The study provides an overview of Indian agricultural 

production, imports, and consumption during 2003–08; Indian tariffs and NTMs; the 

Indian food marketing and distribution system; and Indian government regulations 

relating to the agricultural market, including foreign direct investment and intellectual 

property rights policies. The study also provides economic modeling analysis of the 

effects of Indian tariffs and certain NTMs on U.S. agricultural exports. 

i

Executive Summary 

Indian economic and demographic indicators suggest a market with strong potential for 

U.S. agricultural exports. India has a large and expanding population (1.2 billion 

consumers, or one-sixth of the world’s population), and its annual gross domestic product 

(GDP) growth rate of more than 8 percent over the past five years is among the highest in 

the world. India also has a sizable and growing middle class, expected to reach 

500 million by 2025, which includes many affluent urban consumers interested in 

Western-style foods. Yet, despite robust U.S. agricultural exports worldwide, U.S. 

exports to India are limited, both in value and in the range of products. In 2008, India 

received less than one-half of 1 percent of total U.S. agricultural exports and ranked 39th 

among overseas markets for U.S. agricultural products. Moreover, U.S. agricultural 

goods accounted for only 6 percent of the Indian agricultural import market in 2008, 

compared to an 18 percent share of global markets.

This report responds to a request by the Senate Committee on Finance (Committee) for 

information and analysis on the effects of Indian tariffs and nontariff measures (NTMs) 

on U.S. agricultural exports and U.S. agricultural firms operating in India. Specifically, 

the Committee requested that the report provide (1) an overview of the Indian agricultural 

market, including recent trends in consumption, imports, and domestic supply; (2) a 

description of the principal measures affecting Indian agricultural imports, including 

tariffs, sanitary and phytosanitary measures, food regulations, packaging and labeling 

requirements, pricing policies, intellectual property policies, and customs procedures; 

(3) information on Indian government regulations, including state regulations, covering 

agricultural markets and foreign direct investment (FDI) affecting U.S. agricultural 

products in India; (4) an evaluation of the impact of India’s food marketing and 

distribution system, including market structure, transportation infrastructure, and coldstorage capacity, on U.S. agricultural products in the Indian market; and (5) a quantitative 

analysis of the economic effects of tariffs and, to the extent possible, NTMs on U.S. 

agricultural exports to India. The major findings of this report are summarized below. 

Major Findings and Observations 

Indian Tariffs and Nontariff Measures 

Very high Indian agricultural tariffs are a substantial impediment to U.S. 

agricultural exports. 

Indian bound tariff rates on agricultural products average 114 percent, with the majority 

of bound tariff rates between 50 and 150 percent. These rates are among the highest in 

the world and are much higher than the average bound rates of other major developing 

countries, such as Brazil (36 percent) and China (16 percent), or for the top 10 U.S. 

agricultural export markets (34 percent). Product groups with the highest average bound 

and applied tariff rates are generally those considered to be import sensitive by the Indian 

government (table ES.1). 

Indian applied tariff rates on agricultural products range from 10 to 150 percent and are 

levied almost exclusively on an ad valorem basis. Average applied tariff rates have 
ii

TABLE ES.1 India: Average bound and applied tariffs by selected product groups, as of April 2009 (percent)

Product groups Bound tariff Applied tariff

Vegetable fats and oils 227 24

Alcoholic beverages 150 133

Oilseeds 130 30

Grains 113 40

Processed fruits and vegetables 111 30

Fresh and dried fruits, vegetables, and nuts, excluding almonds 100 30

Sources: Government of India, Ministry of Finance, Central Board of Excise and Customs, Customs Tariff 

2008/09; Government of India, Ministry of Finance, Central Board of Excise and Customs, various Notifications 

of Customs. 

Note: Averages are rounded to whole numbers. 

declined significantly from 113 percent in 1991, prior to Indian economic liberalization, 

to approximately 34 percent in 2007, but they remain among the highest in the world. 

The wide gap between high WTO bound and lower applied tariff rates allows India 

to vary its rates frequently and substantially, which creates uncertainty for U.S. 

agricultural exporters. 

For many agricultural products, India’s WTO bound tariff levels are much higher than its 

applied rates. These gaps allow the Indian government to modify its tariff rates in 

response to domestic and international market conditions. The Indian government 

frequently changes its rates on heavily traded international commodities, such as wheat, 

rice, sugar, and vegetable oils, to mitigate food price inflation, depending on market 

conditions. If domestic agricultural prices rise, tariff rates are lowered to create 

downward pressure on those prices to minimize the impact on consumers; when prices 

fall, the rates are often increased to protect farmers by raising the overall cost of imports. 

This tariff rate variability and the complex notification process for announcing tariff-rate 

changes create uncertainty and are an additional impediment for U.S. agricultural 

exporters. 

A wide array of Indian NTMs substantially limits or effectively prohibits certain 

U.S. agricultural exports. 

Indian NTMs raise the cost of exporting U.S. agricultural products to India and, in some 

cases, effectively prohibit U.S. products from the Indian market (table ES.2). India also 

links NTMs to domestic policies by relaxing NTMs when imports are required to 

alleviate food price inflation or food shortages. For example, certain phytosanitary 

requirements on key commodities such as wheat are reportedly adjusted by the Indian 

government when imports are needed to control prices and adjust buffer stocks. 

Indian Agricultural Imports 

Indian agricultural imports are relatively small and concentrated in a few bulk 

commodities. 

Indian agricultural imports accounted for just 1 percent of global agricultural trade in 

2008 and supplied only 3 percent of Indian agricultural demand. The limited range of 
iii

Indian agricultural imports tends to consist of staple foods, such as vegetable oils and 

pulses (peas, beans, and lentils), of which there is chronic undersupply from domestic 

production (table ES.3). In 2008, vegetable oils (mostly palm oil and soybean oil), pulses 

and nuts accounted for 60 percent of all Indian agricultural imports. Notably, Indian 

imports of food grains (excluding wheat), feed grains, oilseeds, meat, dairy products, 

sweeteners, and processed foods were negligible in 2008. India is self-sufficient in many 

of these products. 

TABLE ES.2 India: Nontariff measures facing certain U.S. agricultural exports, 2009 

Measure Application Product 

Sanitary/phytosanitary measures 

 Health standards 

 

 Contamination standards 

 Rules for genetically modified 

 organisms 

 

 Fumigation requirements 

Exceed internationally accepted standards 

Inconsistent with international practices 

Effectively ban imports because of 

burdensome approval process 

Require destructive or unavailable 

treatment processes 

Poultry, swine, dairy 

Wheat, barley 

Corn, certain processed 

foods 

Pulses, certain fruits 

Quality standards Exceed internationally accepted standards Certain processed foods, 

hides and skins, bovine 

semen 

Labeling and packaging rules Preclude agricultural product distribution 

without mandated disclosures

Processed foods 

Bans, monitoring, and licensing 

 requirements 

Place restrictions on free movement of 

imports 

Beef, poultry, edible oils, 

cereals, nuts, corn 

State trading enterprises Restrict imports to certain state-sanctioned 

entities 

Food grains 

Customs procedures Create uncertainty regarding paperwork 

and valuation 

All 

Notice and comment procedures Hinder information dissemination about 

rules affecting imports 

All 

Corruption Raises costs through payment of bribes All 

Source: Compiled by Commission staff. 

TABLE ES.3 India: Agricultural imports at a glance 

 United States World

Indian agricultural imports, 2008 $497 million $8,533 million

Indian agricultural import average annual growth, 

2003–08 

14.5% 12.7%

Top five Indian agricultural imports, 2008 Almonds, cotton, peas, 

apples, soybean oil 

Palm oil, soybean oil, peas, 

cashews, beans

Top five Indian agricultural suppliers, 2006–08 

average 

(

a

) Indonesia, Argentina, Burma, 

EU-27, Canada

Source: GTIS, World Trade Atlas Database (accessed June 8, 2009). 

a

Not applicable
iv

U.S. agricultural products face strong competition in the Indian import market 

from low-cost international suppliers. 

For certain products, limited Indian imports from the United States reflect market 

competition from other global suppliers. Indian traders and consumers are reportedly very 

price sensitive and, in many cases, will not pay a premium for higher-quality U.S. 

products. 

Indian Agricultural Policy Objectives 

Restrictive Indian agricultural trade policies should be viewed in the context of 

three core domestic policy objectives: food security, food self-sufficiency, and 

income support for farmers. 

Indian agricultural trade policies are consistent with the government’s long-standing 

policies of protecting domestic producers from foreign competition and consumers from 

domestic and global price fluctuations for food staples such as wheat, rice, and vegetable 

oils. The Indian government explicitly links tariffs and NTMs to its domestic policies to 

meet these objectives. The tension between the desire to raise food prices for the benefit 

of farmers and the desire to lower them for the benefit of consumers has caused the 

Indian government to intervene heavily in the farm sector with multiple policy 

instruments. 

Broad government intervention in the agricultural sector responds to current and 

historical challenges faced by Indian policymakers and contributes to the low level 

of U.S. agricultural exports. 

Significant challenges faced by India include a history of food shortages, a large segment 

of the population dependent on the agricultural sector for its livelihood, and hundreds of

millions of poor Indians who spend most of their incomes on food. More than one-third 

of the population, mostly rural Indians, still lives on less than $1 per day. Indian farmers 

are a politically powerful voting bloc that has a major influence on Indian domestic and 

international trade policies. 

Indian agricultural support policies promote domestic production at the expense of 

imports. These policies include input support programs, output price support programs, 

and farmer income programs. Input supports focus primarily on fertilizer, irrigation water, 

electricity, diesel fuel, and seeds. Output price supports consist largely of minimum 

support prices for certain staple crops. Farmer income programs lower the cost of 

borrowing to farmers and boost wages for farm laborers. 

Agricultural Consumption 

Indian per capita caloric consumption, centered on staple foods, is low compared to 

that of other developing countries, but is rising with income growth.

Indian food consumption primarily consists of grains (wheat and rice), pulses, edible oils, 

and potatoes. Grains account for almost two-thirds of Indian daily caloric intake. In 

recent years, per capita consumption of many food products has risen owing to GDP 
v

growth, and Indians have added more nonstaple food items, such as fruits and vegetables, 

dairy products, and meat, to their diet. Despite the rise in caloric intake over time, Indians 

still consume fewer calories per capita than people in many other developing countries. 

Rising incomes among middle-class Indians are driving increased consumption of 

nonstaple foods. 

The rapid development of the Indian economy and strong income growth has led to an 

increase in the variety of foods consumed, particularly among India’s growing middle 

class of 200–300 million consumers. Middle- and upper-class Indians, mainly in urban 

areas, are increasingly consuming imported foods or multinational-branded foods 

produced domestically. 

Agricultural Sector Characteristics 

Agriculture is vital to the Indian economy. 

Indian agricultural production, valued at $176 billion in 2007, represented 17 percent of 

Indian GDP. In contrast, agricultural production in the United States accounted for 

1 percent of U.S. GDP. Agriculture provides livelihoods for more than 60 percent of the 

population, and millions of small-scale, poor farmers account for more than one-half of 

total agricultural production. 

India is a major global producer of agricultural products and is largely selfsufficient. 

India has the second-largest arable land base after the United States and is endowed with 

the full spectrum of the world’s climates. As a result, India produces a wide variety of 

agricultural products and is a major global producer of grains (wheat, rice, and corn), 

dairy, fruits and vegetables, and livestock. Domestic production supplies more than 

97 percent of Indian agricultural consumption. Food self-sufficiency has been a focus of 

the Indian government since the Green Revolution in the 1960s. 

Indian Marketing and Distribution System 

Despite the size of the Indian market, inefficiencies in India’s marketing and 

distribution system make it less attractive for U.S. agricultural products.

Marketing and distribution inefficiencies result from high levels of government 

intervention, poor quality and limited availability of storage and transportation 

infrastructure, a lack of alternative sales outlets for farmers, several layers of middlemen, 

limited access to marketing information, inadequate grades and standards, and few tools 

for risk management. These inefficiencies discourage the entry of U.S. firms into the 

Indian market and increase the costs for firms already in the market. However, 

Commission research suggests that for most products, these market and distribution 

inefficiencies do not disproportionately affect U.S. exports or U.S. agricultural firms 

operating in India. 
vi

U.S. Foreign Direct Investment 

U.S. firms are active participants in the Indian food sector through FDI. 

U.S. FDI in India, most prominently in food and beverage processing, alcoholic beverage 

industries, and quick-service restaurants, permits U.S. agricultural firms to access Indian 

consumers directly, while bypassing many trade barriers. U.S. firms report that the Indian 

government encourages FDI and that they generally have not experienced market access 

or national treatment barriers. Many U.S. firms prefer to operate in India through joint 

ventures rather than wholly owned affiliates. Local partners can be particularly useful in 

helping U.S. firms navigate through central and state government bureaucracies and the 

intricacies of local business customs. 

The Indian market offers incentives and disincentives for U.S. agriculture-related 

FDI. 

Incentives for U.S. FDI include access to the large and growing Indian consumer market, 

an enhanced ability to adapt products to local needs and requirements, and the ability to 

bypass tariffs and NTMs that may inhibit U.S. exports. The Indian government also 

provides some regulatory FDI incentives, such as tax rebates linked to Special Economic 

Zones. Disincentives to FDI include a ban on FDI in most farming activities, occasionally 

difficult relations with joint venture partners, complex licensing and regulatory systems, 

and a disjointed national market in which it is difficult to achieve economies of scale 

because of logistical constraints and widely varying state regulations. 

Intellectual Property Rights 

Indian intellectual property rights (IPR) policies reportedly are of critical 

importance to U.S. seed firms operating in India, but U.S. firms in most other 

agricultural sectors did not identify IPR as a significant trade or investment barrier.

Three factors identified by U.S. and global seed firms as critical to participation in the 

Indian market are strong and effective IPR laws, market-based pricing, and science-based 

regulatory review of new seed technologies. India recently enacted a plant variety 

protection law and patent provisions for seed biotechnology inventions, but broad 

exceptions in the laws, delayed implementation, and uncertainty about enforcement 

undermine the effectiveness of these IPR protections. State-level restrictions on seed 

prices and time-consuming and unpredictable regulatory review also hinder the 

commercialization of new seed technologies. In the absence of effective regulatory 

review and IPR enforcement, illegal and counterfeit seed markets have flourished, to the 

detriment of legitimate products. 

Quantitative Findings 

Indian tariffs are estimated to have reduced U.S. agricultural exports by as much as 

$291 million in 2007. 

Economic simulations suggest that Indian agricultural tariffs reduced U.S. agricultural 

exports to India by $200–291 million in 2007. In the absence of Indian tariffs, total U.S. 

exports to India would have been 42–61 percent higher (table ES.4). 
vii

TABLE ES.4 India: Simulated effects of removing Indian tariffs on selected U.S. food and agricultural exports, 2007

Items Average tariff rate Simulated change in U.S. exports 

 Percent Million $

Almonds, fresh or dried, inshell 20 27–33

Soybean oil 40 17–22

Fresh apples 50 17–21

Cotton 10 3–26

Fresh grapes 30 4–5

All other (a

) 132–184

 Total 24 200–291

Source: Commission economic modeling simulations. 

a

Not applicable

In the absence of Indian tariffs and in the span of a few years, U.S. exports could expand 

more rapidly than modeling simulations indicate because of the possible additional 

effects of economic growth in India and market development by U.S. exporters, two 

factors not included in the simulation. 

Economic simulations suggest that Indian NTMs restricted U.S. exports of wheat by 

more than $146 million in 2007. 

Economic simulations were conducted on a set of U.S. agricultural product sectors for 

which (1) Indian import prices were higher than world prices and (2) Commission 

research indicated that specific NTMs were impeding U.S. agricultural exports. These 

sectors include dairy products (lactose, whey products, and nonfat dry milk); beverages 

(wine and spirits); cereal grains, other than wheat (corn and other grains); and meat 

products (pork and poultry), which have positive NTM price gaps. Simulations were also 

conducted for wheat, for which U.S. exports to the world are large but U.S. exports to 

India were zero in 2007 owing to NTM restrictions. The estimated increase in U.S. 

exports of wheat following removal of Indian NTMs would have been $146–334 million 

in 2007. The increase in other U.S. exports following NTM removal would have been 

significantly smaller (table ES.5). 

TABLE ES.5 India: Simulated effects of removing certain NTMs on selected U.S. food and agricultural exports, 

2007

Items Estimated tariff equivalent of NTMs Simulated change in U.S. exports

 Percent Million $ 

Wheat (a) 146–334 

Dairy products 27 15–20 

Beverages 75 6–9 

Other cereal grainsb

 151 2–8 

Meat products 8 0.08–0.10 

Source: Commission economic modeling simulations. 

 aBecause there were no U.S. wheat exports to India in the 2007 base year, there is no estimated tariff 

equivalent. 

 bGrains other than wheat and rice, such as corn, sorghum, and oats. 

ix

CONTENTS 

Page

Abstract................................................................................................................................... 1

Executive Summary....................................................................................................... i

Acronyms and Terms................................................................................................... xv

Chapter 1 Introduction............................................................................................. 1-1

 Scope of the report .............................................................................................................. 1-3

 India’s policy framework .................................................................................................... 1-5

 Policy environment.......................................................................................................... 1-7

 Policy objectives.............................................................................................................. 1-8

 Policy instruments ........................................................................................................... 1-9

 Approach ............................................................................................................................. 1-10

Chapter 2 Indian Agricultural Trade ........................................................... 2-1

 Overview ............................................................................................................................. 2-1

 Imports ................................................................................................................................ 2-1

 Imports by product .......................................................................................................... 2-1

 Imports by major trading partner..................................................................................... 2-9

 Exports ................................................................................................................................ 2-9

 Exports by product .......................................................................................................... 2-11

 Exports by major trading partner..................................................................................... 2-16

Chapter 3 Domestic Consumption................................................................... 3-1

 Overview ............................................................................................................................. 3-1

 Consumption ....................................................................................................................... 3-1

 Food consumption patterns............................................................................................. 3-1

 Caloric intake ................................................................................................................. 3-2

 Factors affecting consumption ............................................................................................ 3-4

 Population size and demographics ................................................................................. 3-4

 Income and expenditure ................................................................................................. 3-5

 Income levels ............................................................................................................. 3-5

 Income distribution .................................................................................................... 3-8

 Spending on food ....................................................................................................... 3-11

 Food preferences ............................................................................................................ 3-13

 Regional variation ...................................................................................................... 3-15

 Vegetarianism ............................................................................................................ 3-15

Chapter 4 Indian Agricultural Production and Policies................ 4-1

 Overview ............................................................................................................................. 4-1

 Production ........................................................................................................................... 4-2

 General production patterns............................................................................................. 4-2

 Recent production trends ................................................................................................. 4-3

 The farm sector.................................................................................................................... 4-5

 Food processing sector ........................................................................................................ 4-6
x

CONTENTS―Continued

Page

Chapter 4 Indian Agricultural Production and Policies— 

Continued

 Indian government policies affecting farm-level production .............................................. 4-7

 Output price support policies........................................................................................... 4-10

 Input support programs.................................................................................................... 4-11

 Fertilizer support programs .......................................................................................... 4-11

 Irrigation water support................................................................................................ 4-12

 Electricity and diesel support programs ....................................................................... 4-12

 Government support to farmers for seeds .................................................................... 4-13

 Farmer welfare programs................................................................................................. 4-14

 Low-interest loans for farmers ..................................................................................... 4-14

 Debt write-offs for farmers........................................................................................... 4-14

 National Rural Employment Guarantee Act................................................................. 4-14

 Indian government policies affecting food processing........................................................ 4-15

 Recent Indian government incentives for the food processing sector ............................. 4-15

 Food safety standards and regulations ............................................................................. 4-16

Chapter 5 Tariffs............................................................................................................ 5-1

 Overview ............................................................................................................................. 5-1

 Bound tariffs and tariff-rate quotas ..................................................................................... 5-1

 Applied tariffs ..................................................................................................................... 5-4

 Tariff variability .................................................................................................................. 5-6

 Tariff adjustment process .................................................................................................... 5-9

 Adjustments to product classifications................................................................................ 5-10

 Reference prices .................................................................................................................. 5-11

 Additional border fees and taxes ......................................................................................... 5-11

 Additional duty............................................................................................................... 5-11

 Additional duty of customs ............................................................................................ 5-12

 Landing fees and educational cess ................................................................................. 5-13

 Free trade agreements.......................................................................................................... 5-14

 Simulated effects of Indian food and agricultural applied tariffs........................................ 5-15

Chapter 6 Nontariff Measures............................................................................ 6-1

 Overview ............................................................................................................................. 6-1

 Sanitary and phytosanitary issues........................................................................................ 6-2

 International health standards ......................................................................................... 6-3

 Contamination standards................................................................................................. 6-5

 Rules for genetically modified organisms ...................................................................... 6-7

 Fumigation requirements ................................................................................................ 6-9

 Quality standards................................................................................................................. 6-9

 Labeling and packaging rules.............................................................................................. 6-10

 Bans, monitoring, and licensing requirements .................................................................... 6-11

 Bans ................................................................................................................................. 6-11

 Monitoring ....................................................................................................................... 6-11

 Licensing requirements.................................................................................................... 6-12

 

 
xi

CONTENTS―Continued

Page

Chapter 6 Nontariff Measures—Continued

 State trading enterprises ...................................................................................................... 6-13

 Customs procedures ............................................................................................................ 6-15

 Notice and comment procedures ......................................................................................... 6-15

 Corruption .......................................................................................................................... 6-17

 Modeling of nontariff measures .......................................................................................... 6-18

Chapter 7 Marketing and Distribution System..................................... 7-1

 Overview ............................................................................................................................. 7-1

 Market structure .................................................................................................................. 7-1

 First point of sale............................................................................................................. 7-4

 State-regulated mandis................................................................................................. 7-4

 Alternative markets...................................................................................................... 7-4

 Direct marketing ...................................................................................................... 7-5

 Private mandis ......................................................................................................... 7-6

 Contract farming...................................................................................................... 7-6

 Further distribution.......................................................................................................... 7-6

 Government procurement............................................................................................ 7-6

 Wholesale and processors............................................................................................ 7-7

 Consumption ................................................................................................................... 7-7

 Government distribution.............................................................................................. 7-7

 Retail and hotel, restaurant, and institutional (HRI) sales........................................... 7-8

 Attributes of an efficient marketing and distribution system.............................................. 7-11

 Concentration .................................................................................................................. 7-11

 Market information.......................................................................................................... 7-11

 Grades and standards....................................................................................................... 7-12

 Risk management ............................................................................................................ 7-13

 Government intervention................................................................................................. 7-14

 Transaction costs ............................................................................................................. 7-15

 Market integration........................................................................................................ 7-15

 Storage ......................................................................................................................... 7-15

 Electricity..................................................................................................................... 7-16

 Transportation .............................................................................................................. 7-16

 Effects on U.S. exports...................................................................................................... 7-18

Chapter 8 Foreign Direct Investment in Indian Agricultural 

 and Food-Related Industries...................................................................... 8-1

 Overview ............................................................................................................................. 8-1

 FDI regulations and trends .................................................................................................. 8-2

 Food processing and nonalcoholic beverages ..................................................................... 8-6

 Incentives for FDI in food processing ............................................................................. 8-8

 Disincentives for FDI in food processing ........................................................................ 8-11

 Alcoholic beverages ............................................................................................................ 8-13

 Quick-service restaurants .................................................................................................... 8-16
xii

CONTENTS―Continued

Page

Chapter 9 Intellectual Property Rights and Related Policies 

 in the Indian Seed Sector............................................................................... 9-1

 Overview ............................................................................................................................. 9-1

 Structure of the Indian seed market..................................................................................... 9-2

 Intellectual property rights protection for seeds.................................................................. 9-2

 Plant variety protection.................................................................................................... 9-3

 Patent protection .............................................................................................................. 9-6

 State pricing restrictions...................................................................................................... 9-8

 Biosafety regulation ............................................................................................................ 9-10

Appendixes 

A. Request letter............................................................................................................................ A-1

B. Federal Register notice ............................................................................................................ B-1

C. Hearing witnesses..................................................................................................................... C-1

D. Summary of views of interested parties ................................................................................... D-1

E. Potential for U.S. agricultural products in the Indian market................................................... E-1

F. Indian agricultural production and consumption by sector ...................................................... F-1

G. Union and state/union territory jurisdiction over Indian agricultural matters .......................... G-1

H. Analytical framework and assumptions for economic simulations.......................................... H-1

Boxes 

2.1. Soybean oil............................................................................................................................. 2-7

2.2. Indian agricultural export restrictions .................................................................................... 2-11

3.1. Indian pork consumption........................................................................................................ 3-5

3.2. Indian consumers and price.................................................................................................... 3-6

3.3. Indian consumption of imported fruits and vegetables .......................................................... 3-7

3.4. Indian almond consumption ................................................................................................... 3-8

4.1. The central government’s five year plan for agriculture ........................................................ 4-9

4.2. Does the minimum support price program really affect U.S. exports? .................................. 4-11

5.1. The impact of tariffs and additional fees on wine retail prices .............................................. 5-13

6.1. Milk and milk products .......................................................................................................... 6-4

6.2 Wheat ..................................................................................................................................... 6-6

6.3. Corn ..................................................................................................................................... 6-8

7.1. Farmer cooperatives: The Anand Pattern and Mother Dairy ................................................. 7-5

8.1. FDI in India’s poultry market................................................................................................. 8-7

8.2. PepsiCo operations in India.................................................................................................... 8-9

8.3. Restrictions on foreign joint venture partners ........................................................................ 8-12

9.1. The UPOV system for plant variety protection...................................................................... 9-4

9.2. Bt cotton in India.................................................................................................................... 9-9

9.3. Illegal and counterfeit cottonseeds in India............................................................................ 9-11
xiii

CONTENTS―Continued

Page

Figures 

1.1. India: Flowchart of the agricultural system ........................................................................ 1-4

1.2. India: Agricultural policy framework ................................................................................. 1-6

2.1. India: Agricultural trade balance, 2003–08......................................................................... 2-2

2.2. India: Agricultural imports from the world by product share, 2006–08 average................ 2-4

2.3. India: Agricultural imports from the United States by product share, 2006–08 average.... 2-6

2.4. India: Major agricultural imports by trading partner, 2006–08 average ............................. 2-7

2.5. India: Agricultural imports by major trading partner, 2006–08 average ............................ 2-10

2.6. India: Agricultural exports to the world by product share, 2006–08 average..................... 2-14

2.7. India: Agricultural exports to the United States by product share, 2006–08 average......... 2-15

2.8. India: Agricultural exports by major trading partner, 2006–08 average............................. 2-16

3.1. India and selected countries: Per capita daily consumption of calories, average 

 2001–03........................................................................................................................... 3-3

3.2. India: Share of per capita daily calorie consumption by food item, average 2001–03 ....... 3-4

3.3. India: States and union territories ....................................................................................... 3-10

3.4. India: Share of food expenditure by food item in rural areas, fiscal year 2006/07 ............. 3-12

3.5. India: Share of food expenditure by food item in urban areas, fiscal year 2006/07............ 3-12

5.1. India: Average applied and bound tariff rates by selected product groups, 2009 ............... 5-6

5.2. India: Applied tariffs for wheat and rice, by quarter, Jan. 2006–April 2009 ...................... 5-8

5.3 India: Applied tariffs for selected vegetable oils, by quarter, Jan. 2005–Jan. 2009............ 5-8

7.1. India: Agricultural marketing and distribution structure..................................................... 7-3

8.1. India: Food-related FDI projects in India by business activity, 2003–08 ........................... 8-5

8.2. India: Food-related greenfield FDI projects by source country, 2003–08 .......................... 8-5

9.1. Plant variety protection applications filed in India, 2007–present...................................... 9-6

F.1. India: Leading state agricultural production for select commodities.................................. F-6

F.2. India: Selected total meat consumption, percent share, 2003 ............................................. F-13

H.1. Partial equilibrium model and linkages to general equilibrium model: Indian supply, 

 demand, and trade for a general equilibrium product group that contains two 

 hypothetical HS6 products .............................................................................................. H-6

Tables 

ES.1. India: Average bound and applied tariffs by selected product groups, as of April 2009.... ii

ES.2. India: Nontariff measures facing certain U.S. agricultural exports, 2009........................... iii

ES.3. India: Agricultural imports at a glance................................................................................ iii

ES.4. India: Simulated effects of removing Indian tariffs on selected U.S. food and 

 agricultural exports, 2007................................................................................................ vii

ES.5. India: Simulated effects of removing certain NTMs on selected U.S. food and 

 agricultural exports, 2007................................................................................................ vii

1.1. India: Agricultural trade at a glance.................................................................................... 1-2

2.1. India: Agricultural imports from the world and the United States by product, 2003–08.... 2-2

2.2. India: Agricultural imports by major trading partner, 2003–08.......................................... 2-10

2.3. India: Agricultural exports to the world and the United States by product, 2003–08......... 2-12

2.4. India: Agricultural exports by major trading partner, 2003–08 .......................................... 2-16
xiv

CONTENTS―Continued

Page

Tables—Continued

3.1. India: Total domestic consumption of select commodities, MYs 2003/04–2008/09.......... 3-2

3.2. India: Per capita consumption of select commodities, MYs 2003/04–2008/09.................. 3-3

3.3. India: Ten highest per capita income states and union territories, FY 2005/06.................. 3-9

3.4. India: Share of household consumer expenditures spent by rural and urban consumers 

 on food and beverages, FYs 2004/05–2006/07 ............................................................... 3-11

4.1. India: Agricultural production by commodity, MYs 2003/04–2007/08 ............................. 4-4

4.2. India: Summary of central government’s key funding and regulations for agricultural 

 production ....................................................................................................................... 4-8

5.1. India: Average bound and applied tariff rates by selected product groups and 

 products, as of April 2009................................................................................................ 5-2

5.2. India: Tariff-rate quotas on agricultural products, as of January 2008 ............................... 5-3

5.3. India: U.S. food and agricultural exports and simulated effects of the absence of 

 Indian tariffs, by product group, 2007 ............................................................................. 5-18

5.4. India: U.S. food and agricultural exports and simulated effects of the absence of 

 Indian tariffs, top 50 HS 6-digit products, 2007 ............................................................. 5-19

6.1. India: Nontariff measures facing certain U.S. agricultural exports, 2009........................... 6-2

6.2. India: Estimated economic effects of removing NTMs on U.S. exports, 2007 .................. 6-19

6.3. India: Estimated tariff equivalents of Indian NTMs, 2005–07 ........................................... 6-20

7.1. India: Characteristics of the agricultural marketing and distribution system and its 

 effects on imports............................................................................................................. 7-2

7.2. India: Food retail establishments and characteristics by outlet type................................... 7-10

8.1. India: Specific FDI regulations in certain food-related industries ...................................... 8-2

8.2. India: Agriculture-related FDI inflows, by industry ........................................................... 8-4

8.3. India: Identified greenfield FDI projects in food-related industries, 2003–08.................... 8-4

8.4. India: U.S. majority acquisitions of Indian food companies, 2003–08............................... 8-6

9.1. Major differences between Indian and U.S. plant variety protection laws ......................... 9-5

9.2. Major differences between Indian and U.S. plant-related patent provisions ...................... 9-7

9.3. India: Patents granted to U.S. and other global seed firms for biotechnology, 2007–09.... 9-7

E.1. India: U.S. agricultural products with sales potential ......................................................... E-4

F.1. India: Agricultural production by commodity, MYs 2003/04–2007/08 ............................. F-4

F.2. India: Government procurement and distribution of rice and wheat, MYs 2004/05– 

 2008/09............................................................................................................................. F-4

H.1. GTAP model sectors and number of food and agricultural HS6 products contained 

 in each sector.................................................................................................................... H-4

H.2. Values of partial equilibrium model parameters ESM and ETG........................................... H-7

H.3. India: Estimated effects on U.S. exports of removing certain Indian support payments, 

 2007.................................................................................................................................. H-12
xv

AAY Antodaya Anna Yojana, a support program for the poorest households 

Agmark Grading system of the Directorate of Marketing and Inspection of the 

 Ministry of Agriculture 

AI Avian influenza 

AP State of Andhra Pradesh, India 

APHIS Animal and Plant Health Inspection Service, USDA 

APL Above poverty line 

APMC Agricultural Product Marketing Commission 

APMRA Agricultural Product Marketing Regulation Act 

APTA Asia-Pacific Trade Agreement 

ASEAN Association of Southeast Asian Nations 

ASTA Average ship turn-around time 

BPL Below poverty line 

Bt Bacillus thuringiensis

CAGR Compound annual growth rate 

CCI The Cotton Corporation of India 

CES Constant elasticity of substitution 

CET Constant elasticity of transformation 

c.i.f. Cost, insurance, and freight 

Codex Codex Alimentarius Commission 

cold chain Temperature-controlled storage and transportation 

CONCOR Container Corporation of India 

crore 10,000,000 

CVD Countervailing duty 

CY Crop year 

DUS Distinctiveness, uniformity, and stability 

ECA Essential Commodities Act 

e-Choupal Online source of price, credit, and transportation information for India’s 

 farmers 

EPA U.S. Environmental Protection Agency 

ERS Economic Research Service, USDA 

EU European Union 

FAO Food and Agriculture Organization of the United Nations 

FAOSTAT FAO’s online statistical database 

FAS Foreign Agricultural Service, USDA 

FCI Food Corporation of India 

FDA U.S. Food and Drug Administration 

FDI Foreign direct investment 

f.o.b. Free on board 

FSSA Food Safety and Standards Authority, Ministry of Health and Family 

 Welfare, Government of India 

FTA Free trade agreement 

FY Fiscal year 

GDP Gross domestic product 

GE General equilibrium 

GFCF Gross fixed capital formation 

GM Genetically modified 

ACRONYMS AND TERMS 
xvi

ACRONYMS AND TERMS—Continued

GMO Genetically modified organism 

Golden Quadrilateral National highways linking Delhi, Mumbai, Chennai, and Kolkata 

GTAP Global Trade Analysis Project 

GTIS Global Trade Information Services 

HCI Hindi Times, CNN, and IBN 

HRI Hotel, restaurant, and institutional 

HS WTO Harmonized Tariff System 

HS6 Six-digit level of the Harmonized System 

IFPRI International Food Policy Research Institute 

IPR Intellectual property rights 

jowar Sorghum 

kirana Small, “mom and pop”store 

lakh 100,000 

levy rice A specified portion of the rice procured from farmers that millers are required to 

 sell to the central government at a set price 

MAcMapHS6 Market Access Map at the HS6 level 

mandi Regulated market into which most raw agricultural products in India are sold 

MEP Minimum export price 

Mercosur Common Market of the South 

MFN Most favored nation 

MIS Marketing Intervention Scheme 

MMB Mahyco-Monsanto Biotech 

mmt Million metric tons 

Model Act State Agricultural Produce Marketing (Development and Regulation) Act of 2003 

MOFPI Ministry of Food Processing Industries, Government of India 

Mother Dairy A farmer cooperative, and the largest brand of milk in India 

MSP Minimum support price 

mt Metric ton 

NAFED National Agricultural Marketing Federation 

n.d. No date 

n.e.c Not elsewhere classified 

n.e.s.o.i Not elsewhere specified or indicated 

NREGA National Rural Employment Guarantee Act 

NTM Nontariff measure 

OECD Organisation for Economic Co-operation and Development 

OIE World Organization for Animal Health (also known by its original name, 

 International Organization for Epizootics; OIE reflects French acronym). 

OPV Open-pollinated variety 

PDS Public Distribution System 

PE Partial equilibrium 

PFA Prevention of Food Alteration Act 

PPV&FR Protection of Plant Varieties and Farmers’ Rights Act, 2001 

PSD Production, supply, and distribution 

PSS Price Support Scheme 

PTA Preferential trade agreement 

ragi Finger millet 
xvii

ACRONYMS AND TERMS—Continued

RGGVY Rajiv Gandhi Grameen Vidyutikaran Yojana rural electrification program 

RoW Rest-of-the-world 

Rs. Indian rupees 

rythu bazaars Type of direct market established in Andhra Pradesh 

SAFTA South Asian Free Trade Agreement 

SEZ Special economic zone 

SPS Sanitary and phytosanitary 

SSI Small-scale industries 

STE State trading enterprise 

TBT Technical barrier to trade 

TRAINS Trade Analysis and Information System 

TRIPS Trade-Related Aspects of Intellectual Property Rights Agreement 

TRQ Tariff-rate quota 

UAE United Arab Emirates 

UNCTAD UN Conference on Trade and Development 

UP State of Uttar Pradesh, India 

UPOV International Convention for the Protection of New Varieties of Plants 

USDA U.S. Department of Agriculture 

USITC U.S. International Trade Commission 

USTR U.S. Trade Representative 

UT Union territories 

uzhavar sandhai Type of direct market established in Tamil Nadu 

VAT Value-added tax 

WITS World Integrated Trade Solution 

 

1-1

CHAPTER 1 

Introduction 

The economic prosperity of the U.S. agricultural sector is highly dependent on access to 

foreign markets. As the leading global supplier of agricultural products, the United States 

exported $116 billion in goods in 2008, representing more than one-third of U.S. farm 

cash receipts.1

 Between 2003 and 2008, U.S. agricultural exports almost doubled in value. 

During this period, the value of U.S. agricultural exports to developing countries 

increased almost twice as fast as the value of exports to developed countries, and the 

share of U.S. agricultural exports sent to developing countries rose from about one-half to 

two-thirds. 2 Growth in U.S. agricultural exports was particularly strong to many 

developing Asian countries, such as China, Indonesia, and Vietnam—countries 

characterized by rapid rates of per capita income growth and a high propensity to spend 

rising incomes on food. 

The Indian market holds significant sales potential for U.S. agricultural products. India’s 

annual gross domestic product (GDP) growth rate, averaging more than 8 percent during 

the last five years, is among the highest in the world.3

 India has a large and expanding 

population (1.2 billion consumers, or one-sixth of the world population), with a middle 

class expected to reach 500 million by 2025.4

 Its population is among the youngest in the 

world and includes many affluent urban consumers interested in Western-style foods, as 

evidenced by the substantial recent growth for U.S.-based firms such as McDonald’s, 

KFC,5

 and Domino’s Pizza in the Indian quick-service restaurant sector. 

Although India experienced rapid population and income growth during the last two 

decades, its trade and agricultural policies have resulted in only about 3 percent of Indian 

food and agricultural demand being met by imports.6

 Of these imports, the share from the 

United States is small. U.S. agricultural goods accounted for only 6 percent of the Indian 

import market in 2008, compared to 18 percent of global markets. U.S. agricultural 

exports to India were $497 million in 2008, accounting for less than 0.5 percent of total 

U.S. agricultural exports. 7

 India currently ranks as the 39th-largest U.S. agricultural 

export market. Many leading U.S. export commodities, such as wheat, corn, soybeans, 

pulses (peas, beans, and lentils), edible oils, and processed products, are not exported to 

India or are shipped only in small quantities. Furthermore, during 2003–08, U.S. 

agricultural exports to India were concentrated in a small number of products. A 

summary of key Indian agricultural trade information comparing the United States with 

the world is provided in table 1.1. 

 1

 USDA, ERS, Amber Waves, “Rural and Natural Resources Indicators,” June 2009. 2

 USDA, FAS, online trade statistics. 

3

 EIU, Country Report: India, September 2009. 4

 U.S. Department of State, Bureau of South and Central Asian Affairs, Background Note: India, 

January 2009. 5

 KFC Corporation is also known as Kentucky Fried Chicken. 

6

 Narayanan and Walmsley, Global Trade, Assistance, and Production, 2008. The share of food demand 

met by imports for Asia as a whole is 13 percent. 7

 GTIS, World Trade Atlas Database (accessed June 8, 2009). 
1-2

TABLE 1.1 India: Agricultural trade at a glance 

 United States World

Indian agricultural imports, 2008 $497 million $8,533 million

Indian agricultural import average annual 

growth, 2003–08 

14.5% 12.7%

Top five Indian agricultural imports, 2006–08 

average 

Almonds, cotton, peas, 

apples, soybean oil 

Palm oil, soybean oil, peas, 

cashews, beans

Top five Indian agricultural import suppliers, 

2006–08 average 

(

a

) Indonesia, Argentina, Burma, 

EU-27, Canada

Indian agricultural exports, 2008 $1,282 million $20,150 million

Indian agricultural export average annual 

growth, 2003–08 

17.3% 27.0%

Top five Indian agricultural exports, 2006–08 

average 

Cashews, gum and 

thickeners, pepper, 

dairy, rice 

Rice, soybean meal, cotton, 

sugar, frozen beef

Top five Indian agricultural export markets, 

2006–08 average 

(

a

) EU-27, China, UAE, United 

States, Bangladesh

Source: GTIS, World Trade Atlas Database (accessed June 8, 2009). 

a

Not applicable. 

The low level of U.S. agricultural exports to India is a concern to the U.S. agricultural 

community, business representatives, and policymakers. In general, these groups view 

high Indian tariffs and burdensome nontariff measures (NTMs) as principal reasons 

impeding U.S. products from entering the Indian market.8

 For example, the U.S.-India 

Business Council (USIBC), whose members include several food and agricultural 

companies and trade associations, identified a number of tariffs and NTMs impeding U.S. 

exports of such products as pistachios, chocolate and confectionery, frozen poultry, 

cheese, frozen French fries, and soybean oil. 9 The U.S. Department of Agriculture 

(USDA) and United States Trade Representative (USTR) have held several consultations 

with the Indian government in an attempt to open the market to U.S. products.

In its letter requesting this investigation, the Senate Committee on Finance (Committee) 

asked the U.S. International Trade Commission (Commission) to examine and report on 

the effects of Indian tariffs and NTMs on U.S. agricultural exports. The Committee asked 

that the report cover the period 2003 through 2008, or through the latest year for which 

data are available. Noting the potential importance of export markets such as India to the 

U.S. agricultural sector, the Committee pointed out that the extent to which Indian trade 

and investment measures depress the U.S. share of India’s agricultural imports remains 

largely undocumented. More specifically, the Committee asked that the report include the 

following: 

 an overview of the Indian agricultural market, including recent trends in consumption, 

imports, and domestic supply; 

 a description of the principal measures affecting Indian agricultural imports, 

including tariffs, sanitary and phytosanitary (SPS) measures, food regulations, 

 8

 USTR, 2009 National Trade Estimate Report on Foreign Trade Barriers, 2009, 235. See appendix D of 

this report, which summarizes the views of interested parties. 9

 USIBC, written submission to the USITC, June 26, 2009, 8. 
1-3

packaging and labeling requirements, pricing policies, intellectual property rights 

(IPR) policies, and customs procedures; 

 information on Indian government regulations, including state regulations, covering 

agricultural markets and foreign direct investment (FDI) affecting U.S. agricultural 

products in India; 

 an evaluation of the impact of India’s food marketing and distribution system, 

including market structure, transportation infrastructure, and cold-storage capacity, 

on U.S. agricultural products in the Indian market; and 

 a quantitative analysis of the economic effects of Indian tariffs and, to the extent 

possible, NTMs on U.S. agricultural exports to India. 

Scope of the Report 

In response to the Committee’s request, this study examines the effects of Indian tariffs 

and NTMs on U.S. agricultural exports. As shown in figure 1.1, U.S. agricultural 

exporters and food companies reach Indian consumers primarily by two routes: the export 

of agricultural goods and FDI. U.S. agricultural exports face Indian tariffs and NTMs 

before they enter that country’s food processing sector and marketing and distribution 

system. Besides competing with other exporters, U.S. firms must compete with Indian 

domestic agricultural production, which is highly regulated and supported by the 

government. In addition, U.S. agricultural firms access the Indian market through FDI, by 

establishing facilities in the processing sector or by operating in certain segments of the 

food marketing and distribution system. In either case, investment decisions by U.S. 

firms are heavily influenced by Indian policies covering FDI and IPR. 

As requested by the Committee, the report provides two types of information: 

(1) background information on India’s production, consumption, and trade in agricultural 

products, and (2) information on the factors that directly impact U.S. exports and firms, 

including tariffs, NTMs, market and distribution conditions, FDI, and IPR. Factors 

described and analyzed in this report are included in the framework provided in figure 1.1. 

The figure identifies principal Indian agricultural policies (shaded parallelograms) that 

affect the system, including those bearing on domestic production and marketing, trade, 

investment, and IPR. Also shown are relevant market factors (ovals) that affect 

consumption and imports. 

Background information is covered in chapters 2–4 of the report. Indian agricultural trade 

trends are presented in chapter 2, focusing on trade with the United States and the U.S. 

competitive position in the Indian market vis-à-vis other global suppliers. Indian 

agricultural consumption is discussed in chapter 3, including a description and analysis of 

Indian consumption patterns, preferences, and trends, which are the ultimate drivers of 

current and potential demand for U.S. agricultural products. Indian farm-level production, 

agricultural processing, and domestic agricultural policies are examined in chapter 4. 

This chapter explains how highly regulated domestic production, supported by trade 

restrictions, is a major factor behind the very low share of imports, including U.S. 

imports, in the Indian market. 
Indian agricultural consumption 

(chapter 3) 

Indian food marketing and distribution system 

(chapter 7) 

U.S. agricultural sector 

Indian farm-level production 

(chapter 4)

Trade policies 

Tariffs 

NTMs 

(e.g., SPS, 

customs) 

(chapters 5 and 6)

Exp

Exports from U.S. 

(chapter 2) 

Domestic agricultural policies (e.g., APMC, 

MSP, input support) 

(chapter 4) 

FDI 

(chapter 8) 

Demand factors 

(e.g., price, income, 

preferences) 

(chapter 3) 

FIGURE 1.1 India: Flowchart of the agricultural system

Indian agricultural 

processing 

(chapter 4) 

Exports 

(chapter 2) 

Competitive factors 

(e.g., price, exchange rates, 

transportation costs) 

(chapter 2) 

FDI policies (e.g., 

investment caps, 

incentives) (chapter 8) 

and IPR policies 

(chapter 9) 

1-4 

Source: Compiled by Commission staff. 
1-5

Information on the factors that directly affect U.S. agricultural exports and firms is 

covered in chapters 5–8 of the report. Chapter 5 describes India’s tariff rates and tariff 

policies and provides quantitative estimates of what U.S. agricultural exports to India 

would have been in 2007 in a tariff-free environment. NTMs are described and analyzed 

in chapter 6, including quantitative estimates of what selected U.S. agricultural exports to 

India would have been in 2007 if certain NTMs had not been present. The Indian food 

marketing and distribution system is covered in chapter 7, focusing on market and 

distribution conditions and deficiencies that affect the Indian agricultural market, 

including U.S. agricultural exports and FDI. Chapter 8 provides an overview and analysis 

of current U.S. FDI in India, including regulations and other factors affecting U.S. 

agricultural firms operating in India. Indian IPR policies and regulations, which primarily 

affect the U.S. seed industry, are described and analyzed in chapter 9.10

Products covered in this investigation include all existing or potential U.S. agricultural 

product exports to India. Agricultural products in this study are defined to match those 

products covered in the World Trade Organization (WTO) Agreement on Agriculture, 

part XIII, article 21. These include 768 six-digit product codes classified in the World 

Customs Organization harmonized system (HS)—specifically, HS chapters 1 to 24, 

excluding fish and fish products (HS chapter 3),11 plus certain additional products in 

other HS chapters, such as milk proteins (HS chapter 35); hides, skins, and furs 

(HS chapters 41 and 43); wool (HS chapter 51); and cotton (HS chapter 52). 

As requested by the Committee, certain information presented in this report, including 

trends in trade, production, and consumption, covers the period 2003–08 or the period 

from 2003 to the latest year for which data are available. Longer-term data are used to 

explain important long-term trends. The descriptive and quantitative analysis of the 

effects of Indian trade measures and market conditions is based on the latest available 

information and data. 

India’s Policy Framework 

The Government of India’s Eleventh Five Year Plan, covering the period 2007–12, 

identifies three core domestic agricultural policy objectives: food security,12 food selfsufficiency,13 and income support for farmers.14 In order to meet these objectives, the 

Indian government actively regulates the agricultural sector, including production, 

marketing, and consumption, in addition to international agricultural trade. 15 Broad 

government intervention in the agricultural sector is a response to substantial challenges 

facing Indian policymakers. These challenges, as well as India’s responses to them, are 

described in more detail below. 

 10 Firms in other agricultural sectors did not identify IPR policies as critical to their trade or investment 

decisions. 11 Processed fish products classified in HS chapter 16 are also excluded from the WTO definition of 

agricultural products. 12 Government of India, Planning Commission, Eleventh Five Year Plan: 2007–12, vol. 3, 2008, 3–5, 25, 

34, 26, 39, 51, 91. 13 Ibid., 17, 157. 

14 Ibid., 4, 37. 

15 The Government of India maintains highly interventionist agricultural policies, which include price 

support, insulation from world markets, rigorous trade restrictions, and support for the purchase of 

agricultural inputs. Mittal and Mukherjee, Food for Policy: Reforming Agriculture, 2008, 78. 
1-6

India’s central and state governments formulate policies (in this case, agricultural policies) 

in response to a policy environment linked to historical events and current social, 

demographic, and political factors. This environment leads Indian officials to articulate 

broad policy objectives, which in turn generate specific policy instruments influencing 

either macroeconomic factors (e.g., inflation rates, interest rates, and trade deficits) or 

microeconomic ones (e.g., industrial sectors and business investment). Indian trade 

policies are only one set of those policy instruments. A simplified framework for Indian 

domestic and trade policies in the agricultural sector appears in figure 1.2; the diagram 

flows from the policy environment to policy objectives and finally to India’s specific 

policy instruments.16

 16 The examples in figure 1.2 are intended to be illustrative, not comprehensive. 

Policy Environment 

 History of famines and food shortages 

 Large population of poor farmers 

 Constitutional authority of central and state governments 

 Politically powerful farm sector 

FIGURE 1.2 India: Agricultural policy framework 

Policy Objectives 

 Food security 

 Food self-sufficiency 

 Income support for farmers 

Policy Instruments 

 Minimum support prices 

 Input subsidies 

 Regulated markets 

 Food subsidies for consumers 

 Trade policies 

Source: Compiled by Commission staff. 
1-7

Policy Environment 

As figure 1.2 shows, India’s agricultural policy is based on a number of historical 

economic, social, and legal considerations.17 They include a history of famines, a large 

population dependent on the agricultural sector for its livelihood, millions of poor people 

who must spend most of their incomes on food, a strong farm lobby with millions of rural 

voters, and a constitutional structure that vests certain powers over agricultural policy in 

state governments. 

India’s agricultural policies are based, in part, on a history of periodic famines, such as 

the famine of 1943 and chronic food shortages after independence in 1947 and into the 

1950s.18 The response of the Indian government was to achieve greater security in food 

supply, especially food grains. The set of policy instruments employed for these efforts, 

and the resulting expansion in Indian agricultural production, is generally known as the 

Green Revolution.19 

More than one-half of India’s population of 1.2 billion depends on farming for its 

livelihood. Although the overall Indian economy has grown significantly, most of the 

rural population has not benefited. 20 The Indian farm sector has very low labor 

productivity, 21 about one-sixth the level of other sectors of the economy, which the 

Organisation for Economic Co-operation and Development (OECD) has identified as a 

major factor contributing to low living standards and poverty in rural areas.22 Although 

overall poverty has declined nationwide, more than one-third of the population, mostly 

rural Indians, still live on less than $1 per day.23 This persistent poverty is a major factor 

driving government agricultural policy. 

The Indian constitution provides the states with primary authority over the agricultural 

sector. The role of the central government is to develop overarching policies and 

regulatory guidelines, while the states hold most of the legislative and implementation 

authority so that they can address local needs.24 This constitutional structure is the result 

of historical factors, including the desire of states to have control over the local food 

supply. Central government and state jurisdiction over Indian agricultural matters are 

described in appendix G. 

 17 Throughout most of India’s history as an independent country, starting in 1947 and continuing until 

1991, India’s economy was dominated by central planning characterized by extensive regulation, trade 

protectionism, and public ownership of heavy industry. India’s first government under Prime Minister 

Jawaharlal Nehru fashioned the economy on a Soviet socialist model and similar to other planned economies. 

Vestiges of central planning can be found in India’s economy. For example, India’s government still 

produces five-year plans for major portions of the economy, including agriculture. Lalwani, August 15, 2007, 

1–2; Poddar, 4. 18 The famine of 1943 is widely known as the Bengal Famine; an estimated 4 million people died in 

eastern India. 19 Information on the Green Revolution’s effect on India’s agricultural production can be found in 

chapter 4. 20 Government of India, Planning Commission, Eleventh Five Year Plan: 2007–12, vol. 3, 2008, 3. 21 World Bank, Agriculture for Development: World Development Report, 2008, 2007, 141, 202. 22 OECD, Agricultural Policies in Emerging Economies 2009, 98. 23 European Commission, India’s Role in World Agriculture, 2; OECD, Agricultural Policies in 

Emerging Economies 2009, 98. 24 WTO, Trade Policy Review, 2007. 
1-8

Despite their weak economic profile, Indian farmers represent an enormous voting bloc, 

and political parties require the backing of these voters to help win elections.25 According 

to numerous Indian sources, for fear of being voted out of office, Indian politicians are 

reluctant to set policies that may negatively affect farmers.26 Out of this political reality, a 

deeply held view has taken hold among Indian policymakers that farmer incomes should 

be increased through targeted government spending.27

Policy Objectives 

Emerging from this environment are three broad government objectives for India’s 

agricultural domestic and trade policy: food security, food self-sufficiency, and income 

support for farmers.28 Ensuring that millions of poor citizens have access to food staples 

at affordable prices is a primary objective of India’s central government, which has 

chosen to coordinate domestic food production and international trade policies to meet 

this objective.29

Food security is defined by the World Bank as “access by all people at all times to 

enough food for an active, healthy life”; 30 its components are often listed as food 

availability, access, and use.31 Of the three, only availability and access will be addressed 

in this investigation. Food availability can be met with domestic production, imports, or a 

combination of the two. Food access can be achieved through government policies that 

lower prices to affordable levels for the poor or through payment schemes that cover the 

full cost of the food. In all cases, however, food security requires that food be available in 

sufficient volumes at prices consumers can afford. 

Food self-sufficiency is defined as the extent to which a country can satisfy its food needs 

from domestic production.32 In seeking food self-sufficiency, India focuses on staple 

crops, primarily food grains such as wheat and rice. The concepts of food self-sufficiency 

and food security differ in that food self-sufficiency encompasses only national food 

production for sources of supply, while food security takes imports into account.33 Indian 

 25 Chatterjee, “BJP Goes One Step Ahead of Cong in Dangling Sops,” The Times of India, April 4, 2009; 

Bykere, “In India, Populism is the Real Electoral Winner,” The Wall Street Journal Asia, June 10, 2009. 26 Birner et al., The Political Economy of Agricultural Policy Reform in India, 16, 18, 40, 45; industry 

representative, interview by Commission staff, New Delhi, India, May 26, 2009. 27 Government of India, Planning Commission, Eleventh Five Year Plan: 2007–12, vol. 3, 2008, 3–4. 28 Government of India, Planning Commission, Eleventh Five Year Plan: 2007–12, vol. 3, 2008. 29 Ibid., 15. 

30 The U.S. Agency for International Development (USAID) and the United Nation’s Food and 

Agriculture Organization (FAO) have similar definitions. USAID, “Policy Determination: Definition of Food 

Security,” April 13, 1992. 31 More formally, the terms are defined as the following: “food availability” is having enough food 

consistently available; “food access” is having enough resources to obtain foods needed for a nutritious diet; 

and “food use” is the appropriate use based on knowledge of basic nutrition and care, as well as adequate 

water and sanitation. WHO, “Food Security.” For a more detailed discussion of food security and citations to 

several studies on the issue, see FAO, Trade Reforms and Food Security, 2003. 32 Thompson, Implications of Economic Policy for Food Safety, 1999. 33 Ibid. 
1-9

policymakers seek to achieve food security by attaining food self-sufficiency, 34 as 

observed in India’s most recent five-year plan for agriculture.35

Income support for farmers is the third major policy objective of the central and state 

governments. Raising farmer incomes is important to the government because many of 

India’s poor reside in rural areas, and the bulk of the nation’s employment is based in 

smallholder agriculture.36 

India’s policy objectives in agriculture are contradictory. For example, policy 

interventions that support producer incomes by increasing crop prices may lead to higher 

food prices that negatively affect poor consumers. India’s policy objectives of food 

security and food self-sufficiency also face inherent conflicts. Food security requires low 

and stable prices of food staples for poor consumers. On the other hand, the drive for 

food self-sufficiency requires sufficiently high crop prices to expand domestic food 

production. 

Policy Instruments 

The tension between the goals of increasing farm incomes and lowering consumer food 

prices has caused the Indian government to intervene heavily in the farm sector with 

multiple policy instruments. Some policies focus on supporting producers by boosting 

incomes, achieved through minimum support prices and what the Indian government 

refers to as “input subsidies” that artificially lower the cost of agricultural production 

inputs, including fertilizer, irrigation water, electricity, diesel fuel, and seeds.37 These are 

partially offset by government regulations that limit the number of potential buyers for 

farm products, resulting in lower farmgate prices.38 Other policies are designed to lower 

purchase prices for consumers and maintain price stability. India’s Public Distribution 

System provides staple foods (e.g., rice and wheat) to the poor at below-market prices. 

The Essential Commodities Act permits the states to maintain adequate local stocks and 

to control prices for certain crops (e.g., wheat, rice, corn, sugar, and seeds).39 Because 

Indian policymakers seek to achieve food security through domestic production, imports 

(to drive prices down for consumers) and exports (to drive prices up for farmers) are 

viewed as second-best policy instruments to achieve these objectives.40 Tariffs and NTMs 

are used to raise or lower food prices and increase or decrease food supply when 

domestic policy instruments fail.41

 34 The World Bank and other organizations acknowledge that India significantly increased its prospects 

for food security through the development of domestic agricultural production. This has encouraged efforts 

by Indian government officials to link the two policy objectives. But these groups also note that external trade 

is a more useful tool for dealing with food production surpluses and shortfalls. World Bank, India Foodgrain 

Marketing Policies, 1999, 1–2; Thompson, Implications of Economic Policy for Food Safety, 1999. 35 Government of India, Planning Commission, Eleventh Five Year Plan: 2007–12, vol. 3, 2008. 36 Landes, “Indian Agriculture and Policy in Transition,” 2008, 20. 

37 Government of India, Planning Commission, Eleventh Five Year Plan: 2007–12, vol. 3, 2008; The 

Times of India, “Farmers to Get Diesel Subsidy of Rs. 15 a litre,” September 20, 2008; Government of India, 

Press Information Bureau, “Centre to Give Financial Assistance to States introducing diesel subsidy to 

farmers in deficit rainfall affected areas,” August 3, 2009; and Industry representative, interview by 

Commission staff, Mumbai, India, May 12, 2009. 38 Market controls are discussed in greater detail in chapters 4 and 7. 39 Government of NCT of Delhi, Department of Planning, Economic Survey of Delhi, 2008–09, Ch. 19 

Public Distribution System, 1. 40 Government of India, Planning Commission, Eleventh Five Year Plan: 2007–12, vol. 3, 2008, 5, 25, 34, 

36, 51. 41 Tariff measures are addressed in chapter 5 and nontariff measures are addressed in chapter 6 of the 

report. 
1-10

Current Indian agricultural trade policy is consistent with the government’s long-standing 

attempts to strictly regulate trade to protect domestic producers from foreign competition 

and consumers from global price fluctuations.42 In short, Indian agricultural trade policies 

should be viewed in the context of India’s three core domestic policy objectives. The 

Indian government explicitly links tariffs to its domestic policies by stating that 

agricultural import duties should be carefully calibrated with domestic support prices to 

meet price stability goals.43 Under India’s WTO obligations, agricultural tariffs are bound 

at very high levels.44 For many agricultural products, however, applied rates are much 

lower than high bound levels, and this disparity allows the government to modify tariffs 

to counter domestic and international market conditions.45 In practice, the government 

raises and lowers tariffs in response to changes in world commodity prices and domestic 

supply and demand.46 India also appears to link NTMs to domestic policies by relaxing 

NTMs when policymakers determine that imports are needed to relieve food price 

inflation or food shortages. For example, the government has reportedly adjusted certain 

phytosanitary requirements on key commodities (or eased their enforcement) to control 

prices and adjust buffer stocks.47 

Approach 

As requested by the Committee, this report contains qualitative and quantitative 

information and analysis examining a broad range of trade, market, and regulatory factors, 

including information on Indian agricultural production and consumption, trade measures, 

government regulations, and investment and IPR policies. The qualitative analysis 

consists of two parts: (1) a general discussion and examination of Indian policies and 

their effect on U.S. agricultural exports and U.S. firms, and (2) case studies by product, 

sector, or issue, in text boxes, to highlight the effect of specific Indian tariff and NTM 

policies and market conditions on U.S. agricultural products. 

The descriptive information and data analyzed in this report were obtained from a variety 

of sources, focusing on primary sources whenever possible. Commission staff sought 

information from U.S. agricultural trade associations and U.S. firms with operations in 

India, contacting more than 120 commodity- and sector-specific agricultural trade 

associations and companies. Commission staff held extensive meetings with U.S. 

government and private-sector officials, including the Office of the USTR; the USDA 

Economic Research Service (ERS), Foreign Agricultural Service (FAS), and Animal and 

Plant Health Inspection Service (APHIS); the USIBC; the Grocery Manufacturers 

Association; and the American Farm Bureau Federation, as well as international 

 42 Government of India, Planning Commission, Eleventh Five Year Plan: 2007–12, vol. 3, 2008, 7, 15. 43 The government reportedly also uses certain nontariff measures in response to domestic market 

conditions. For example, certain SPS requirements have been relaxed when India needs to import certain 

commodities. Government official, interview by Commission staff, New Delhi, India, June 2, 2009. 44 India was an active participant in the WTO Uruguay Round trade negotiations setting upper limits 

(“binding”) on all agricultural tariffs, albeit at very high levels. By 2001, India eliminated all quantitative 

restrictions on agricultural imports, consistent with its WTO commitments, but kept very high bound levels 

on most products. 45 OECD, Agricultural Policies in Emerging Economies 2009, 95. Indian wholesale market prices were 

largely insulated from world price increases during the global rise of commodity prices in 2007–08. Ibid., 

101. 46 For example, when the domestic and international prices of wheat increased substantially in 2007, 

India lowered tariffs to replenish depleted buffer stocks and moderate domestic prices, while at the same time 

restricting exports. Support prices for wheat were increased, but set at prices below world prices. 47 Government official, interview by Commission staff, New Delhi, India, June 2, 2009. 
1-11

organizations such as the International Food Policy Research Institute. Staff also traveled 

to India to meet with relevant Indian government officials, USDA officials, U.S. and 

Indian private-sector officials, academic researchers, importers, and market and logistics 

officials. 

Commission staff conducted extensive literature and data research on Indian trade and 

domestic policies that affect U.S. agricultural products in the Indian market. Relevant 

trade and production data were obtained from Global Trade Information Services; the 

Commission’s DataWeb; Indian government websites, including those of the Ministries 

of Agriculture and Statistics; the United Nations’ Food and Agriculture Organization; and 

the USDA. Information on Indian tariffs and NTMs was obtained from the WTO, UN 

Conference on Trade and Development, OECD, World Bank, and USDA (FAS, ERS, 

and APHIS), as well as many private-sector and academic sources. 

In addition to descriptive information, the Committee requested that the Commission 

provide quantitative analysis of the economic effects of Indian tariffs and, to the extent 

possible, NTMs on U.S. agricultural exports to India. Quantitative analysis of the 

potential effects of removing Indian tariffs was based on a simulation framework that 

consists of a partial equilibrium (PE) model and a general equilibrium (GE) model. The 

PE model focused on bilateral trade in food and agricultural products at the HS six-digit 

level among the United States, India, and the rest of the world. The GE model used for 

the analysis was the Global Trade Analysis Project model, an economy-wide computable 

GE model of world trade specified at an aggregate product and sector level. The PE 

model was used to simulate the effects of removing Indian tariffs and tariff-rate quotas on 

U.S. food and agricultural exports. The GE model was then used to simulate the 

economy-wide effects of those border measures. The two models were linked to provide 

consistent estimates of effects. A similar approach was applied in the Commission’s 

recent investigatory report on U.S. beef exports.48 

Quantitative analysis of the potential effects of NTMs was completed in a three-step 

process. First, price gap data were developed. The existence of NTMs would likely raise 

Indian import prices and restrict the quantities imported. Thus, the differences between 

the prices of goods imported by India and the export prices of countries that sell 

agricultural goods to India were estimated at a disaggregated level (HS six-digit level) 

using unit values of imports from 2005–07. These were estimated separately for U.S. 

exports to India and third countries’ exports to India taken as a group, adjusting for 

observable quality differences between exporters and for transportation costs. Second, a 

subset of products was identified for which available information indicated the presence 

of NTMs that may increase prices or restrict quantities. For these products, positive price 

gaps were treated as representing the economic effects of NTMs. Third, these price gaps 

were introduced into the simulation-modeling framework as being equivalent to tariffs, 

and the effects of their removal were estimated. In the case of wheat, NTMs have reduced 

U.S. exports to India to zero or near-zero levels. Because estimating a wheat price gap 

was not possible, analysts developed a plausible market share for U.S. exports in the 

absence of an Indian NTM, and the effects of NTM removal were estimated by inserting 

that market share directly into the analysis. 

 48 USITC, Global Beef Trade, 2008. 
1-12

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2-1

CHAPTER 2 

Indian Agricultural Trade

Overview 

India is a minor participant in global agricultural markets. In 2008, Indian agricultural 

imports and exports accounted for just 1 percent and 3 percent, respectively, of global 

agricultural trade.1

 Agriculture’s share of total Indian merchandise imports and exports 

was 3 percent and 11 percent, respectively.2

 Only about 3 percent of Indian food and 

agricultural demand is met by imports, compared with 13 percent for Asia as a whole.3

During 2003–08, India experienced an increasingly positive trade balance in agricultural 

products, reaching $11.6 billion in 2008 (fig. 2.1).4

 Much of this growth occurred in 2007 

and 2008, mostly reflecting significantly higher global commodity prices. Between 2003 

and 2008, Indian agricultural imports increased at an annual average rate of about 

13 percent, reaching a record $8.5 billion in 2008. Indian agricultural exports increased 

more than threefold, from $6.1 billion in 2003 to $20.2 billion in 2008, representing 

annual average growth of 27 percent. 

Imports 

Imports by Product 

Indian agricultural imports from the world are highly concentrated in a few major product 

categories (table 2.1 and fig. 2.2) in which domestic supply is unable to meet domestic 

demand. These categories include edible oils (mostly palm and soybean oils), pulses 

(peas, beans, and lentils), and nuts, which together accounted for 60 percent of all 

agricultural imports in 2008. Imports of hides and skins, wool, and cotton accounted for 

13 percent of imports during 2006–08. With the exception of wheat, animal feed, and 

alcoholic beverages, all other product categories each accounted for less than 1 percent of 

total agricultural imports during this period. Notably, Indian imports of food grains 

(excluding wheat), feed grains, oilseeds, meat, dairy products, sweeteners, and processed 

foods were negligible in 2008. As outlined in chapter 1, low levels of trade in agricultural 

products are an outcome of Indian government policies aimed at food security, food selfsufficiency, and income support for farmers, implemented through domestic agricultural 

production support, tariffs and nontariff measures (NTMs), and export restrictions. 5

Consequently, many trade trends can be explained more by domestic and trade policy 

initiatives, such as tariff changes, than by changing market factors, such as weather. 

 1

 GTIS, World Trade Atlas Database (accessed June 8, 2009). 2

 In 2008, Indian total merchandise imports and exports amounted to $293 billion and $178 billion, 

respectively. Ibid. 3

 Narayanan and Walmsley, Global Trade, Assistance, and Production, 2008. 4

 For the purposes of this chapter, agricultural products are those covered by the WTO Agreement on 

Agriculture. They include products in Harmonized System (HS) chapters 1–24 (excluding fish and fish 

products) and several manufactured agricultural products covered in HS chapters 35, 41, 51, and 52. In this 

chapter, information on trade trends is provided for 2003–08; information describing the most recent trade 

environment is presented in terms of a 2006–08 average. 5

 Chapters 5 and 6 provide a detailed discussion of tariffs and nontariff measures affecting India’s 

agricultural imports. 
2-2

0

5

10

15

20

25

2003 2004 2005 2006 2007 2008

Billion $

Exports Imports Balance of trade

FIGURE 2.1 India: Agricultural trade balance, 2003–08

Source: GTIS, World Trade Atlas Database (accessed June 8, 2009).

 

TABLE 2.1 India: Agricultural imports from the world and the United States by product, 2003–08 (million $)

Product Source 2003 2004 2005 2006 2007 2008

Animal products 

Live animals World 1 1 2 3 4 9

United States 0 0 0 1 0 1

Meat World 0 0 1 1 2 3

United States 0 0 0 0 0 0

Dairy World 29 15 9 24 17 18

United States 1 0 1 1 3 3

Eggs World 1 0 1 1 1 0

United States 0 0 0 0 1 0

Grains 

Wheat World 0 0 0 306 401 293

United States 0 0 0 0 0 0

Other grains World 0 1 3 6 5 8

United States 0 0 0 0 0 0

Animal feed World 72 80 104 84 103 126

United States 2 2 3 4 4 6

Fats and oils 

Oilseeds World 12 15 19 25 45 67

United States 0 0 0 0 0 0

Soybean oil World 609 569 822 793 699 336

United States 45 10 20 20 15 2

Palm oil World 1,601 1,670 1,205 1,184 1,483 2,379

United States 0 0 0 0 0 0

Other fats and oils World 161 177 316 323 418 379

United States 1 4 5 2 0 3
2-3

TABLE 2.1 India: Agricultural imports from the world and the United States by product, 2003–08 (million $)—Continued

Product Source 2003 2004 2005 2006 2007 2008

Vegetables 

Peas World 186 149 195 284 556 720

United States 2 1 13 26 69 90

Beans World 227 167 211 432 445 447

United States 1 0 1 2 0 1

Lentils World 15 14 14 21 117 30

United States 0 0 0 1 10 1

Other vegetables World 172 150 181 144 184 265

United States 3 2 3 3 5 6

Nuts 

Cashews World 286 379 477 400 369 617

United States 0 0 0 0 0 0

Almonds World 68 100 163 171 211 220

United States 52 80 133 131 162 158

Pistachios World 24 27 23 33 48 49

United States 1 2 0 0 4 6

Other nuts World 7 18 16 25 13 21

United States 0 0 0 0 0 0

Fruit 

Dates World 31 39 53 69 74 77

United States 0 0 0 0 0 0

Figs World 1 4 9 23 32 32

United States 0 0 0 0 0 0

Apples World 13 10 21 23 53 66

United States 4 3 11 11 21 19

Other fruit World 13 21 24 35 43 59

United States 1 2 4 3 6 9

Beverages and products 

Coffee World 5 9 41 21 37 55

United States 0 0 0 0 0 0

Tea World 12 31 24 29 30 39

United States 0 0 0 0 0 0

Alcoholic beverages World 13 25 44 54 80 112

United States 0 1 1 2 2 4

Nonalcoholic beverages World 17 25 34 38 54 53

United States 0 1 1 2 2 2

Ethanol World 6 103 157 19 12 53

United States 0 0 0 0 0 0

Sugar, sweeteners, confectionery World 22 215 271 24 46 69

United States 2 3 2 4 5 4

Cocoa products World 15 18 23 28 41 58

United States 0 0 0 0 0 0

Spices 

Cloves World 21 30 43 40 39 45

United States 0 0 0 0 0 0

Pepper World 23 21 29 34 38 51

United States 0 0 0 0 0 0

Other spices World 36 42 63 51 65 79

United States 0 1 1 1 1 1

Other 

Miscellaneous processed foods World 22 26 32 34 27 39

 United States 9 12 13 14 5 8

Gum and thickeners World 21 30 39 52 47 60

United States 0 0 0 0 0 0
2-4

All other

27%

Palm oil

23%

Soybean oil

8%

Cotton

3%

Wool

4%

Wheat

5% Beans

6% Hides

and skins

6%

Other fats

and oils

5%

Cashews

6%

Peas

7%

Average total imports – $7.2 billion

Source: GTIS, World Trade Atlas Database (accessed June 8, 2009).

FIGURE 2.2 India: Agricultural imports from the world by product share, 

2006–08 average

TABLE 2.1 India: Agricultural imports from the world and the United States by product, 2003–08 (million $)—Continued

Product Source 2003 2004 2005 2006 2007 2008

Other—Continued

Seeds for sowing World 18 20 28 31 46 51

 United States 3 4 4 4 5 5

Tobacco World 9 24 18 26 13 17

 United States 0 0 1 1 1 1

Hides and skins World 219 255 304 344 421 479

 United States 7 6 8 8 8 10

Wool World 178 195 211 220 271 271

 United States 2 2 1 2 2 5

Cotton World 351 214 160 153 188 340

 United States 121 58 39 57 71 112

All other World 219 227 304 312 376 441

 United States 21 23 26 24 33 39

Total World 4,735 5,115 5,696 5,918 7,151 8,533

 United States 278 215 290 323 435 497

Source: GTIS, World Trade Atlas Database (accessed June 8, 2009).
2-5

In spite of U.S. export competitiveness worldwide,6 Indian agricultural imports from the 

United States are limited, both in value and in the range of products. In 2008, agricultural 

imports from the United States totaled $497 million and accounted for just 6 percent of 

total Indian agricultural imports that year. In 2008, agricultural exports to India 

represented less than 0.5 percent of total U.S. agricultural exports, and India ranked 39th 

among leading overseas markets for U.S. agricultural products. Although the United 

States is considered to be among the world’s most competitive exporters of wheat, corn, 

soybeans, and meat, Indian imports of these products from the United States amounted to 

less than $0.5 million in 2008. 

During 2006–08, Indian imports of U.S. agricultural products were highly concentrated in 

a few product categories (fig. 2.3 and table 2.1), but in different categories than imports 

from the rest of the world. Almonds, cotton, and peas accounted for 70 percent of Indian 

agricultural imports from the United States during 2006–08; apples, soybean oil, hides 

and skins, and processed foods represented an additional 11 percent, while most other 

products each contributed less than 1 percent. Limited imports from the United States 

reflect, in part, competition in the Indian market from other suppliers for certain products. 

For example, although the United States is considered highly competitive in the global 

soybean oil market, it faces strong competition from Argentina, which can supply the 

Indian market at a lower price, in part, due to Argentine government policies.7

 For other 

products, however, low import levels reflect high tariffs and tariff-rate quotas (milk 

powder, corn) and sanitary and phytosanitary (SPS) measures (wheat, pork, poultry, corn). 

By far, India’s largest agricultural import category is vegetable oils.8

 In 2008, India was 

the world’s fourth-largest importer behind the EU-27,9

 China, and the United States.10

Because imports are needed to satisfy domestic demand, 11 applied tariff rates on 

vegetable oils have been significantly lower than the bound rates that range from 40 to 

300 percent. 12 Moreover, vegetable oil imports are not subject to specific NTMs. 13

During 2006–08, palm oil and soybean oil imports accounted for 23 percent and 

8 percent, respectively, of total Indian agricultural imports (fig. 2.2). During this period, 

imports of palm oil increased sharply at the expense of soybean oil, largely because of 

relative price movements14 and favorable tariff treatment for palm oil.15 More than 

 6

 The United States is the largest agricultural exporting country in the world, accounting for about 

18 percent of global agricultural exports in 2008. It ranks among the world’s most competitive and leading 

exporters of several commodities, including soybeans, corn, wheat, poultry, and cotton. The competitive 

advantage of U.S agricultural products in global markets is based on highly efficient production, marketing, 

and distribution systems coupled with supportive domestic policies. The United States exports its agricultural 

products worldwide and is a major supplier to several Asian countries, such as Indonesia and Thailand. 7

 NOPA, written submission to the USITC, April 1, 2009. 

8 Vegetable oils are classified in HS headings 1507–1515.

9

 The EU-27 is composed of Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, 

Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxemburg, Malta, The 

Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. 10 GTIS, World Trade Atlas Database (accessed June 8, 2009). 11 Vegetable oils are a staple food product in India, and imports consisting mostly of palm oil and 

soybean oil reportedly accounted for more than 50 percent of Indian consumption of vegetable oils in 

2008/09. Aradhey, India: Oilseeds, April 16, 2009. 12 For example, as of April 1, 2008, the applied tariffs on crude palm oil and on refined soybean oil were 

lowered to zero and 7.5 percent, respectively. Aradhey, India: Oilseeds and Products, May 19, 2008. 13 Industry representative, interview by Commission staff, New Delhi, India, May 7, 2009. 14 During 2006–08, India’s import unit value for soybean oil was on average 24 percent higher than for 

palm oil. GTIS, World Trade Atlas Database (accessed June 8, 2009). 15 Industry representative, interview by Commission staff, New Delhi, India, May 6, 2009.
2-6

Hides and skins

2%

Soybean oil

3%

Misc. processed 

foods

2%

All other

19%

Apples

4%

Peas

15%

Cotton

19%

Almonds

36%

Source: GTIS, World Trade Atlas Database (accessed June 8, 2009).

Average total imports $418 million

FIGURE 2.3 India: Agricultural imports from the United States by 

product share, 2006–08 average

80 percent of Indian palm oil imports are sourced from Indonesia, with the remainder 

mostly supplied by Malaysia (fig. 2.4). For soybean oil, Argentina is the largest supplier 

to the Indian market, accounting for 76 percent of Indian soybean oil imports during 

2006–08, followed by Brazil with 18 percent. During this period, the United States 

accounted for only 2 percent of India’s soybean oil imports.16 Indian buyers reportedly 

buy soybean oil principally on the basis of price, and in recent years, Argentine soybean 

oil was priced lower than the U.S. product (box 2.1).17

After vegetable oils, the largest agricultural import category is pulses (table 2.1), which 

accounted for 14 percent of all agricultural imports during 2006–08.18 Even though India 

is a large producer of pulses, demand exceeds domestic supply, and India is now the 

leading importer of pulses in the world.19 Imports receive favorable tariff treatment but 

face certain SPS requirements associated with fumigation.20 During 2006–08, the United 

States accounted for 6 percent of Indian pulse imports. U.S. government and industry 

sources attribute the relatively low U.S. share to competitive factors that favor other 

suppliers: (1) lower prices (U.S. pulses tend to be high quality and command a price 

 16 From 2005 to 2007, U.S. soybean oil producers have shipped $11–20 million of refined soybean oil 

annually to India and much less crude soybean oil, which is notable primarily because of India’s long-time 

desire to import crude edible oils as feedstock for their underutilized refining capacity. Government officials, 

interview by Commission staff, New Delhi, India, May 26, 2009; industry representatives, interviews by 

Commission staff, Mumbai, India, May 28, 2009; and industry representative, interview by Commission staff, 

Mumbai, India, June 1, 2009. 17 Industry representative, interview by Commission staff, Mumbai, India, May 28, 2009. 18 Pulses play an important role in the Indian diet and are the major protein source for a large segment of 

the population. Aradhey, India: Grain and Feed; Pulses Situation and Outlook, December 14, 2007.

19 GTIS, World Trade Atlas Database (accessed June 8, 2009). 20 Aradhey, India: Grain and Feed; Pulses Situation and Outlook, December 14, 2007. See chapter 6 for 

more details.
2-7

0 100 200 300 400 500 600

Other

Tanzania

China

Australia

Burma

Other

Indonesia

Tanzania

Benin

Guinea-Bissau

Côte d'Ivoire

Other

France

Australia

United States

Canada

Other

United States

Brazil Argentina

Other

Thailand

Malaysia

Indonesia

Million $

Source: GTIS, World Trade Atlas Database (accessed June 8, 2009).

Palm oil

Soybean oil

Peas

Cashews

Beans

1,390

FIGURE 2.4 India: Major agricultural imports by trading partner, 2006–08 average

BOX 2.1 Soybean Oil __

India is one of the largest edible oil markets in the world, and domestic producers are unable to satisfy Indian 

demand. Several factors—soybean industry fragmentation; government policies that encourage small-scale 

activity and favor grain production instead of oilseed production; marketing and distribution inefficiencies; and 

irregular water supplies—negatively affect vegetable oil production in India.a As a result, India imports roughly 

one-half of its annual consumption. 

With India’s lagging domestic supply, low tariffs, and few specific nontariff measures, U.S. soybean oil 

producers could be in a good position to supply the Indian market except for two cost factors: prices for 

soybean oil substitutes and a global competitor’s export tax structure. India satisfies the overwhelming share of 

its vegetable oil import needs with low-cost palm oil from Indonesia and Malaysia because the Indian vegetable 

oil market is fairly price sensitive. When India does import soybean oil, it turns first to Argentine and Brazilian 

sources, as those producers have certain shipping cost and seasonal advantages. Consequently, despite India 

lowering its tariffs to encourage additional edible oil imports in 2008, U.S. soybean oil exports to India have 

fallen to almost zero.b More important for U.S. soybean processors, however, is Argentina’s use of a differential 

export tax scheme, which taxes raw soybean exports at a higher rate (35 percent) than soybean oil exports 

(32 percent). Although the tax on Argentine soybean oil exports raises their price on world markets, taxing raw 

material exports at a higher rate than processed product exports results in an export subsidy for Argentina’s 

oilseed processors. This export subsidy confers a competitive advantage for this commodity product over U.S. 

soybean oil in the Indian market.c

 

______________ 

a

 NOPA, written submission to the USITC, April 1, 2009; industry representative, e-mail message to 

Commission staff, June 24, 2009. b

 In early 2009, because of the increase in U.S. soybean oil stocks, the decrease in U.S. soybean oil usage, 

and the dearth of supply in South America, U.S. soybean oil producers recorded sales to India of 60,000 tons. 

Industry representative, telephone interview by Commission staff, May 1, 2009. c

 NOPA, written submission to the USITC, April 1, 2009. 
2-8

premium); (2) Indian consumption patterns favoring certain pulses, such as desi 

chickpeas, pigeon peas, mung beans, and black matpe, of which the United States is not a 

major producer; 21 and (3) the ability of producers in other countries to ship larger 

volumes than their counterparts in the United States.22

Among pulses, peas are the largest import item, with Indian imports growing from 

$149 million in 2004 to $720 million in 2008, in response to strong consumer demand 

during this period. Canada is the leading supplier of peas to the Indian market, accounting 

for about 70 percent of all pea imports during 2006–08 (fig. 2.4). In 2007, the United 

States became India’s second-largest supplier of peas, and in 2008, its share of Indian pea 

imports was 12 percent.23 Indian imports of beans, the second-largest pulses import item, 

increased during 2004–08 (table 2.1). Three-quarters of Indian bean imports were 

supplied by Burma during 2006–08 (fig. 2.4), which benefits from close proximity to the 

Indian market and produces the types of beans in high demand by India.24 

India is a large importer of nuts, and during 2006–08, cashews alone accounted for 

6 percent of Indian agricultural imports, mostly supplied by several African countries 

(fig. 2.4). Most of the cashews imported into India are “in-shell” and manufactured into 

higher-value processed cashews and cashew products, many of which are exported to the 

United States, EU-27, Japan, and the Middle East. 25

Almonds are the largest Indian agricultural import from the United States, accounting for 

36 percent of all imports from the United States during 2003–08. With limited domestic 

production,26 strong domestic demand growth,27 and low tariffs,28 Indian almond imports 

have risen rapidly in recent years, increasing from about 21,000 mt in 2003 to 51,000 mt 

in 2008.29 The United States is by far the largest supplier, accounting for about 85 percent 

of Indian almond imports during this period, although since 2007, the United States has 

faced increasing competition from Australia. 

Certain imported agricultural products are used as inputs for the Indian textile and 

apparel industry, including cotton, wool, and leather. During 2006–08, these products 

accounted for 13 percent of Indian agricultural imports. India is a major cotton-producing 

country, but its production is not sufficient to meet the demand from its textile mills. 

Cotton is the second-largest Indian agricultural import from the United States, accounting 

for 19 percent of all agricultural imports during 2006–08 (fig. 2.3). Egypt is the other 

major supplier, mostly of long and extra-long staple cotton. Certain sub-Saharan African 

countries also supply cotton to the Indian market.30

 21 Industry representative, interview by Commission staff, Mumbai, India, May 28, 2009. 22 The United States reportedly does not have large exportable surpluses. Moreover, U.S. pulse exporters 

ship in costlier containers rather than bulk vessels. Industry representatives, interviews by Commission staff, 

Mumbai, India, May 26 and May 30, 2009. 23 Pea imports from the United States are green peas, which are not grown in India and are eaten largely 

as snacks. Industry representative, interview by Commission staff, Mumbai, India, May 28, 2009. 24 Aradhey, India: Grain and Feed; Pulses Situation and Outlook, December 14, 2007. 25 GTIS, World Trade Atlas Database (accessed June 8, 2009). 26 Indian almond production accounted for about 3 percent of domestic consumption in 2008. Aradhey, 

India: Tree Nut, September 17, 2008. 27 Almonds are very popular in India and have special significance in the Indian diet. Industry 

representative, interview by Commission staff, Mumbai, India, May 11, 2009. 28 In 2008, the Indian tariff on imported in-shell almonds was Rs. 35 per kilogram (about 18–20 percent 

ad valorem equivalent). 29 U.S. almonds are imported “in-shell.” 

30 Singh, India: Cotton and Cotton Products, December 5, 2008.
2-9

During 2006–08, India’s imports of fruit averaged $195 million annually; dates, figs, and 

apples accounted for about three-quarters of this amount. Of these three, the United 

States exports only apples to India, consisting mostly of the Red Delicious variety from 

Washington state. Apples accounted for 4 percent of Indian agricultural imports from the 

United States during 2006–08.31 Although facing strong competition from Fuji apples 

from China, Indian demand for U.S. apples has grown in recent years, increasing from 

$2.5 million in 2004 to about $20 million in 2008.32

India imported wheat in 2006 following shortfalls in domestic production and problems 

pertaining to domestic procurement.33 Imports were encouraged by lowering tariffs and 

easing phytosantiary barriers.34 During 2006–08, wheat imports averaged $333 million, 

sourced mostly from Russia, Canada, and Argentina. As discussed in chapter 6, certain 

SPS trade measures prevented the import of U.S. wheat. Even without these measures, 

however, U.S. wheat exports to India may have faced competition from other suppliers 

on the basis of delivery price. 

Imports by Major Trading Partner 

In terms of major suppliers, Association of Southeast Asian Nations (ASEAN) countries 

accounted for 35 percent of Indian agricultural imports during 2006–08. Indonesia, a 

major supplier of palm oil, was by far the largest supplier, accounting for close to onequarter of Indian imports during this period (table 2.2 and fig. 2.5). Other leading 

ASEAN suppliers were Burma (dry beans) and Malaysia (palm oil, certain cocoa 

products), accounting for 7 percent and 4 percent of total Indian agricultural imports, 

respectively. During this period, imports of soybean oil from Argentina fell sharply, from 

$661 million to $222 million, as India sourced more competitively priced palm oil from 

Indonesia. These losses were somewhat offset by Argentine exports of wheat as India 

resumed importing in 2006 after several years of being a net wheat exporter.35 During 

2006–08, the EU-27 supplied a wide range of products, led by alcoholic beverages 

(mostly whiskies), peas, fibers (wool and flax), and hides and skins. Indian agricultural 

imports from Canada increased sharply during 2003–08, such that by 2008, Canada 

became the second-largest agricultural supplier behind Indonesia. Canada’s exports to 

India were almost exclusively peas and lentils. 

Exports 

The competitiveness of Indian agricultural exports is based on low costs associated with 

abundant labor and subsidized inputs, including fertilizer, electricity, and seeds.36 India’s 

proximity to ASEAN and Middle Eastern markets provides India with a transportation 

cost advantage over other suppliers. Other factors affecting Indian agricultural exports 

 31 Industry representative, interview by Commission staff, New Delhi, India, May 27, 2009. 32 Although apples can be supplied more cheaply by China and Chile, U.S. Red Delicious apples are 

considered to have superior color and shape and, when available out of season, can command a price 

premium. Industry representative, interview by Commission staff, Mumbai, India, June 1, 2009. 33 Govindan, India: Grain and Feed, February 21, 2007. 34 Industry representative, interview by Commission staff, New Delhi, India, June 2, 2009. 35 Govindan, India: Grain and Feed, February 20, 2008. 36 Eighty percent of Indian agricultural production is reportedly competitive in world markets. Industry 

representative, interview by Commission staff, New Delhi, India, June 4, 2009. 
2-10

Argentina

9%

Burma

7%

United States

6%

 All other

43%

Indonesia

23%

Canada

6%

EU27

6%

Average total imports – $7.2 billion

Source: GTIS, World Trade Atlas Database (accessed June 8, 2009).

FIGURE 2.5 India: Agricultural imports by major trading partner, 

2006–08 average

include government export restrictions aimed at curtailing food price inflation (box 2.2),37

a minimum export price program that makes certain Indian exports less competitive in 

world markets,38 and the use of export subsidies when government buffer stocks become 

too large. 

 37 USDA, FAS, India: Trade Policy Monitoring, March 15, 2009. 38 Govindan, India: Grain and Feed, February 20, 2009. 

TABLE 2.2 India: Agricultural imports by major trading partner, 2003–08 (million $)

Trading partner 2003 2004 2005 2006 2007 2008

Indonesia 1,119 1,423 1,195 1,160 1,469 2,315 

Canada 127 110 169 194 601 566 

EU-27 283 255 295 391 478 528 

Burma 216 199 210 455 478 512 

United States 278 215 290 323 435 497 

Argentina 511 450 608 745 631 486 

Malaysia 615 439 289 230 185 390 

China 193 198 270 299 341 388 

Australia 151 164 158 298 270 322 

Brazil 145 405 530 123 164 240 

Côte ďIvoire 53 89 117 127 118 203 

All other 1,043 1,167 1,566 1,574 1,980 2,088 

 Total 4,735 5,115 5,696 5,918 7,151 8,533 

Source: GTIS, World Trade Atlas Database (accessed June 8, 2009).
2-11

BOX 2.2 Indian Agricultural Export Restrictionsa 

Export restrictions are one of several policy instruments the central government uses to address food price inflation 

and maintain stockpiles of food to feed the poor through the Public Distribution System. Export restrictions are of 

three types—export bans, minimum export prices (MEPs), and export taxes. Export bans prohibit the export of 

products, regardless of international and domestic price levels. MEPs are prices below which exporters cannot sell 

their product, making Indian goods less competitive overseas. Export taxes are levied on the value of exports, again 

making Indian product less competitive. 

In 2007, the Indian government began significantly restricting exports of essential commodities as global food prices 

increased and Indian strategic food reserves, or stocks, declined below government target levels. Reportedly, these 

export restrictions were also imposed because of the government’s desire to keep food prices low in the run-up to 

the national elections in early 2009. Recent export restrictions for major commodities are described below. 

Wheat. On February 9, 2007, the government banned exports of wheat and wheat products until 

December 31, 2007, a prohibition that was later extended indefinitely. 

Nonbasmati rice. Effective October 9, 2007, the government banned exports of all nonbasmati rice to ensure 

adequate rice availability in the domestic market. On October 31, 2007, however, because of the demands of rice 

exporters, the outright ban on exports was replaced by an MEP of $425 per ton, which was later increased to 

$1,000 per ton on March 27, 2008. On April 1, 2008, the government again banned exports. 

Basmati rice. Effective March 5, 2008, an MEP of $950 per ton was imposed, which was gradually increased to 

$1,200 per ton on April 1, 2008. In addition, an export tax of Rs. 8,000 per ton was imposed at that time. On 

January 20, 2009, the MEP was lowered to $1,100 per ton, and the export tax was abolished. 

Corn. On March 5, 2007, the government banned exports of corn by the private sector and channeled exports only 

through state trading enterprises for a period of six months. Effective July 3, 2008, the government banned exports 

of corn through October 15, 2008. 

Vegetable oils. On March 17, 2008, the government banned exports of vegetable oils. This prohibition was 

extended to March 16, 2010. 

Pulses. Effective June 22, 2006, the government imposed a ban on the export of pulses, with the exception of 

kabuli chana (garbanzos).

Milk and milk products. On February 9, 2007, the government imposed a ban on exports of skimmed milk powder, 

skimmed milk food for babies, whole milk, whole milk for babies, and other milk products until September 30, 2007. 

______________ 

a

 Aradhey, India: Oilseeds and Products, April 16, 2009, 22; Govindan, India: Grain and Feed, February 20, 

2009, 15; Govindan, India: Grain and Feed, February 20, 2008, 7; and Dhankhar, India: Dairy and Products, 

November 5, 2008.

Exports by Product 

Between 2003 and 2008, Indian agricultural exports to the world grew more than 

threefold, increasing from $6.1 billion in 2003 to $20.2 billion in 2008. Similarly, Indian 

agricultural exports to the United States increased steadily from $585 million in 2003 to 

about $1.3 billion in 2008 (table 2.3). Indian global agricultural exports are concentrated 

in a few major commodities. During 2006–08, rice, soybean meal, and cotton represented 

one-half of Indian global agricultural exports, with sugar and frozen beef (mostly buffalo 

meat) accounting for an additional 20 percent (fig. 2.6). Tobacco, nuts (mostly cashews 

and peanuts), beverages (tea and coffee), and spices are also exported by India. 

Agricultural products exported by India to the United States include nuts and a wide 

range of specialty products supplying ethnic grocery stores and restaurants. 
2-12

TABLE 2.3 India: Agricultural exports to the world and the United States by product, 2003–08 (million $) 

Product Source 2003 2004 2005 2006 2007 2008

Animal products 

Live animals World 4 5 5 10 10 11

United States 0 0 0 0 0 0

Frozen beefa World 268 392 553 656 804 1,091

United States 2 0 0 0 0 0

Other meat World 43 31 31 44 48 96

United States 0 0 0 0 0 1

Concentrated/sweetened dairy World 17 39 124 89 108 171

United States 0 4 3 1 0 0

Other dairy World 24 49 89 64 178 192

United States 13 30 62 34 78 64

Eggs World 46 60 76 57 101 109

United States 0 0 0 0 0 0

Grains 

Rice World 885 1,173 1,763 1,460 2,360 2,784

United States 22 20 31 33 51 45

Corn World 27 187 73 105 325 953

United States 0 0 0 0 0 0

Other grains World 442 451 216 28 109 148

United States 0 0 0 0 0 1

Animal feed 

Soybean meal World 389 767 638 1,070 1,303 2,337

United States 0 0 0 0 0 2

Other animal feed World 61 156 165 198 314 462

United States 0 0 0 0 0 0

Fats and oils 

Oilseeds World 163 242 199 205 367 553

United States 20 28 24 29 34 63

Castor oil World 106 184 229 199 275 380

United States 21 34 31 30 32 48

Other fats and oils World 69 129 90 116 149 207

United States 8 24 5 9 8 11

Vegetables 

Onions and shallots World 109 162 157 232 263 326

United States 0 0 0 0 0 0

Chickpeas World 1 5 22 49 126 94

United States 0 0 0 1 1 1

Pickled vegetables World 35 40 68 87 94 127

 United States 6 6 9 13 16 22

Other vegetables World 183 214 378 374 249 298

 United States 8 9 12 16 1 1

Nuts 

Cashews World 351 491 620 546 532 667

United States 170 234 251 211 191 221

Peanuts World 82 126 109 166 238 283

United States 3 17 0 0 0 0

Other nuts World 26 29 35 34 38 54

United States 14 18 25 33 37 47

See footnotes at end of table. 
2-13

TABLE 2.3 India: Agricultural exports to the world and the United States by product, 2003–08 (million $)—Continued 

Product Source 2003 2004 2005 2006 2007 2008

Fruit 

Guava/mango World 70 93 116 153 164 211

United States 2 3 3 4 5 6

Grapes World 24 20 44 55 58 101

United States 0 - 0 0 0 0

Other fruit World 443 588 745 704 708 906

United States 10 9 8 12 21 26

Beverages and products 

Coffee World 155 156 238 317 294 397

United States 2 6 4 6 6 4

Tea World 307 380 386 415 441 541

United States 18 22 24 24 27 35

Alcoholic beverages World 21 24 33 38 57 96

United States 1 1 1 1 1 2

Nonalcoholic beverages World 8 9 14 12 14 11

United States 1 2 1 2 4 2

Sugar, sweeteners, confectionery 

Cane/beet sugar World 370 52 38 620 1,024 1,511

United States 5 3 1 5 5 1

Other sugars/sweeteners World 39 38 55 84 111 133

United States 9 9 13 16 6 24

Spices 

Pepper World 87 124 124 194 396 353

United States 24 27 30 43 84 76

Cumin World 10 16 17 49 76 174

United States 1 2 2 8 13 16

Other spices World 88 98 112 123 149 206

United States 13 17 15 18 20 27

Miscellaneous processed products 

Instant coffee World 68 68 99 111 124 152

United States 1 2 1 3 4 5

Other processed foods World 84 102 142 161 186 274

United States 11 14 20 25 28 40

Gum and thickeners World 243 284 403 402 380 471

United States 89 90 146 164 139 208

Seeds for sowing World 11 13 18 26 35 28

United States 2 3 2 3 4 3

Tobacco World 220 265 299 366 455 666

United States 14 15 13 15 20 27

Fibers 

Cotton World 36 176 323 978 1,655 1,560

United States 0 0 0 - 3 0

Other fibers World 18 34 18 34 22 31

United States 1 2 1 1 1 1

All other World 504 476 440 700 967 989

United States 92 102 122 160 169 253

 Total World 6,135 7,949 9,310 11,330 15,307 20,150

 United States 585 754 862 917 1,008 1,282

Source: GTIS, World Trade Atlas Database (accessed June 8, 2009). 

a

Frozen beef is mostly buffalo meat. 
2-14

During 2006–08, cashews were the leading Indian export to the United States, accounting 

for 19 percent of all Indian agricultural exports, followed by gum and thickeners at 

16 percent (fig. 2.7).39 Other important exports include pepper, certain dairy products 

(mostly casein), and rice. 

Rice is the largest Indian agricultural export, accounting for 14 percent of all agricultural 

exports to the world in 2006–08. Rice exports consist of parboiled rice and basmati rice, 

which are highly competitive in the global market.40 High-quality basmati rice is exported 

principally to the Middle East and the EU-27 and competes with U.S. exports of basmati 

rice.41 With the aim of curbing food price inflation, the government has imposed a series 

of export restrictions on rice, beginning in October 2007, including an export ban on 

nonbasmati rice, a minimum export price, and an export tax.42 As a result, the volume of 

rice exports fell from 6.2 million metric tons (mmt) in 2007 to 3.5 mmt in 2008.43

 39 Natural gums and resins (HS 1301), such as gum arabic, and vegetable saps/extracts, pectates, and 

other thickeners (HS 1302), such as carrageenan, are commonly used as food additives, typically displaying 

thickening properties. However, both HS 1301 and 1302 include a wide variety of vegetable gums, resins, 

and extracts, such as turpentine (used as a solvent), and anesthetic or therapeutic substances, such as poppy 

straw extract. 40 Govindan, India: Grain and Feed, February 21, 2007. 41 Low-quality parboiled rice is exported mainly to Bangladesh and several African countries. 42 Govindan, India: Grain and Feed, February 20, 2009. 43 The value of rice exports increased, however, owing to the doubling of global rice prices between 2007 

and 2008. Between 2007 and 2008, the world price of rice (FOB Bangkok) increased from $332 per metric 

ton to $700 per metric ton. IMF, Commodity Prices, 2009. Wheat is another product impacted by export 

controls. In 2003, India exported about 3 mmt of wheat, mainly to Bangladesh and other Southeast Asian 

countries. The government banned the export of wheat beginning in February 2007 because of very low 

levels of government-held stocks in 2006. In 2006, government-held wheat stocks were down to 2 mmt 

compared with the desired buffer stock level of 4 mmt. Govindan, India: Grain and Feed, February 21, 2007. 

As a result, there were no wheat exports during 2007 and 2008, except for small amounts for food aid to 

neighboring countries. 

Tea

3% Tobacco

3%

Cashews

4%

Frozen beef

5%

Cane/beet sugar

7%

All other

42%

Rice

14%

Soybean

10%

Cotton

9%

Corn

3%

Average total exports — $15.6 

FIGURE 2.6 India: Agricultural exports to the world by product share, 

2006–08 average

Source: GTIS, World Trade Atlas Database (accessed June 8, 2009).
2-15

 

 

Soybean meal, used as a protein source in animal feed, was the second-largest 

agricultural export by India during 2006–08, accounting for 10 percent of all agricultural 

exports. In 2008, soybean meal exports reached $2.3 billion, compared with $389 million 

in 2003, reflecting both increasing prices and strong demand by the expanding livestock, 

dairy, and poultry industries across Asia. 44 Indian cotton exports increased from 

negligible levels in 2003 to about $1.6 billion in 2008. This growth stemmed from the 

rapid increase in cotton production following the introduction of Bt cotton into India.45 In 

2008, India was the world’s second-largest cotton exporting country behind the United 

States and is increasingly competing with the United States as a supplier of cotton in 

several markets.46

 44 Aradhey, India: Oilseeds and Products, May 19, 2008. 45 Genetically modified cotton was developed by Monsanto and sold under the brand names Bollgard and 

Bollgard 2 (both are Bt cotton). From 2001 to 2007, production increased from 16 million bales to 31 million 

bales produced from the same acreage. According to Monsanto officials, no agricultural technology since the 

Green Revolution has had a bigger impact on Indian agriculture. Industry representative, interview by 

Commission staff, New Delhi, India, May 11, 2009. 46 Singh, India: Cotton and Cotton Products, December 5, 2008. Exports of sugar also increased rapidly 

in recent years, from $38 million in 2005 to $1.5 billion in 2008. This increase can be explained partly by 

government assistance provided to sugar mills in the form of a payment on internal as well as ocean 

transportation costs during April 2007–April 2008. USDA, FAS, India: Trade Policy Monitoring Annual, 

March 15, 2009. Major markets purchasing Indian sugar are in the Middle East (mostly the United Arab 

Emirates and Saudi Arabia) and Asia (mostly Bangladesh and Sri Lanka). 

Pepper

6%

Gum and 

thickeners

16%

Tea

3%

Rice

Oilseeds 4%

4%

Castor oil

3% Other nuts

4%

19%

All other

36%

Other dairy

5%

Average total exports — $1.1 billion

Source: GTIS, World Trade Atlas Database (accessed June 8, 2009).

FIGURE 2.7 India: Agricultural exports to the United States by product 

share, 2006–08 average

Cashews
2-16

EU-27

14%

 All other

49%

Vietnam

5%

United States

7%

United Arab 

Emirates

7%

China

7%

Saudi Arabia

5%

Bangladesh

6%

Average total exports – $15.6 billion

Source : GTIS, World Trade Atlas Database (accessed June 8, 2009).

FIGURE 2.8 India: Agricultural exports by major trading partner, 

2006–08 average

Exports by Major Trading Partner

Indian agricultural exports are dispersed among a large number of destination markets 

(table 2.4). During 2006–08, the EU-27 was India’s largest agricultural export market, 

accounting for 14 percent of the total, followed by the United Arab Emirates (UAE), 

China, and the United States each with a 7 percent share (fig. 2.8). Other important 

markets include Bangladesh, Saudi Arabia, and Vietnam. During 2003-08, growth in 

Indian agricultural exports to the UAE, China, Vietnam, and Pakistan was particularly 

strong, led by sharply higher exports of rice, cotton, meat, and animal feed. 

TABLE 2.4 India: Agricultural exports by major trading partner, 2003–08 (million $)

Trading partner 2003 2004 2005 2006 2007 2008

EU-27 1,144 1,377 1,604 1,780 2,122 2,658 

United Arab Emirates 368 467 503 553 989 1,702 

Bangladesh 583 633 649 568 949 1,322 

United States 585 754 862 917 1,008 1,282 

Saudi Arabia 323 576 612 550 748 1,271 

China 105 169 389 896 1,277 1,178 

Vietnam 104 167 229 368 659 1,158 

Malaysia 297 337 295 349 596 952 

Indonesia 251 265 233 378 495 653 

Pakistan 49 124 154 655 611 648 

Japan 144 232 298 326 383 604 

All other 2,181 2,848 3,481 3,988 5,469 6,723 

 Total 6,135 7,949 9,310 11,330 15,307 20,150 

Source: GTIS, World Trade Atlas Database (accessed June 8, 2009).
2-17

Bibliography 

Aradhey, Amit. India: Grain and Feed; Pulses Situation and Outlook, 2007. GAIN Report no. IN8005. 

 U.S. Department of Agriculture, Foreign Agricultural Service, December 14, 2007. 

———. India: Oilseeds and Products; Annual, 2008. GAIN Report no. IN8047. U.S. Department 

 of Agriculture, Foreign Agricultural Service, May 19, 2008. 

———. India: Oilseeds; Annual, 2009. GAIN Report no. IN9051. U.S. Department of Agriculture, 

 Foreign Agricultural Service, April 16, 2009. 

———. India: Tree Nuts; Annual, 2008. GAIN Report no. IN8107. U.S. Department of Agriculture, 

 Foreign Agricultural Service, September 11, 2008. 

Dhankhar, Deepa. India: Dairy and Products; Annual, 2008. GAIN Report no. IN8131. U.S. Department 

 of Agriculture, Foreign Agricultural Service, November 5, 2008. 

Global Trade Information Service, Inc. (GTIS). World Trade Atlas Database (accessed June 8, 2009). 

Govindan, A. India: Grain and Feed; Annual, 2007. GAIN Report no. IN7012. U.S. Department of 

 Agriculture, Foreign Agricultural Service, February 21, 2007. 

———. India: Grain and Feed; Annual, 2008. GAIN Report no. IN8015. U.S. Department of 

 Agriculture, Foreign Agricultural Service, February 20, 2008. 

———. India: Grain and Feed; Annual, 2009. GAIN Report no. IN9025. U.S. Department of 

 Agriculture, Foreign Agricultural Service, February 20, 2009. 

International Monetary Fund (IMF). International Financial Statistics. May 2009. 

Mittal, Surabhi, and Arpita Mukherjee. Food for Policy. Reforming Agriculture. Foundation Books: 

New Delhi: Cambridge University Press India, 2008. 

Narayanan, Bradri and Terrie Walmsley, eds. Global Trade, Assistance, and Production: The GTAP 7 

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Commission in connection with inv. no. 332-504, India: Effects of Tariffs and Nontariff 

Measures on U.S. Agricultural Exports, April 1, 2009. 

Singh, Santosh. India: Cotton and Cotton Products;Annual, 2008. GAIN Report no. IN8049. U.S. 

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3-1

CHAPTER 3 

Domestic Consumption 

Overview 

The Indian diet centers around staple foods such as grains, pulses, edible oils, and 

potatoes.1

 Of these staples, grains account for almost two-thirds of caloric intake on a 

daily basis, and per capita consumption of grains (mainly rice and wheat) has remained 

fairly constant over the past six years. In recent years, total Indian food consumption as 

well as per capita consumption of many food products has increased, including nonstaple 

food items, such as fruits, vegetables, dairy foods, and meat. Despite the rise in caloric 

intake over time, Indians still consume fewer calories than people in many other 

developing countries.2

 

Indian food consumption is influenced by factors such as population size and 

demographics, income, price, cultural preferences, and availability. India has a large and 

diverse population that historically has been poor and has spent a relatively large share of 

its income on food.3

 The recent rise in Indian incomes has resulted in an increase in the 

size of India’s middle class, with increased disposable income available for spending on 

food. Rising incomes typically lead to a diversification of diets from those high in food 

grains to ones with increasing amounts of nongrain food items, and this trend is occurring 

in India.4

 

Looking beyond income and cultural practices, the availability of certain foods clearly 

affects consumption patterns.5

 Indian consumers have only limited access to imported 

foods or to Western-type foods produced in India,6

 but as in other countries, when new 

foods become available in India, certain market segments readily develop preferences for 

them. Middle- and upper-class Indians, who mainly live in urban areas, are more likely to 

buy imported foods or multinational brand foods produced domestically. Over time, the 

growth of the Indian middle class and urban dwellers with diversified food preferences 

should not only increase overall consumption but also increase demand for different types 

of foods, including varied imports.7

 

Consumption 

Food Consumption Patterns 

Total Indian consumption of food products has increased in recent years. Available data 

for consumption of a number of foods, including grains, meat, dried fruit and nuts, dairy, 

 1

 Comprehensive consumption data, including per capita consumption are not available for many food 

products in India. The available, albeit limited, consumption data are presented later in this chapter. 2

 FAO, Country Profiles: Brazil, China, and India, FAO Statistical Yearbook, 2005. 3

 EIU, India Food, November 11, 2008. 4

 Chatterjee, Rae, and Ray, “Food Consumption, Trade Reforms, and Trade Patterns in Contemporary 

India,” n.d., 7. 5

 Chapter 2 covers India’s imports and chapter 4 agricultural production. 

6

 The barriers to agricultural imports are discussed primarily in chapters 5 and 6. 7

 Industry representatives, interviews by Commission staff, New Delhi and Mumbai, India, various dates. 
3-2

edible oils, and sugar, show that total consumption of these products increased 

approximately 12 percent in volume from marketing year (MY) 2003/04 to MY 2008/09 

(table 3.1). India is currently the 12th-largest food consumer in the world, and one source 

predicts it could grow to be the 5th-largest consumer food market by 2025, depending on 

India’s population growth projections and per capita spending on food.8

 

TABLE 3.1 India: Total domestic consumption of select commodities, MYs 2003/04–2008/09 (1,000 mt) 

Commodity 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09

Grains 189,538 186,939 188,868 192,585 202,311 199,200

Beef and veal (carcass weight equivalent) 1,528 1,638 1,633 1,694 1,735 1,845

Poultry, broiler 1,498 1,648 1,899 2,000 2,239 2,489

Almonds, shelled basis 25 27 24 33 40 43

Walnuts, in-shell basis 16 17 18 20 19 20

Raisins 4 8 9 7 10 11

Dairy 86,635 90,838 94,418 99,496 105,722 108,989

Edible oils 11,165 11,563 12,114 11,988 12,518 13,438

Sugar, centrifugal 20,750 18,600 19,500 21,235 22,425 23,550

Source: USDA, FAS, Production, Supply and Distribution (accessed July 2, 2009). 

According to an Indian government survey, per capita food consumption increased 

5.1 percent annually from fiscal year (FY) 2003/04 to FY 2007/08, a significant increase 

from the 2.6 percent average annual growth during the previous 11 years. 9 U.S. 

government data for certain food items in India also show strong growth rates in per 

capita consumption during the same period (table 3.2); per capita consumption increased 

51 percent for dried fruit, 17 percent for dairy, and 12 percent for edible oils. However, 

these higher growth rates were partially offset by a decline in the consumption of grains 

for most years after MY 2003/04. For the period per-capita grain consumption declined 

2 percent.

Caloric Intake 

Indians consumed fewer calories per day (approximately 2,240) in 2001–03 than the 

average person in China, Brazil, or the United States (fig. 3.1).10 Yet, the Indian caloric 

amount represented an increase of approximately 17 percent over the past quarter-century 

(from the 1979–81 annual average to the 2001–03 annual average).11 The majority of 

daily calories (1,354) for Indians came from grains: rice and wheat together accounted for 

53 percent of daily total caloric intake (fig. 3.2).12 The next largest sources of calories for 

Indians were sugar, edible oils, and milk. Indians consumed very small amounts of meat 

compared to other foods and to meat consumption in other developing countries, such as 

Brazil and China, because of cultural and economic factors.13 Unidentified “other foods,” 

 8

 McKinsey Global Institute, “The ‘Bird of Gold,’” May 2007, 10 and 14. 9

 Government of India, Ministry of Finance, Economic Survey 2007–08, n.d., 3. The Indian fiscal year is 

April 1–March 31. 10 The most recent data available are for 2003. FAO, Country Profiles: Brazil, China, India, and the 

United States, FAO Statistical Yearbook, 2005. 11 FAO, Country Profile: India, FAO Statistical Yearbook, 2005. 12 This information is based on the FAO Statistical Yearbook, which provides daily caloric information 

for a basket of food items including food grain, certain types of oil, and some animal products averaged over 

the years 2001–03. FAO, Country Profiles: Brazil, China, India, and the United States, FAO Statistical 

Yearbook, 2005. 13 Ibid. 
3-3

3,770

2,940 3,060

2,440

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

India China Brazil United States

Source: FAO, Country Profiles, Brazil, China, India, and the United States, FAO Statistical Yearbook , 2005. 

FIGURE 3.1 India and selected countries: Per capita daily consumption of calories, average 

2001–03 Calories

TABLE 3.2 India: Per capita consumption of select commodities, MYs 2003/04–2008/09 (kilograms) 

Commodity 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09

Grains 

Rice, milled 77.53 72.07 74.69 74.99 77.12 77.67

Wheat 60.84 64.92 61.43 63.45 65.08 59.09

Corn 12.22 12.39 12.47 12.02 12.11 13.70

Other grains 20.05 17.24 17.21 16.10 18.16 16.98

All grains 170.64 166.62 165.79 166.57 172.47 167.44

Meat 

Beef and veal 1.38 1.46 1.43 1.47 1.48 1.55

Poultry, broiler 1.36 1.47 1.67 1.73 1.91 2.09

Dairy 

Butter 2.22 2.32 2.41 2.64 2.86 3.10

Fluid milk 76.05 78.43 80.28 83.20 87.03 88.25

Nonfat dry milk 0.17 0.21 0.20 0.21 0.23 0.26

All dairy 78.44 80.96 82.88 86.05 90.13 91.61

Edible oil 

Oil, palm 3.26 3.04 2.74 3.26 3.93 4.27

Oil, soybean 1.71 2.34 2.57 2.25 1.96 1.88

Other edible oil 5.14 4.93 5.32 4.86 4.78 5.14

All edible oil 10.11 10.31 10.63 10.37 10.67 11.30

Other 

Sugar, centrifugal 18.79 16.58 17.12 18.37 19.12 19.80

Dried fruit 0.04 0.05 0.04 0.05 0.06 0.06

Population (millions) 1,104.53 1,121.95 1,139.19 1,156.21 1,173.04 1,189.68

Source: USDA, FAS, Production, Supply and Distribution (accessed July 2, 2009); and International Monetary Fund, International 

Financial Statistics, July 2009. 

Note: For each crop, per capita consumption was calculated by dividing total domestic consumption by the estimated population. 

Indian population data for 2003 through 2008 were available from International Monetary Fund, International Financial Statistics, 

July 2009. From 2003 to 2008, the IMF population estimates reflected the expectation that India’s population growth rate would 

decline 0.04 percent per year. Therefore, to calculate a population estimate for 2009 and 2010, the previous year’s population 

was inflated by that year’s growth rate less 0.04 percent. The estimated marketing year population (e.g., 2003/04) is based on the 

simple average of the population for the two calendar years making up that marketing year (2003 and 2004).
3-4

Milk

4%

Palm Oil

3%

Wheat

Sugar 21%

7%

Rice

32%

Other foods

33%

FIGURE 3.2 India: Share of per capita daily calorie consumption by 

food item, average 2001–03

Source: FAO, Country Profiles, India, FAO Statistical Yearbook , 2005. 

which represented almost one-third of Indian caloric intake, likely included fruits, pulses, 

vegetables, dried fruits, and processed foods. 

Factors Affecting Consumption 

Generally, the factors that affect food consumption in India are those that influence food 

consumption globally, namely population size and demographics, income levels, food 

prices, and consumer food preferences. Rapid changes in the Indian economy and 

corresponding changes to Indian society and demographics are likely not only to increase 

the amounts of traditional foods that Indians eat, but also to change the mix of foods 

Indians consume, including the addition of new food types to their diets, such as highervalue processed foods and imported food products. 

Population Size and Demographics 

India’s population is currently 1.2 billion, approximately one-sixth of the world’s 

population and second in size only to China. The population is spread across 28 states 

and 7 union territories (UTs). From MY 2003/04 to 2008/09, the Indian population is 

estimated to have grown approximately 8 percent (table 3.2). Such rapid population 

growth translates into a much larger consumer market for food products, whether 

traditional Indian staple foods or foods new to the Indian diet. Furthermore, India’s large 

population is young and ethnically diverse. India’s median age is 25, which is young even 

compared to that of other large developing countries, such as China and Brazil.14 The 

changing demographics of the Indian population will likely have an impact on the types 

of foods Indians eat. Young people, especially young professionals in urban areas, are 

 14 China and Brazil have median ages of 34 and 29, respectively. CIA, The World Factbook: India, 

updated June 1, 2009; CIA, The World Factbook: China, updated May 14, 2009; and CIA, The World 

Factbook: Brazil, updated May 14, 2009. 
3-5

more likely to have been exposed to Western culture and have an affinity for Westernstyle foods, whether produced in India or imported.15

Religion is also an important factor that can influence the types of food Indians consume. 

For example, certain meats are forbidden or strongly discouraged by Hinduism (e.g., cow 

meat) and Islam (e.g., pork) (box 3.1). The Indian population practices a number of 

religions, but the majority of the population (81 percent) is Hindu. Muslims are the 

second-largest religious group (13 percent), followed by Christians (2.3 percent) and 

Sikhs (1.9 percent). 16

Income and Expenditure 

Income Levels 

Most of the Indian population historically has been poor. Consequently, most Indians are 

very price sensitive with respect to food purchases (box 3.2). Even today, about 

34 percent of the population lives on $1 per day or less, and 80 percent of Indians live on 

$2 per day or less. 17 By national standards, however, not all these individuals are 

considered impoverished; only 29 percent of Indians live below the national poverty line. 

Moreover, recent economic growth has caused incomes to rise, with a corresponding rise 

in spending, including food expenditures. Between FY 2003/04 and FY 2007/08, Indian 

per capita incomes grew 7.2 percent annually, which has allowed considerable numbers 

of Indians to move into the middle class.18

 15 Singh, India: Retail Food Sector, December 21, 2006, 5; Govindan and Dhankar, India: Exporter 

Guide, October 1, 2008, 5; and Bryant Christie Inc., India Research Study, January 31, 2008, 14. 16 CIA, The World Factbook: India, updated June 1, 2009. 17 UNDP, Human Development Report 2007/2008, 2007, 239. 18 Government of India, Ministry of Finance, Economic Survey 2007–08, n.d., 3. 

BOX 3.1 Indian Pork Consumptiona

Pork consumption in India is small for cultural and religious reasons. Pork is generally viewed as a poor man’s meat, 

in part because pigs in India roam free and are viewed as feral scavengers. In addition, practicing Muslims are 

prohibited from eating pork. However, pork is consumed in somewhat larger quantities in Christian communities in 

the northeastern and southwestern areas of India, including in Goa, where it was introduced by the Portuguese 

when Goa was a colony of Portugal. It is also consumed in hotels and restaurants in India that feature or sell 

Western food, but generally not in Chinese restaurants (which are popular in India), notwithstanding its widespread 

use in Chinese cooking outside of India. 

______________ 

a USMEF, “India’s Pork Market:” March 2007; FAO, Country Profile: India, FAO Statistical Yearbook, 2005. 
3-6

The middle class is India’s most rapidly growing segment, and one source estimates that 

583 million Indians will be considered middle class by 2025.19 The middle class in India 

includes approximately 200–300 million people, with most located in urban areas.20 This 

demographic grouping includes Indians with annual incomes of $2,000 or more (roughly 

equivalent to a daily income of $5.50 or more), or approximately 17–25 percent of the 

2008 population.21 One study estimates that the urban middle class will account for more 

than 75 percent of total food spending by 2025.22 Research has shown that, generally, as 

incomes rise, Indians increasingly consume more nongrain food items such as fruits, 

vegetables, and nuts (boxes 3.3 and 3.4).23 Because middle class Indians already meet 

their basic food needs, it is expected that they will increasingly buy higher-value foods, 

including nontraditional items such as processed foods, organic or premium foods, 

foreign foods, and meals in restaurants. 

 19 Chatterjee, Rae, and Ray, “Food Consumption, Trade Reforms, and Trade Patterns,” 7; Bryant Christie 

Inc., India Research Study, January 31, 2008, 3. 20 Singh, India: Retail Food Sector, December 21, 2006, 4. 21 The growing middle class in India is difficult to define precisely because its definition depends on the 

income levels used. One study divides Indians into five groups based on income (from low to high): deprived, 

aspirers, seekers, strivers, and global. According to this study, only seekers and strivers—about 5 percent of 

the population—qualify as middle class. McKinsey Global Institute, “The ‘Bird of Gold,’” May 2007. 

Several other studies use a lower income criterion and would consider aspirers to belong to the middle class 

as well. 22 McKinsey Global Institute, “The ‘Bird of Gold,’” May 2007, 120. 

23 Chatterjee, Rae, and Ray, “Food Consumption, Trade Reforms, and Trade Patterns,” 7. 

BOX 3.2 Indian Consumers and Price ______

Indian consumers are considered to be price sensitive, carefully planning their food purchasesa

 and buying food in 

small quantities. This price sensitivity makes “[p]ackage size an important element of demand”b

 in India. Many food 

items, such as almonds, fruits, and pulses, are sold loose so consumers can buy only what they need for a few 

days’ consumption. Low-income customers can avoid paying a markup on such items as pulses by cleaning and 

sorting them at home.c

 Edible oils are also sold from bulk containers, requiring customers to bring their own bottles 

to be filled at the shop—often of a branded oil mixed with a cheaper oil.d

Indian consumers value quality, but all but the upper classes are often reluctant or unable to pay for higher quality 

food.e

 Nonetheless, a recognized high-quality brand may command some brand loyalty and thus a price premium.f

For example, U.S. products reportedly command a 5–10 percent premium because of their high quality and brand 

names. Affluent urban customers who are aware of quality and international brands and may have traveled abroad 

are more willing to pay a premium for quality food products, including imports.g

______________ 

a Bryant Christie Inc., “India Research Study,” January 31, 2008, 15. b EIU, India Food, November 11, 2008. c Approximately 90 percent of purchases are preplanned. USDA, ERS, Indian’s Pulse Sector, May 2003, 9. d Industry official, interview by Commission staff, Washington, DC, April 30, 2009. e Singh, India: Retail Food Sector, December 21, 2006, 5; Govindan, India: Exporter Guide, October 1, 2007, 5; 

and Govindan and Dhankhar, India: Exporter Guide, October 1, 2008, 5. f Government official, interview by Commission staff, New Delhi, India, May 26, 2009. g EIU, India Food, November 11, 2008; Industry official, interview by Commission staff, New Delhi, India, 

May 26, 2009.
3-7

BOX 3.3 Indian Consumption of Imported Fruits and Vegetables

India imports a wide variety of fresh fruits and vegetables. Fruit imports are dominated by apples, but relatively 

large imports of pears, citrus, dates, and grapes have been recorded as well.a Navel oranges are in high demand.b

Smaller quantities of durians, kiwi, apricots, cherries, and plums are also imported into India.c

 Imported vegetables 

include potatoes, tomatoes, garlic, and mushrooms.d 

As a result of their high cost—said to be up to 10 times the price of local producee

—the primary Indian consumers 

of imported fruits and vegetables are higher-income Indians, hotels, and catering businesses.f

 Reportedly, in the 

off-season, Indian consumers are willing to pay a premium for U.S. fruit exports.g For example, although Chinese 

apples are lower priced, approximately one-third of Indian apple imports are from the United States, primarily Red 

Delicious from Washington State. A survey conducted in six major Indian cities found that imported fruits and 

vegetables are generally consumed at higher rates in major port cities than in interior cities.h

 Imported fruits are 

more commonly consumed than imported vegetables, probably because vegetables are more perishable. The 

reasons most commonly cited by Indian consumers for buying imported fruits and vegetables varied among the six 

cities in question, although nutrition ranked as the number one reason in five cities. The second most common 

reason was the country of origin of the produce. 

______________ 

a Dhankhar, India: Product Brief, December 16, 2008, 5. b Industry official, interview by Commission staff, New Delhi, India, May 27, 2009; Dhankhar, India: Product 

Brief, December 16, 2008, 11. 

c Dhankhar, India: Product Brief, December 16, 2008, 18. d Florida Department of Agriculture and Consumer Services, India: Road to Success, August 2007, 38. e Dhankhar, India: Product Brief, December 16, 2008, 4; Florida Department of Agriculture and Consumer 

Services, India: Road to Success, August 2007, 24 f Dhankhar, India: Product Brief, December 16, 2008, 4 and 11. g

 Industry official, interview by Commission staff, New Delhi, India, May 27, 2009. h Consumption of imported fruit was especially high in Chennai, Bangalore, and Mumbai, while imported 

vegetable consumption was highest in Chennai and Mumbai. Florida Department of Agriculture and Consumer 

Services, India: Road to Success, August 2007, 31.
3-8

Income Distribution 

Income growth has been more rapid in some regions of India than in others, and as a 

result, certain states and UTs have a higher concentration of wealth than others (table 3.3 

and fig. 3.3). Five states (Punjab, Himachal Pradesh, and Haryana in northern India; 

Kerala and Andhra Pradesh in southern India) have 16 percent or fewer of households 

below the national poverty line.24 Punjab, Himachal Pradesh, and Haryana, which border 

each other, were also among the 10 states and UTs with the highest per capita income in 

FY 2005/06, while Kerala and Andhra Pradesh were in the top 15.25 The combination of 

high population density and high per capita income make Indian centers such as Delhi 

and Maharashtra the most likely regions to be targeted for the marketing of new, highervalue, nontraditional foods, according to one California study.26

 24 Government of India, Ministry of Finance, Economic Survey 2007–08, n.d., 28–29 and table 2.3. 25 Government of India, PIB, press release, November 25, 2007. 26 Bryant Christie Inc., India Research Study, January 31, 2008, 4. 

BOX 3.4 Indian Almond Consumption

Almonds play a special role in Indian culture. The preference for almonds in northern India, especially in Delhi, 

stems from historical patterns of importing almonds and many dried fruits from Iran over several generations.a

Almonds, not commercially grown in India, remain most popular in the north, although they are reportedly also 

enjoyed in Mumbai and the west coast, and their consumption is expanding into the south.b

 Indians consume 

almonds primarily as food, although they are also used in cosmetic and health care products.c

 Almonds are viewed 

as “high energy” and “brain” food and are recommended for children, pregnant women, recuperating patients, and 

athletes.d

 Reportedly, it is traditional for children to be given seven almonds soaked in milk or water for overall good 

health. Lower-income Indians aspire to eat almonds, and for the many who consider them a luxury item, they are 

reserved for holidays.e

The demand for almonds in India is filled almost exclusively through imports, of which the United States supplies 

roughly 85 percent.f

 Indians like the large size, even shape, and taste of the California nonpareil almond variety. 

Reportedly the California “brand” is highly regarded in India, and California exporters feel it is important to 

emphasize their almonds’ origin.g However, in certain regions, such as Gujarat and Rajasthan, people prefer Iranian 

almonds (Mamra/qumi) and pay a price premium for them.h

 Indians are particular when purchasing almonds, 

preferring only those that have no chips or marks.i For this reason, most almonds are shipped whole to India, where 

they are hand-shelled. The majority of almonds are sold loose in small stores; only about 5 percent are sold in 

retail-sized packages.j

______________ 

a Industry official, interview by Commission staff, Mumbai, India, May 11, 2009; Government official, interview by 

Commission staff, New Delhi, India, May 4, 2009. b Industry official, interview by Commission staff, Mumbai, India, May 11, 2009. c Aradhey, India: Tree Nuts, September 11, 2008, 4. d Ibid., Industry official, interview by Commission staff, Mumbai, India, May 11, 2009; and USITC, hearing 

transcript, April 21, 2009, 23 (testimony of Mr. Heron, Blue Diamond Growers). e

 Industry official, interview by Commission staff, Mumbai, India, May 11, 2009. 

f Aradhey, India: Tree Nuts, September 11, 2008, 4. g

 Industry official, interview by Commission staff, Mumbai, India, May 11, 2009; USITC, hearing transcript, 

April 21, 2009, 125–126, (testimony of Mr. Gore, JBC International; Mr. Zion, the California Pistachio Export 

Council; and Mr. Heron, Blue Diamond Growers). h Aradhey, India: Tree Nuts, September 11, 2008, 4. i Industry official, interview by Commission staff, Mumbai, India, May 11, 2009; Aradhey, India: Tree Nuts, 

September 11, 2008, 4. j Aradhey, India: Tree Nuts, September 11, 2008, 4; Industry official, interview by Commission staff, Mumbai, 

India, May 11, 2009. 
3-9

TABLE 3.3 India: Ten highest per capita income states and union territories, FY 2005/06 

State/UT 

2005/06 average 

annual per capita 

income

(US $)

Average per 

capita daily 

income

(US $) 

Total population 

(1,000 persons) 

 (2001) 

Pop. density 

(per sq. km) 

(2001)

Chandigarh 1,726 4.73 901 7,900

Delhi 1,250 3.42 13,851 9,340

Goa 1,207 3.31 1,344 363

Puducherry 925 2.53 974 2,030

Haryana 760 2.08 21,145 478

Maharashtra 739 2.03 96,752 314

Punjab 727 1.99 24,359 484

Andaman and Nicobar Islands 694 1.90 356 43

Himachal Pradesh 690 1.89 6,078 109

Gujarat 675 1.85 50,671 258

Sources: Government of India, PIB, “Per Capita Income,” November 25, 2007. Originally expressed in U.S. dollars 

for FY 1999/2000 (for FY 2005/06 year) and converted to U.S. dollars for FY 2005/06 using IMF, International 

Financial Statistics (online) (accessed May 2009). Government of India Web site, Know India: States and Union 

Territories, reviewed February 22, 2008 (accessed May 2009); Government of India Web site, "Districts of India," 

reviewed February 22, 2008 (accessed May 2009). 
3-10

FIGURE 3.3 India: States and union territories 

The rise in the number of urban dwellers, with their faster-growing incomes, is likely to 

increase per capita food consumption and consumption of nontraditional food in Indian 

cities. Currently, Indians live mainly in rural areas; only about 29 percent of Indians, or 

approximately 342 million people, lived in urban areas in 2008.27 By 2015, however, 

32 percent of the population is expected to be urban.28 Indians living in urban areas tend 

to have higher incomes than those in rural areas; in 2001 the population living in the eight 

largest cities accounted for 40 percent of India’s disposable income.29 Urban households 

 27 CIA, The World Factbook: India, updated June 1, 2009; International Monetary Fund, International 

Financial Statistics, July 2009. 28 UNDP, Human Development Report 2007/2008, 2007, 345. 29 They are Mumbai (Bombay), Delhi, Kolkata (Calcutta), Chennai, Bangalore, Hyderabad, Ahemdabad, 

and Pune..

 McKinsey Global Institute, “The ‘Bird of Gold,’” May 2007, 74. 

Andhra

Pradesh

Maharashtra

Gujarat

N.C.T.

of Delhi

Goa

Rajasthan

Madhya

Pradesh

Karnataka

Tamil

Nadu

Kerala

Orissa

Chhattisgarh

West

Bengal

Bihar

Jharkhand

Uttar Pradesh

Jammu and

Kashmir

Punjab

Himachal Pradesh

Uttarakhand

Sikkim

Assam

Arunachal

Pradesh

Nagaland

Manipur

Mizoram Tripura

Meghalaya

Haryana

Chandigarh

Daman and Diu

Dadra and Nagar

Haveli

Puducherry

Lakshadweep

Andaman and Nicobar Islands

Note: Italics indicate union territories and the national capital territory.
3-11

are expected to see income growth of 5.8 percent per year from 2005 to 2025, while rural 

incomes are forecast to grow at a rate of only 3.6 percent per year.30

Spending on Food 

Regardless of where they live, Indians spend a substantial share of their disposable 

income on food relative to other countries. For example, Indians’ average food 

expenditures as a share of their total spending were estimated to be 8 percentage points 

higher than those of residents of China in 2008.31 However, the share of household 

expenditures that both rural and urban dwellers spent on food fell in FY 2006/07 to 

52 percent for rural households and 39 percent for those in urban areas (table 3.4).32 In 

some regions of India, there is a pronounced difference between urban and rural 

households’ food expenditures. For example, in Maharashtra the absolute amount of 

money that urban households spent on food was more than double that spent by rural 

households in FY 2006/07.33 Higher urban incomes provide one likely explanation for 

this disparity; five times as many rural households as urban ones face food inadequacy 

for some months of the year.34

The portion of income that rural and urban households allocate to certain foods also 

differs. A greater percentage of rural households’ expenditures is allocated to staple food 

items. Food grains were the biggest food expenditure for rural and urban dwellers, 

constituting 32 percent and 23 percent, respectively, of food expenditures in FY 2006/07 

(figs. 3.4 and 3.5). 35 Expenditure on dairy for urban households was 18 percent, 

compared to 15 percent for rural households. The greater income of urban households 

allows for greater shares of nonstaple foods. For example, urban households spent about 

15 percent of their food budget on beverages, refreshments, and processed foods, while 

rural households spent slightly less than 8 percent on these items in FY 2006/07. 

 30 McKinsey Global Institute, “The ‘Bird of Gold,’” May 2007, 11. 

31 Estimates included consumer expenditures of food, beverages, and tobacco. EIU, India Food,

November 11, 2008. 32 The survey covered the period July 2006 through June 2007. Government of India, NSSO, Household 

Consumer Expenditure in India, FY 2006/07, October 2008. 33 Government of India, NSSO, Household Consumer Expenditure in India, 2006/07, October 2008. 34 In FY 2004/05, according to the government of India, 2 percent of India’s rural households faced food 

inadequacy, compared with 0.4 percent of urban households. Government of India, Ministry of Finance, 

Economic Survey 2007–08, n.d., 246. By international standards, however, India’s rates of food inadequacy 

are much higher. For example, the World Food Programme recently reported that 35 percent of Indians are 

food insecure and 20 percent are undernourished. World Food Programme, “Countries: India,” 2009. It is 

likely that more of these food-insecure and undernourished individuals live in rural areas than in urban areas. 35 Government of India, NSSO, Household Consumer Expenditure in India, 2006/07, October 2008. 

TABLE 3.4 India: Share of household consumer expenditures spent by rural and urban consumers on food and 

beverages, FYs 2004/05–2006/07 (%) 

July 2004–June 2005 July 2005–June 2006 July 2006–June 2007 

Rural Urban Rural Urban Rural Urban 

55 43 53 40 52 39 

Sources: Government of India, NSSO, Household Consumer Expenditure Among Socio-Economic Groups India, 

FY 2004/05, August 2007; Household Consumer Expenditure in India, FY 2006/07, January 2008; and Household 

Consumer Expenditure in India, FY 2006/07, October 2008. 
3-12

Milk and milk 

products

15%

Sugar, salt, and 

spices

8%

Beverages, 

processed food, 

and purchased 

meals 

8%

Other food items

25% Food grains

32%

Vegetables

12%

Source : Government of India, NSSO, Household Consumer Expenditure Among SocioEconomic Groups, 2006/07 , October 2008.

FIGURE 3.4 India: Share of food expenditure by food item in rural areas, 

fiscal year 2006/07

Milk and milk 

products

18%

Food grains

23%

Vegetables

10%

Beverages, 

processed 

food, and 

purchased 

meals 

15%

Other food 

items

34%

Source: Government of India, NSSO, Household Consumer Expenditure Among 

Socio-Economic Groups, 2006/07 , October 2008. 

FIGURE 3.5 India: Share of food expenditure by food item in urban 

areas, fiscal year 2006/07

 
3-13

Food Preferences 

India is a country of diverse food preferences that vary by region, religion, and income 

group.36 One Indian industry official stated that “there are different consumer preferences 

every 50 kilometers.” 37 Indians typically consume unprocessed fresh foods with 

traditional ingredients, such as food grains, pulses, potatoes, edible oils, and Indian 

spices.38 Many fresh foods are seasonal, and consumers adjust their diets to what is 

available.39 A preference for fresh foods also applies to items such as meat, which is 

usually bought freshly slaughtered. Anecdotal evidence suggests that Indians, even those 

with financial means, regularly tend to eat a relatively narrow variety of foods.40

Indian food consumption patterns generally change for holidays, which include festivals 

such as Diwali,41 and special occasions, such as weddings. During the fall festive season, 

demand peaks for specialty and high-value foods.42 These special foods include Indian 

sweetmeats as well as a variety of imported foods, such as chocolates, nuts, baked goods, 

and exotic fruits and juices. Outside of special occasions, as noted earlier, rising incomes 

have driven a generally steady rise in the consumption of nonstaple items, such as fruit, 

vegetables, and meat.43

Although Indians may be slow to change their traditional diets, some multinational food 

companies are finding gradual success in the Indian market.44 Generally, Western-style 

foods have been slow to penetrate the Indian market because of consumer preferences for 

fresh products and traditional ingredients. 45 Some multinational franchises (e.g., 

McDonald’s, Pizza Hut, and Subway) have expanded their presence in India, with menus 

often altered for Indian tastes. For example, these restaurants serve no beef and little, if 

any, pork in their Indian outlets.46 Other adjustments include giving higher prominence to 

dairy products and spicy foods, as well as developing unique products specifically for the 

Indian market.47 The trend toward higher incomes and the large number of young adults 

 36 Industry representative, interview by Commission staff, Washington DC, April 30, 2009. 

37 Industry representative, interview by Commission staff, Mumbai, India, June 1, 2009. 38 EIU, India Food, November 11, 2008; Singh, India: Retail Food Sector, December 21, 2006, 5; and 

Govindan and Dhankar, India: Exporter Guide, October 1, 2008, 5. 39 Singh, India: Retail Food Sector, December 21, 2006, 5; Govindan and Dhankar, India: Exporter 

Guide, October 1, 2008, 5. 40 Industry official, interview by Commission staff, New Delhi, India, May 9, 2009; government official, 

interview by Commission staff, New Delhi, India, May 26, 2009. 41 Diwali (the festival of lights) is one of the most important Hindu holidays and occurs in October or 

November. 42 Singh, India: Retail Food Sector, December 21, 2006, 5; Govindan, India: Exporter Guide, October 1, 

2007, 5; and Govindan and Dhankar, India: Exporter Guide, October 1, 2008, 5. 43 USDA, ERS, Prospects for India’s Emerging Apple Market, January 2006, 5. 44 Reportedly, Indian consumer preferences are slow to change, and it can take five to seven years for 

them to do so. Industry official, interview by Commission staff, Mumbai, India, May 12, 2009. 45 Singh, India: Retail Food Sector, December 21, 2006, 5; Govindan and Dhankar, India: Exporter 

Guide, October 1, 2008, 5. 46 Industry representatives, interview by Commission staff, Mumbai, India, May 12, 2009, and 

June 2, 2009; industry representative, interview by Commission staff, New Delhi, India, May 8, 2009. 47 Industry representative, interview by Commission staff, Mumbai, India, May 12, 2009; industry 

representative, interview by Commission staff, New Delhi, India, May 8, 2009. 
3-14

(ages 20 to 34) who are less inclined to cook is also contributing to the popularity of 

Western-style restaurants.48

Consumption of processed foods in India is low but growing. Some of the prepared and 

packaged foods commonly consumed are sauces, spice mixtures, snacks, confectionery, 

and packaged noodles.49 Similar to dining in restaurants, acceptance of processed and 

packaged products by the middle class is growing because of rising incomes, growing 

urbanization, and the increased number of working women.50 Additionally, growth in 

processed food consumption comes with increased exposure to Western culture, 

especially by young professionals, including fast food restaurants, cafés, and Western 

products introduced by multinational food companies.51 The middle class reportedly is 

especially open to processed foods, 52 but the higher cost of some processed foods 

constrains their consumption.53 In addition, wealthy households that employ domestic 

help to cook reportedly have less need to buy processed foods in order to save time.54 

Consumption preferences are also influenced by Indians’ adoption of the global trend 

toward health consciousness and the corresponding increase in demand for healthier 

foods.55 In a recent survey of Indian consumers with above-average incomes, 52 percent 

of respondents reported nutrition was the primary reason for trying imported produce.56

Other information indicates, however, that some Indian consumers choose their food 

mainly on the basis of taste, rather than for safety or nutrition reasons.57

Additionally, consumption in India is influenced by access to food items, whether from 

domestic or import sources. For example, oats are not produced in India and had not been 

available to Indian consumers, but once they entered the marketplace, Quaker brand oats 

found success as a healthy breakfast food. 58 Many other food products not currently 

available in India may have the potential for acceptance by Indian consumers. This 

potential could be met, at least in part, by global export suppliers. 

 48 Bryant Christie Inc., India Research Study, January 31, 2008, 13. According to a 2007 study, only 

about 2.5 to 3 percent of all Indians’ food expenditures were for meals in restaurants or hotels. USDA, FAS, 

India: HRI Food Service Sector, December 14, 2007, 3. In urban areas, only 23 percent of city dwellers ate 

out at all in 2006; around 12 percent ate out once a month, and 4.5 percent of Indians dined out weekly. 

Yadav and Kumar, “The Food Habits of Nation,” August 14, 2006. 

49 EIU, India Food, November 11, 2008; Govindan, India: Exporter Guide, October 1, 2007, 5; 

Govindan and Dhankar, India: Exporter Guide, October 1, 2008, 5; Singh, India: Retail Food Sector, 

December 21, 2006, 5; and DATAMONITOR, “Confectionery in India,” November 2008. 50 Singh, India: Retail Food Sector, December 21, 2006, 5; Govindan, India: Exporter Guide, 

October 1, 2007, 5; and Govindan and Dhankar, India: Exporter Guide, October 1, 2008, 5. 51 Singh, India: Retail Food Sector, December 21, 2006, 5; Govindan and Dhankar, India: Exporter 

Guide, October 1, 2008, 5. 52 Industry representatives, interview by Commission staff, New Delhi, India, May 26, 2009. 53 Basu, “Indian’s Food Sector Poised for Rapid Growth,” March 2008, 16. 

54 Government official, interview by Commission staff, New Delhi, May 26, 2009. 55 Dhankhar, India: Product Brief, December 16, 2008, 4; industry representative, interview by 

Commission staff, Mumbai, India, May 29, 2009. 56 Florida Department of Agriculture and Consumer Services, India: Road to Success, August 2007, 29 

and 51. 57 Industry representative, interview by Commission staff, Mumbai, India, May 12, 2009. 58 Industry representative, interview by Commission staff, New Delhi, India, May 26, 2009. 
3-15

Regional Variation 

 

Geographic and historical factors influence food preferences and preparation methods in 

India and are an important factor in Indian food consumption patterns. Regional cuisine 

tends to draw heavily on food crops that have historical patterns of cultivation in a 

particular region. 59This effect is perhaps most clearly demonstrated by the regional 

consumption of wheat and rice. Northern states and UTs, such as Delhi, Haryana, and 

Punjab, produce wheat and consume it in greater quantities than other food grains. The 

same pattern holds for rice in southern states such as Andhra Pradesh, Karnataka, and 

Tamal Nadu, while Maharashtra, which lies between these regions, has almost equal 

consumption of wheat and rice. 60

Some of the differences in regional food preferences can be traced to the influence of 

other cultures with a present or past physical presence in the region. For example, current 

heavy use of dairy and tandoor (clay oven) cooking in Northern India is based on the 

Mughal culture.61 The Portuguese, through their colony in Goa established in the 16th 

century, are believed to have introduced potatoes, now considered a staple of the Indian 

diet. Similarly, one study found that when Indians relocate within the country, they bring 

their regional food preferences with them and will even pay higher prices to buy these 

foods in their new home, compared to locally available foods.62 Thus, regional taste 

patterns may be blurred by internal migration, especially in areas with large migrant 

populations. For example, wheat consumption is increasing in southern areas such as 

Bangalore, a city that attracts a large migrant population.63

Vegetarianism 

India is known for its tradition of vegetarianism linked to Hinduism.64 According to a 

prominent 2006 Indian survey, however, 60 percent of individuals and 44 percent of 

families are nonvegetarian,65 and the pervasiveness of vegetarianism varies by location 

and social group. Coastal states have the lowest levels of vegetarian families 

(approximately 2–8 percent), while western and northern states have the highest 

(approximately 33–63 percent). Additionally, the survey found that more upper-caste 

Hindus, such as Brahmins,66 were vegetarian than other groups, including lower-caste 

Hindus. Muslims and Christians are the least likely to be vegetarian, with 3 percent and 

8 percent rates of vegetarianism, respectively. Neither Islam nor Christianity forbids 

consumption of meat in general, although there are restrictions on consumption of certain 

types of meat, such as pork, in Islam. Many Indians are vegetarian not for religious 

reasons but because they cannot afford meat.67 Yet, even for those who eat meat, beef 

(cow meat) consumption is low because Hindus consider cows to be sacred. 

 59 Atkin, “Trade, Taste, and Nutrition in India,” January 2009. 60 Government of India, NSSO, Household Consumer Expenditure in India, 2006/07, October 2008. 61 Venkatraman, “India (Cuisine),” May 16, 2000; Whitecomb, “An Overview of India’s Regional 

Cuisines,” August 5, 2008. 62 Atkin, “Trade, Taste, and Nutrition in India,” January 2009. 63 Government officials and industry representative, interview by Commission staff, New Delhi, India, 

May 26, 2009. 64 As used here, “vegetarians” are Indians who do not eat meat, fish, or eggs but may consume dairy 

products. Yadav and Kumar, “The Food Habits of Nation,” August 14, 2006. 65 Yadav and Kumar, “The Food Habits of Nation,” August 14, 2006. 66 A Brahman is a Hindu of the highest caste, traditionally assigned to the priesthood. 67 Govindan, India: Exporter Guide, October 1, 2007, 5; Govindan and Dhankar, India: Exporter Guide, 

October 1, 2008, 5. 
3-16

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CCC. India: Tree Nuts; Annual, 2008. GAIN Report no. IN8107. United States Department of 

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Basu, Indrajit. “Indian=s Food Sector Poised for Rapid Growth.” Equities. March 2008. 

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Yadav, Yogendra and Kumar, Sanjay. “The Food Habits of a Nation.” Hindu. August 14, 2006. 
4-1

CHAPTER 4 

Indian Agricultural Production and Policies 

Overview 

India’s agricultural production, valued at $176 billion1

 and representing 17 percent of 

Indian gross domestic product (GDP) in 2007,2

 has been heavily influenced by domestic 

government policies emphasizing food security, food self-sufficiency, and income 

support for farmers. Indian food consumption is overwhelmingly supplied by domestic 

production, with imports playing a minor role for most commodities. 

Agriculture is an important sector of India’s economy. It employs more than 60 percent 

of the population,3

 dominated by millions of extremely poor farmers working small to 

marginal landholdings, who account for more than one-half of total Indian agricultural 

production. India is a leading global producer of a number of commodities—including 

various grains, dairy, fruits, and vegetables—because of its significant natural resource 

base. The country has the world’s second-largest arable land base after the United States 4

and is endowed with all of the world’s major climates. 5 While grains remain the 

foundation of the Indian diet, production has recently increased for other foods, such as 

milk, meat, fruits, and vegetables, in response to increasing Indian demand.6

 The valueadded food processing sector of the Indian economy is small but growing. 

During marketing years (MYs) 2003/04–2007/08, Indian production volumes of many 

commodities increased, some with annual double-digit growth rates. Many of the 

increases were aided by favorable weather and prices, increased planted area, and rising 

yields. Yet growth in the overall value of agricultural production slowed relative to past 

performance 7

 and lagged behind the growth in population. 8 The 2.5 percent growth 

recorded during fiscal years (FYs) 2002/03–2006/07 (the years covered by the 

government’s Tenth Five-Year Plan) is not considered by the Indian government 

sufficient to sustain food security objectives.9

 Consequently, the government is currently 

looking for ways to improve performance in the sector, which suffers from fragmented 

landholdings, an incentive program that distorts crop planting decisions, the overuse of 

fertilizer and groundwater, inadequate postharvest treatment, and inefficient market 

channels.10

 1

 U.N. Food and Agriculture, FAOSTAT, “Gross Production,” 2007. 2

 Government of India, Ministry of Agriculture, Agricultural Statistics at a Glance, 2008. In contrast, 

agriculture accounts for 1.2 percent of U.S. GDP. CIA, The World Factbook: India, updated June 1, 2009. 3

 Government of India, Ministry of Agriculture, National Policy for Farmers 2007, 1. 4

 Agriculture and Agri-Food Canada, India Agricultural Policy Review, September 2008, 1. 5

 USIBC, written submission to the USITC, June 26, 2009, 2. 6

 The World Bank, “From Competition at Home to Competing Abroad,” June 28, 2005, 1; McKinsey 

Global Institute, “The ‘Bird of Gold,’” May 2007, 87. 7

 National five-year average growth rates for agriculture were in the 3.5–3.7 percent range during the 

1980s and 1990s, but slowed to 2.5 percent during fiscal years 1997/98–2001/02 and 2002/03–2006/07. 

Government of India, Planning Commission, Eleventh Five Year Plan: 2007–12, vol. 3, 2008, 4. 8

 In FY 2006/07, per capita output of some major crops, such as cereals, pulses, oilseeds, and some fruits 

and vegetables, was below FY 1996/97 levels. Government of India, Planning Commission, Eleventh Five 

Year Plan: 2007–12, vol. 3, 2008, 5. 9

 Ibid., 5. 10 Indian agricultural market channels and postharvest treatment are discussed in chapter 7. 
4-2

The central government has created agricultural support policies intended to promote its 

food security and economic goals. These programs intensified during the Green 

Revolution, laying the foundation for the large increases in agricultural production that 

followed. Today, India’s support for the farm sector can largely be subdivided into three 

groups: input support programs, output price support programs, and farmer welfare funds. 

Input support programs focus primarily on fertilizers, rates for irrigation water, electricity 

rates, diesel prices, and seeds. Output price support programs consist of minimum 

support prices (MSPs) for certain staple crops produced in India. Farmer welfare funds 

refer to a suite of government payments that lower the cost of borrowing to farmers (via 

below-market loan rates or debt write-offs) or boost wages for farm laborers. Each of the 

three groups of Indian government support programs affects U.S. agricultural exports 

differently. In the aggregate, however, India’s intervention policies in the farm sector, in 

combination with trade measures, restrict U.S. agricultural exports.11

Production 

General Production Patterns 

India is a significant global producer of many agricultural products, mainly to feed its 

own population. It is the largest or second-largest global producer of milk, pulses, sugar 

cane, tea, wheat, rice, certain fruits (bananas and mangoes), certain vegetables (potatoes, 

onions, garlic, and ginger), and peanuts. India is also a major producer of cotton and 

castor (used for oil). Fresh fruits, vegetables, and livestock, including dairy, account for 

the largest agricultural contributions to Indian GDP.12 

Indian commodity production patterns reflect the Green Revolution’s focus on intensive 

farming and high-yield seeds, almost exclusively for food grains, specifically rice, wheat, 

corn (maize), and millet (a coarse grain). 13 During the 1970s and 1980s, Indian 

agricultural yields for food grains increased through a combination of the use of highyielding varieties, increases in irrigated areas, and the introduction of intensive doublecropping. 14 Government irrigation projects included a system of dams to capture 

monsoon rains and provide water for a second yearly crop of certain commodities. 

Current irrigation patterns reflect those initiatives; nationally, percentage of area under 

irrigation for sugar cane, wheat, and rapeseed/mustard are relatively high (72–

93 percent), in contrast to other commodities, such as soybeans, coarse grains, and pulses 

(2–15 percent).15 

 11 Indian government policies related to incentives for the food processing sector and food safety are also 

described in this chapter. Both sets of policies set up frameworks under which companies are permitted to 

operate in India for investment and trade. In principle, they are policies that impact Indian and foreign 

companies uniformly. 12 Horticulture and livestock each account for approximately one-quarter of agriculture’s contribution to 

GDP. Mittal, “Can Horticulture Be a Success Story for India?” August 2007, 2; Indian National Dairy 

Development Board, National Statistics, 2008. 13 Coarse grains include corn, barley, oats, sorghum, rye, millet, and mixed grains. 14 Double-cropping is the growing of two consecutive crops on the same land in the same season or 

calendar year. Jha et al., “Indian Wheat and Rice Sector Policies and the Implications of Reform,” May 2007, 

2. 15 Irrigation rates are for MY 2005/06. Government of India, Ministry of Agriculture, Agricultural 

Statistics at a Glance, 2008. 
4-3

For most crops, however, Indian agricultural productivity is significantly below world 

averages, and production increases have slowed.16 With the exception of cotton, current 

seed varieties used in India are not producing the rapid annual gains in crop yields that 

existed 20–30 years ago. The overuse of fertilizer and low-cost electricity for pumping 

groundwater has led to deteriorating soils and shrinking groundwater supplies. 17 In 

addition, large increases in government expenditures for input support programs and 

migrant farm labor payments over the last five years have crowded out public investment 

in agricultural research, extension services, irrigation, and other rural infrastructure 

projects. Research suggests that India’s public expenditure patterns in agriculture have 

not maximized long-term sustainable economic growth.18 In particular, long-term capital 

underinvestment in irrigation infrastructure undermined agricultural yields in 2009, as 

drought affected planted areas in Delhi, Haryana, Madhya Pradesh, Punjab, Rajasthan, 

and Uttar Pradesh.19

Recent Production Trends 

During MYs 2003/04–2007/08, the volume of production of many major commodities 

grew rapidly in India (table 4.1), despite the slowdown in overall growth of Indian 

agriculture relative to previous periods. Most major commodities showed double-digit 

increases for the period. The production volume of cotton nearly doubled during this 

period, a result of favorable weather and the increased use of hybrid varieties and Bt 

cotton. Poultry, soybean, and milk production grew extremely rapidly as well, boosted by 

increased domestic demand. 

Production of food grains is heavily influenced by government procurement prices. These 

increased over the period, resulting in faster rates of growth after MY 2006/07, following 

several poor harvests as a result of unfavorable weather. Although the planted area 

remained relatively steady, wheat, rice, and coarse grains benefited from favorable 

weather in MY 2007/08 and reportedly from greater distribution of improved seeds to 

farmers that resulted in higher yields.20 The area planted with wheat increased slightly 

after MY 2005/06, mostly at the expense of mustard/rapeseed, because of the lower 

relative support price for rapeseed vis-à-vis wheat.21 Pulses (e.g., peas, beans, and lentils) 

production has generally been stagnant since the 1970s. There have been few varietal 

improvements for domestic pulse production, and only a small share of production is 

under irrigation.22 As a result, yields have not increased compared to other crops, and the 

planted area has not expanded, eroding its profitability relative to other crops, such as 

wheat and rice.23 

Major oilseed production increased by 18 percent between MY 2003/04 and 

MY 2007/08, driven in large part by increases in soybeans. High domestic market prices 

for soybeans and groundnuts (peanuts) toward the end of the period encouraged 

 16 Landes, “Indian Agriculture and Policy in Transition,” 2008, 19. 17 Jha et al., “Indian Wheat and Rice Sector Policies and the Implications of Reform,” May 2007, 2. 18 Persaud and Rosen, “India’s Consumer and Price Policies,” Food Security Assessment, February 2003, 

34–35. 19 Balchand, “Agricultural Situation to Be Reviewed,” The Hindu, July 9, 2009. 20 Govindan, India: Grain and Feed, May 6, 2008, 3. 21 Govindan, India: Grain and Feed, January 10, 2007, 3. 22 Industry representative, interview with Commission staff, New Delhi, India, May 26, 2009. 23 Price, Landes, and Govindan, India’s Pulse Sector, May 2003, 3. 
4-4

TABLE 4.1 India: Agricultural production by commodity, MYs 2003/04–2007/08 (million mt) 

 Product 2003/04 2004/05 2005/06 2006/07 2007/08 

% increase 

2007/08

over 

2003/04

Grains 

 Rice 88.5 83.1 91.8 93.4 96.7 9.2

 Wheat 72.2 68.6 69.4 75.8 78.6 8.9

 Coarse grains 37.6 33.5 34.1 33.9 40.8 8.4

Pulses 14.9 13.1 13.4 14.2 14.8 -1.0

Major oilseeds 25.2 24.4 28.0 24.3 29.8 18.1

 Groundnut 8.1 6.8 8.0 4.9 9.2 12.9

 Rapeseed-mustard 6.3 7.6 8.1 7.4 5.8 -7.3

 Soybean 7.8 6.9 8.3 8.9 11.0 40.3

Sugar cane 233.9 237.1 281.2 355.5 348.2 48.9

Sugar 15.2 14.2 21.1 30.8 28.6 89.0

Tea 0.9 0.9 0.9 1.0 0.9 7.5

Coffee 0.3 0.3 0.3 0.3 0.3 -3.3

Cotton (million bales) 13.7 16.4 18.5 22.6 25.9 88.5

Fruita

 (

b

) (b) 55.4 58.9 62.9 13.6

Vegetablesa

 (

b

) (b) 111.4 116.0 122.3 9.8

Milk, all 88.1 92.6 97.1 100.9 104.8 19.0

 Buffalo milk 48.0 50.2 52.1 55.2 57.0 18.7

 Cow milk 35.0 37.3 39.8 41.0 42.1 20.5

Meat, bovine 2.1 2.3 2.4 2.4 2.5 16.0

Goat meat 0.4 0.5 0.5 0.5 0.5 32.4

Pig meat 0.5 0.5 0.5 0.5 0.5 1.4

Sheep meat 0.2 0.2 0.2 0.2 0.2 12.5

Poultry 1.7 1.9 2.0 2.2 2.5 50.9

Source: Government of India, Ministry of Agriculture; FAOSTAT; USDA, FAS, PSD database. 

a

Percentage change from 2005/06 to 2007/08. 

b

Not available. 

production and increased plantings.24 Soybean planted area alone increased 35 percent 

during this time. Rising feed demand, mainly for poultry production, in domestic and 

international markets also kept soybean meal prices high.25

India experienced its fifth record cotton crop in MY 2007/08 (and its sixth in 

MY 2008/09) as a result of increased planting and higher yields from improved hybrid 

varieties and Bt cotton,26 improved crop management practices, and favorable weather.27

Cotton planted area increased by 24 percent over the period, reaching 9.43 million 

hectares in MY 2007/08, although the crop competes for area with other crops (rice and 

fodder crops in the north; coarse grains, pulses, and sugar cane in the central region; and 

rice, tobacco, and chilies in the south) that also enjoyed strong prices and relative 

profitability, particularly in MY 2008/09. 28 Cotton yields have nearly doubled– 

increasing 90 percent between 2002 and 2007 versus 10 percent or less for corn, rice, and 

 24 Indian government MSPs set for oilseeds are typically too low to influence market prices. Aradhey, 

India: Oilseeds, April 16, 2009, 3. 25 Aradhey, India: Oilseeds, May 19, 2008, 6. 26 Bt cotton was introduced in India in 2002 and accounted for 85 percent of total cotton area in 

MY 2008/09. 27 Singh, India: Cotton and Products, May 12, 2008, 1. 28 Ibid., 4. 
4-5

soybeans29—but are still below the world average, leaving room for production gains 

despite limited additional area for planting cotton.30

Milk production showed steady growth throughout the period. In response to increased 

demand for milk and value-added dairy products because of several factors—rising 

incomes, changing food habits and lifestyles, and urbanization—private sector milk 

processing capacities continued to expand.31 The expansion was aided by foreign direct 

investment (FDI) in the sector and resulted in strong farmgate milk prices.32 With regard 

to meat, poultry is the fastest growing segment, expanding by over 50 percent between 

MY 2003/04 and MY 2007/08. Consumer demand for processed poultry increased as 

prices decreased, which can be attributed to the increasing presence of integrated 

growing, processing, and distribution operations with higher production efficiencies.33

FDI also aided the growth of this sector.34

The Farm Sector 

Although large-scale agricultural production exists in India, the agricultural sector 

consists overwhelmingly of small (1–2 hectares) and marginal (less than 1 hectare) 

landholding farmers who do not benefit from economies of scale. Of approximately 

500 million workers in the country, 234 million were farmers in 2001: 19 percent of these 

were considered small, and 62 percent were considered marginal in 2000–2001.35 Small 

farms produce 41 percent of India’s total grains, 49 percent of rice, 40 percent of wheat, 

29 percent of coarse grains, 27 percent of pulses, and more than 50 percent of the fruits 

and vegetables. 36 The average size of farmer landholdings has decreased in recent 

decades, as plots are customarily divided when inherited. In addition, land ownership 

laws and government restraints on bank lending for land acquisition may reinforce the 

pressures that keep holdings in agriculture small.37 

Many of the marginal holdings are merely for subsistence needs. But even for farmers 

who sell surplus production on the open market, returns are generally low.38 Poor Indian 

farmers have little access to input or output markets, credit, or extension services, and 

limited investment options.39 They therefore make very little investment in improved 

seeds, fertilizers, or pesticides, limiting advancements in productivity. In addition, in 

2008, 57 percent of Indian crop production was nonirrigated, and because India receives 

on average 80 percent of its total rainfall between June and September from the 

southwest monsoon, farmers on nonirrigated land face considerable weather-related 

risk.40 

 29 Ibid., 5. 

30 Industry sources expect area for cotton production to peak at 10 million hectares. Aradhey, India: 

Cotton, May 21, 2008, 5. 31 Shunmugam, India: Dairy and Products, October 20, 2003, 3. 32 Dhankhar, India: Dairy and Products, November 5, 2008, 3. 33 Singh, India: Poultry and Products, September 14, 2006, 3. 34 See chapter 8 for a discussion of the Tyson-Godrej joint venture in poultry production. 35 Government of India, Ministry of Agriculture, Agricultural Statistics at a Glance, 2008. 36 Government of India, Agriculture Division Planning Commission, “Report of the Working Group on 

Agriculture Marketing Infrastructure and Policy Required for Internal and External Trade for the Eleventh 

Five Year Plan 2007–12,” January 2007, 20. 37 OECD, Agricultural Policies in Emerging Economies, 2009, 107-108; U.S. Dairy Export Council, 

India: Dairy Industry, March 2006, 13. 38 See chapter 7 for further discussion of farm-level marketing and its impact on grower returns. 39 Government of India, Planning Commission, Eleventh Five Year Plan: 2007–12, vol. 3, 2008, 38. 40 Ibid., 46. 
4-6

India’s labor productivity in agriculture is very low—just 1.2 percent of the U.S. rate.41 In 

part this is because of the extremely large number of Indians employed in the sector, as 

well as small farm plots which do not lend themselves to mechanization. The number of 

Indians employed in the agricultural labor force has also not adjusted to the decline of 

agriculture’s share of Indian GDP.42 In India, agriculture value added per worker grew 

15 percent in real terms from 1990 to 2004, compared to 60 percent in China and more 

than 100 percent in Brazil.43

Small and marginal Indian farmers are often stuck in a cycle of poverty. The large 

number of rural dwellers relative to available land and the fragmented nature of 

landholdings make it difficult for large families to subsist on crop production alone. 

Indian farmers face considerable weather- and market-related risks with few risk 

management tools available to them. Savings are often inadequate, yet high transaction 

costs, lack of collateral, and uncertain returns on many crops leave poor farmers without 

access to institutional credit. For those that do secure access to rural credit schemes or 

informal moneylenders, burdensome debt levels and interest rates often follow.44 High 

debt levels are among a number of factors that have led to large numbers of farmer 

suicides in recent years.45

Food Processing Sector 

The Indian processed food sector, valued at $70 billion, is small relative to India’s large, 

wide-ranging raw material base. 46 The level of processing of perishable products in India 

is low compared to that of other countries. For example, 2 percent of total vegetable 

production in India is processed, compared to 65 percent for the United States and 

70 percent for Brazil.47 In part, India’s low rates, as shown in the following tabulation, 

can be attributed to the prevalence of small-scale farming, the lack of grades and 

standards for raw materials, and poor transport and cold storage infrastructure, resulting 

in a small supply of processed foods to the Indian consumer. 

India: Share of primary products processed, 2008 (%) 

Product Share processeda

Fruits and vegetables 2

Poultry 6

Milk 35–37

Other meats 21

Grains 91

Source: Dhankhar, India: Food Processing Sector, July 2, 2008, 3. 

a

Processed products include both those that have had primary processing 

(e.g., the milling of grains or the packaging of fruits and vegetables or liquid 

milk) and those that have undergone further processing (i.e., value-added 

processing). The processing of poultry and meat involves their preparation in 

slaughterhouses. 

 41 McKinsey Global Institute, “The ‘Bird of Gold,’” May 2007, 89. 

42 Unlike the experiences of East Asian countries, the movement of labor from agricultural to other 

sectors of the economy in India has been slow because of rigid labor laws in both the agricultural and 

industrial sectors. EIU, “Indian Agriculture: Production and Demand,” June 18, 2007. 43 European Commission, “India’s Role in World Agriculture,” December 2007. 

44 According to the Indian government, 26 percent of farm households are indebted, and approximately 

half of those are in debt to private informal moneylenders. Government of India, Eleventh Five Year Plan: 

2007–12, vol. 3, 2008, 33, 88. 45 OECD, Agricultural Policies in Emerging Economies, 2009, 104. 46 Dhankhar, India: Food Processing Sector, July 2, 2008, 3. 47 IBEF, Food Processing: Market and Opportunities, 4. 
4-7

Food processing in India involves mainly primary processing, such as packaging fruits 

and vegetables and milling and crushing grains, oilseeds, and pulses, as well as the 

preparation of simply prepared or dried foods such as pickles, spice mixtures, tea, and 

some snack foods. Such primary processing accounts for approximately 60 percent of 

Indian processed foods.48 

Until the 1990s, food processing was governed by laws that relegated it to small-scale 

industry with a prescribed maximum investment. Under these laws, large-scale or 

vertically integrated operations were effectively prohibited. Although changes in the law 

have opened up the sector to large and medium-sized domestic firms, as well as 

multinationals, currently about 75 percent of Indian food processing output is generated 

by small enterprises in the unorganized sector.49 Most processing in the sector is done 

manually, with limited use of controlled-atmosphere storage and irradiation facilities, and 

low levels of processing technology.50

Indian Government Policies Affecting Farm-Level 

Production

As stated above, India’s support for the farm sector can be largely subdivided into three 

types: input support programs, output price support programs, and farmer welfare funds, 

all designed to either boost farmers’ incomes directly or lower the cost of production. 

Output price support programs and input support programs give domestic agricultural 

production a competitive advantage over foreign production, while farmer welfare funds 

boost overall demand for food through higher incomes. In principle, higher demand for 

food will stimulate demand for both domestic and foreign goods in the absence of trade 

barriers. Indian government policies regarding food processing and food safety set up 

frameworks under which all companies in India operate and are intended to affect Indian 

and foreign companies uniformly.51 Table 4.2 summarizes the Indian policies described 

in this chapter. 

India’s legal approach to agricultural policies is important in discerning why government 

funding of the farm sector often varies significantly from state to state and why Indian 

agricultural policies tend to lack transparency. According to the Indian constitution, the 

implementation of most agricultural policies falls within the legal domain of India’s 

states and not the union (central) government.52 The Ministry of Agriculture (Ministry) in 

New Delhi formulates broad agricultural policies under five-year plans and allocates 

funds for those purposes (box 4.1). The Ministry and other central government agencies 

make key decisions about research and development, infrastructure, investment, credit, 

and trade. For the most part, however, policies are implemented by the states, an 

arrangement that gives the states some latitude to adjust policies to fit their economic and 

social needs.53

 48 Ibid., 3. 

49 The unorganized sector consists of small traditional outlets, primarily family owned and operated. 

Dhankhar, India: Food Processing Sector, July 2, 2008, 3. 50 IBEF, Food Processing: Market and Opportunities, 8. 51 Whether government policies actually affect foreign and domestic companies uniformly depends 

largely on how they are implemented. 52 Singh, Federalism, Nationalism and Development, 2008, 104. 53 OECD, Agricultural Policies in Emerging Economies, 2009, 99. For more information on India’s 

constitutional structure related to agriculture, see appendix G. 
4-8

TABLE 4.2 India: Summary of central government’s key funding and regulations for agricultural production

Policy Policy description Policy effect Impact on U.S. exports 

Minimum support prices 

(MSPs) 

Guarantees minimum price. 

Higher levels of support are 

given to rice and wheat. 

Distort production decisions by 

farmers toward rice and wheat. 

Limit opportunities for 

imports of rice and wheat 

from all sources. 

Farmer input support 

programs (fertilizers, 

irrigation, electricity, diesel, 

seeds) 

(

a

) Encourage farmers to 

overproduce, and prices drop. 

Imports are less 

competitive relative to 

domestic production. 

Farmer debt forgiveness (a

) Lowers production costs, 

increases production, and 

increases food demand by 

farmer households. 

Undetermined. Lowers cost 

of Indian domestic 

production relative to U.S. 

production costs, but also 

boosts food consumption 

by farmers. 

Low-interest farmer loans (a

) Lower production costs, 

increase production, and 

increase food demand by farmer 

households. 

Undetermined. Lower cost 

of Indian domestic 

production relative to U.S. 

production costs, but also 

boost food consumption by 

farmers. 

Rural employment 

guarantee program 

Payments are made to farm 

laborers, principally for work on 

water, forestry, and land 

development projects.

Increases labor costs, reduces 

production, and increases food 

demand by rural households. 

Encourages exports to 

India from all countries, 

including the United States, 

through higher food 

demand and higher relative 

costs of Indian production. 

Incentives for food 

processing 

The government sets up agrifood export zones, gives dutyfree treatment to capital goods 

and raw materials, and offers 

income tax rebates for certain 

producers. 

Boost domestic food processing 

sector, and encourage a wider 

variety of food for consumers. 

Increase demand for inputs 

that all exporters to India, 

including the United States, 

can supply. 

Food safety regulations Food Safety and Standards Act 

of 2006 combined and 

expanded several of the central 

government laws together into 

one comprehensive law. 

Establish and enforce sciencebased food safety regulations. State implementation may 

put additional requirements 

on U.S. exporters (e.g., 

labeling), but U.S. exports 

could benefit from uniform, 

predictable enforcement. 

Source: Compiled by Commission staff. 

a

See policy column for description.
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BOX 4.1 The Central Government’s Five Year Plan for Agriculture 

India’s central and state government policies toward agriculture are based on long-standing objectives 

promoting food self-sufficiency in grains, enabling food security, and increasing farmers’ incomes.a Every five 

years the central government issues broad policy guidelines through the Planning Commission for every major 

sector of the economy, including agriculture. The intent of these five-year plans is to set production and 

economic growth targets and formulate action plans for meeting the goals. Under the Tenth Five Year Plan 

(2002/03–2006/07), India set annual economic growth targets for agriculture (both field crops and livestock) of 

4 percent. Actual annual growth was only 2.3 percent over the period,b

 although growth rose to nearly 5 percent 

in the final two years (2005/06 and 2006/07).c

 Growth rates during the five-year plan varied across agricultural 

subsectors, ranging from 1 percent annual growth for cereals to 3 percent or more for fruits and vegetables.d

The most recent Indian government planning document, the Eleventh Five Year Plan, spans FY 2007/08 to 

FY 2011/12. 

Economic growth in India’s farm sector lagged significantly behind that of other sectors of the economy in the 

last reported fiscal year, reaching only 1.6 percent during 2008/09 (April 2008–March 2009).e

 This rate of annual 

growth is far below India’s overall annual economic growth rate of about 6 percent for that year.f

 The reasons 

given by the Indian central government for the agricultural sector’s lower-than-expected growth rates include 

(1) lower profits for farmers, caused by fluctuating world prices for agricultural commodities and efforts to keep 

domestic prices low for consumers;g

 (2) increased vulnerability to world food price volatility after trade 

liberalization;h

 (3) slower development of agricultural technology than expected; (4) rapid and widespread 

decline in the groundwater table, with particular adverse impact on small and marginal farmers; and (5) an 

inefficient use of available technology and inputs.i

 Economists also note a lack of public and private investment 

in agriculture, relative to the rest of India’s economy. For example, the annual percentage of gross domestic 

product (GDP) invested in gross fixed capital formation for India as a whole was 27 percent during 2005/07; for 

agriculture it was only 7 percent.j

 Public investment in irrigation has been insufficient for more than 25 years.k

To meet India’s production goals and all of the other policy objectives, the Indian government plans to increase 

public expenditures in agriculture from 3 percent of agricultural GDP to 4 percent, focusing on increasing perunit productivity of land and water resources through improved technology and increased crop yields.l

Government funds allocated to agriculture during the Eleventh Five Year Plan, as well as specific projects 

targeting irrigation, pest management, animal and seeds research, technological dissemination, and credit 

expansion, among others, are detailed in vol. 3 of the plan. 

______________ 

a

 Landes, “Indian Agriculture and Policy in Transition,” 2008, 20, 23. 

b

 Department of Agriculture and Cooperation, National Policy for Farmers 2007, 1. c

 Government of India, Eleventh Five Year Plan: 2007–12, vol. 3, 2008, 4. 

d Ibid., 3. e

 Bhardwaj. “India Aims for 4 Pct Growth; Analysts Cautious.” 

f

EIU, India: Country Report, July 2009, 7. g Government of India, Department of Agriculture and Cooperation, National Policy for Farmers 2007, 2. h

 The Indian government appears to be referring to trade liberalization coinciding with India’s implementation 

of WTO commitments after completion of the Uruguay Round in the 1990s. i

Government of India, Eleventh Five Year Plan: 2007–12, vol. 3, 2008, 4. 

j

 Landes, “Indian Agriculture and Policy in Transition,” 2008, 21–23. k Balakrishnan et al. Agricultural Growth in India Since 1991, 23–27. l

 Government of India, Eleventh Five Year Plan: 2007–12, vol. 3, 2008, 7–8. 
4-10

Output Price Support Policies 

The Agricultural Prices Commission (now known as the Commission for Agricultural 

Costs and Prices) was created in 1965 by the central government to set MSPs for major 

commodities. 54 Today, direct domestic support for agricultural production continues 

through MSPs for 25 products, including grains, pulses, oilseeds, and cotton. MSPs are 

implemented by various central and state government agencies, often linked to changes in 

production costs for farmers.55 The Food Corporation of India (FCI) is the implementing 

agency for wheat and rice procurement. In conjunction with state and union territory 

(UT) procurement agencies, the FCI purchases all wheat and rice that is offered for sale 

by Indian farmers (and meets prescribed specifications). By purchasing at the notified 

MSP, the FCI ensures a stable market for these two crops.56 The National Agricultural 

Marketing Federation (NAFED) operates price supports for rapeseed, mustard, and 

corn. 57 The Cotton Corporation of India (CCI) and NAFED undertake price support 

operations for cotton, and the Department of Agriculture and Cooperation within the 

Ministry of Agriculture implements price support operations for pulses and oilseeds.58 

The Indian government steadily increased MSPs for most covered commodities over the 

last five years; MSPs for staple crops such as rice, wheat, corn, and millet all increased 

more than 60 percent over the period. Much of that increase occurred in the last two years 

and was directly related to increasing fertilizer and energy costs.59 For crops other than 

rice and wheat, open-market prices are typically higher than the support price, and 

therefore the impact of the MSP program on India’s agricultural production is somewhat 

limited (box 4.2).60 

For agricultural commodities not covered under the MSP scheme, the Department of 

Agriculture and Cooperation implements the Marketing Intervention Scheme (MIS), 

which operates only on request from state and UT governments and typically procures 

products that are perishable, such as horticultural goods.61 The MIS is designed to protect 

growers from making distress sales in the event of a bumper crop that drives prices below 

the cost of production. With a few exceptions, financial losses incurred under the MIS are 

shared equally between the central and state governments and limited to 25 percent of the 

total procurement cost. Profits are retained by the procuring agencies, typically NAFED 

and state-designed agencies. Procurements made under the MIS are very small relative to 

procurements under the MSP scheme, totaling $43.5 million during FY 2008/09. 62

 54 Panagariya, India: The Emerging Giant, 2008, 73. 55 Jha et al., Indian Wheat and Rice Sector Policies, May 2007, 5. 56 Government of India, Department of Food and Public Distribution, Annual Report 2008–09, 32. 57 When crop prices are at or below the MSP in the marketplace, NAFED procures crops directly from 

the farmers through its cooperative network, using mandis (see explanation of mandis in chapter 7). 58 Government of India, Economic Survey 2008–09, 180. 59 Ibid., 178. 60 Government official, e-mail message to the Commission, July 22, 2009. 61 Government of India, Economic Survey 2008–09, 180. 62 Ibid., 180–81. 
4-11

Input Support Programs 

India’s farmers benefit from input support on fertilizer, irrigation water, electricity, 

diesel, and seeds. In each case, these programs lower the price of inputs to the farmer, 

thereby encouraging their overuse. Farm support, particularly for fertilizers, was 

introduced to promote the government’s goal of self-sufficiency in food grain 

production.63 Farm support is also intended to boost farmers’ income by lowering the cost 

of production. Government expenditures for these goods are costly, however, crowding 

out public investment in agricultural research, extension services, irrigation infrastructure 

projects, and other rural infrastructure. Research indicates that India’s public expenditure 

patterns in agriculture have not maximized long-term, sustainable economic growth.64 

Fertilizer Support Programs 

Fertilizer support programs are traditionally the largest among the agricultural input 

supports funded in the central government’s budget. The government controls the prices 

at which fertilizers are sold to farmers, paying the difference between controlled prices 

and market prices to fertilizer producers and importers; payments include an extra 

amount to cover transportation costs. Estimated expenditures for FY 2008/09 total Rs. 

758.5 billion ($16.5 billion); this estimate excludes “off-budget” special bonds issued by 

the government to provide fertilizer companies with funds to meet their capital 

 63 Mittal, Tripathi, and Tripathi, “Reshaping Agriculture Trade Policy,” 2008, 83. 64 Persaud and Rosen, “India’s Consumer and Price Policies: Implications for Food Security,” 

February 2003, 34–35. 

BOX 4.2 Does the Minimum Support Price Program Really Affect U.S. Exports? 

To the extent that minimum support prices (MSPs) force India’s internal market prices above the corresponding 

world price, they may encourage U.S. exports, particularly for goods that the United States produces in large 

volumes for export markets. For those MSP crops that the United States might ship to India under a free trade 

scenario—wheat, corn, and lentils—Indian market prices were as much as 60–120 percent above the MSPs for 

corn and lentils for 2008 and the first half of 2009.a

 (Rice was not considered as a possible U.S. export because 

India imports virtually no rice and remains a significant net exporter.) Therefore, MSPs for corn and lentils were 

not affecting Indian domestic prices. This leaves only wheat. 

Although market prices for wheat tracked the MSP for wheat during 2008 and the first half of 2009 and therefore 

appear to have affected Indian domestic prices in an upward direction, prices of U.S. wheat exports to thirdcountry markets during this 18-month period were significantly higher than Indian domestic prices (by 30–

100 percent).b

 (Quality differences may account for most of the price difference; the United States typically 

produces and exports high-quality wheat.) Therefore, it appears that the United States already sells wheat in 

third-country markets at higher prices than those found in India. Consequently, Indian MSPs, by themselves, are 

unlikely to encourage U.S. exports in a free-trade environment. However, higher levels of government support for 

rice and wheat encourage their production at the expense of other commodities, such as pulses.c

 This may 

discourage imports of rice and wheat and encourage imports of other agricultural commodities from all sources. 

______________ 

a Commission staff chose representative Indian market prices for wheat, lentils, and corn (maize) from large 

producer states, in this case Uttar Pradesh, Madhya Pradesh, and Maharashtra, respectively. Government of 

India, Ministry of Agriculture, Agmarknet database. b

 Indian agricultural prices sometimes vary significantly between states: in 2008, the price of wheat in Punjab 

and Madhya Pradesh differed by as much as 20 percent. At all price points, however, Indian prices were lower 

than U.S. export prices. Government of India, Agmarknet database; Philip, “High Food Prices in India,” 2. c

 Industry representatives, interviews by Commission staff, New Delhi, India, May 26, 2009, and Mumbai, India, 

May 28, 2009. 
4-12

requirements.65 India’s Planning Commission, the author of the five-year plans, notes that 

“the present system of fertilizer subsidy is irrational and has become counterproductive,” 

encouraging soil degradation and damaging agricultural productivity.66 It promotes the 

overuse of primary nutrients such as nitrogen, phosphorus, and potassium, rather 

than the use of secondary nutrients and micronutrients such as zinc, sulphur, and 

gypsum, all required in small quantities to maintain soil fertility.67

Irrigation Water Support 

Government support for irrigation water primarily targets canal irrigation, although some 

of the money supports tank irrigation (man-made reservoirs) as well. Payments are made 

by state governments and totaled approximately $3.2 billion in FY 2005/06 (the last year 

for which data were available).68 According to Indian analysts, the program as designed 

promotes the excessive use of groundwater, degrades soil quality, and depletes 

government coffers of tax revenues that could be better used for capital projects to 

upgrade irrigation infrastructure. 69 By contrast, in the Indian government budget for 

FY 2009/2010, capital projects for irrigation in drought areas under the Accelerated 

Irrigation Benefit Programme will receive funding of Rs. $10 billion ($200 million).70

Electricity and Diesel Support Programs 

Electricity support payments—the difference between the market costs of electricity 

generation/distribution and the lower fixed rates paid by farmers—are given by state 

governments directly to electricity providers. Because these payments are intended to 

help support farmers’ use of irrigation pumps, farmers’ fixed rates are based on the 

declared horsepower of the pumps; and because the fixed rates do not cover the full cost 

of electricity, they lower the cost of production for farmers and encourage the overuse of 

electricity and groundwater. India’s electricity support for farmers totaled $7.1 billion in 

FY 2007/08 and is estimated by the OECD to be $7.6 billion for FY 2008/09.71

Diesel is used mostly by Indian farmers for running irrigation pumps and tractors. Each 

year, certain states pay support on an ad hoc basis to cover some of the cost of diesel used 

for agricultural purposes, and the payments are typically reflected in the price of diesel 

charged to the purchaser. Nationwide cost estimates are unavailable, but anecdotal 

evidence indicates that diesel support totals hundreds of millions of dollars annually.72 In 

the aftermath of the lower-than-normal rainfall experienced by many rice farmers during 

the 2009 monsoon season and the need for significantly higher levels of irrigation, states 

such as Bihar and Punjab appealed to the central government to bear most of the cost of 

diesel used to provide additional irrigation to drought-stricken crops.73 In response, on 

 65 Government official, interview by Commission staff, Mumbai, India, May 13, 2009. 66 Government of India, Planning Commission, Eleventh Five Year Plan: 2007–12, vol. 3, 2008, 16. 67 Misra, “Centre Debates Remodeling Fertiliser Subsidy,” October 30, 2007. 68 OECD, Agricultural Policies in Emerging Economies, 2009, 104. The payment is calculated by 

totaling all operating costs incurred by government irrigation systems and subtracting payments by farmers. 69 Mittal, Tripathi, and Tripathi, “Reshaping Agriculture Trade Policy,” 2008, 83. 70 Haq, “Seeds of Hope and Change,” July 7, 2009. 

71 OECD, Agricultural Policies in Emerging Economies, 2009, 104. 72 For example, the state of Bihar provided a diesel payment to farmers for the summer growing season 

totaling Rs. 10 per liter in 2007 and Rs. 15 per liter in 2008. The budget expenditure in 2008 was estimated to 

be Rs. 63.18 crore ($12.6 million). The Times of India, “Farmers to Get Diesel Subsidy of Rs. 15 a litre,” 

September 20, 2008. 73 The chief minister of Punjab also requested a Rs. 2,000 ($40) per acre payment from New Delhi for 

farmers facing additional planting costs in 2009 due to the reduced monsoon rains. Webindia123, “Bear Full 

Diesel Subsidy for Farm Sector: Badal to PM,” July 25, 2009. 
4-13

August 3, 2009, New Delhi announced a Rs. 1,000 crore ($200 million) support payment 

on diesel to offset 50 percent of the fuel costs required for additional crop irrigation 

during the summer growing season, called the “kharif crop.”74 Under the program, state 

and UT governments of areas affected by drought during July 15–September 30, 2009, 

were extended the full support payment and partially reimbursed by the central 

government.75 

Government Support to Farmers for Seeds 

Free seeds for farmers, paid out of the government budget, have a long history in India.76

Today, seed purchases by farmers are still largely supported through state-run programs, 

and these payments lower farm production costs. For example, in the states of Karnataka 

and Uttar Pradesh, government tenders for bulk sunflower seed are announced, 

companies bid to provide the seed, and the government buys it on consignment. The 

farmer pays 50 percent of the market price, and the rest is paid to the companies by the 

government. If the sunflower seed is not sold to farmers, it is returned to the seed 

company.77 An estimated 75 percent of sunflower seeds in India are sold in this way. In 

Karnataka and Uttar Pradesh, 20 percent of corn seed is sold to farmers using the same 

method, as is an estimated 10–15 percent of all corn seed nationwide. The states of Uttar 

Pradesh, Chhattisgarh, and Bihar participate in a similar program for rice.78 For Bt cotton, 

various states (e.g., Andhra Pradesh in 2006, Gujarat in 2008, and Maharashtra in 2009) 

passed cotton acts to empower seed price controls. These laws forced seed companies to 

lower cotton seed prices to farmers by fiat.79

Data on total seed support from Indian state governments are unavailable, but anecdotal 

evidence shows that the payments are significant. In the state of Andhra Pradesh, a 

support of Rs. 25 ($0.50) per kilogram was granted for maize (corn) seed in May 2009.80

The state of Karnataka covered 50 percent of farmer seed expenditures in 2008.81 The 

state of Haryana announced a Rs. 120 million ($2.4 million) seed payment to farmers in 

March 2008 for summer moong (mung bean) cultivation covering 20,000 hectares. At a 

support rate of Rs. 30 ($0.60) per kilogram, the total payment was 70 percent of the seed 

cost.82

 74 The Hindu, “Govt. to Extend Rs. 1,000-Crore Diesel Subsidy to Paddy Growers,” July 31, 2009. 75 Reimbursement would be up to 50 percent of their costs, not to exceed a payment of Rs. 7.50 per liter 

of diesel, Rs. 500 per hectare and two hectares per farmer. Government of India, Press Information Bureau, 

“Centre to Give Financial Assistance to States Introducing Diesel Subsidy to Farmers in Deficit Rainfall 

Affected Areas,” August 3, 2009. 76 Government official, interview by Commission staff, New Delhi, India, May 4, 2009. 77 Industry representative, interview by Commission staff, Mumbai, India, May 12, 2009. 78 Ibid. 

79 As discussed in chapter 9, seed companies note that the majority of Indian states now have price caps 

in place, because when one state institutes a price cap, the resulting disparity in price puts pressure on other 

state governments to conform. The challenge for these companies in the future is how to retain a portion of 

the farm value of genetically modified seeds that justifies the investment costs. Industry representative, 

interview by Commission staff, Mumbai, India, May 11, 2009. 80 The Hindu, “Subsidy Offered on Seed,” May 30, 2009. 81 Jayaramiah, “Karnataka Set to Ensure Free Flow of Fertilizers, Seeds,” May 6, 2009. 82 Express India, “Rs. 1.2 Crore Marked to Provide Seed Subsidy,” March 28, 2008. 
4-14

Farmer Welfare Programs 

Low-Interest Loans for Farmers 

Implemented through the National Bank for Agriculture and Rural Development and 

starting in the 2006/07 crop year, India’s central government provides approximately 

$400 million per year in interest rate support on farm loans under a program called the 

“Short-Term Rural Co-operative Credit Structure.” Under the program, which lowers 

farmers’ operating costs, farmers are eligible for short-term crop loans of up to Rs. 

300,000 ($7,150) at a preferential annual interest rate of 7 percent, roughly 2 percent 

below the market rate. These loans came to approximately Rs. 2.8 trillion ($70.1 billion) 

during MY 2008/09.83 In the Indian government budget for FY 2009/2010, farm loans 

totaling Rs. 3.25 trillion ($65 billion) will be granted at a preferential annual interest rate 

of 6 percent.84

Debt Write-Offs for Farmers 

India’s 2008 central government budget wrote off loans for farmers totaling more than 

Rs. 653 billion ($14.2 billion).85 The relinquished loans represented 1.6 percent of India’s 

GDP. 86 Of the total, $2.4 billion were one-time waivers of overdue loans. These 

payments assisted an estimated 40 million farmers, more than 30 million of whom were 

classified as small and marginal farmers. Some Indian analysts have commented that 

such actions by the government create a moral hazard for farmers, who will assume that 

future loans are likely to be paid off by the government in a similar way.87 Like lowinterest loans, debt write-offs lower Indian farmers’ operating costs. 

National Rural Employment Guarantee Act 

The National Rural Employment Guarantee Act (NREGA), passed in August 2005 and 

brought into force in February 2006, provides 100 days of employment every year to tens 

of millions of rural poor and migrant laborers. Since its creation, the act has generated 

more than 4.5 billion person-days of employment and paid more than Rs. 350 billion 

($7 billion) in wages, primarily to poor and migrant farmers. 88 About 70 percent of 

NREGA projects involve watershed management, water conservation, forestation, and 

land development.89 In the Indian central government budget for FY 2009/10, announced 

July 6, 2009, NREGA was funded at Rs. 390.1 billion ($7.8 billion), an increase of 

144 percent from FY 2008/09 and more than the program’s combined funding over the 

previous three years.90

This program boosts incomes for poor farm laborers, but it also increases operating costs 

for farmers that use migrant labor. NREGA is blamed by farmers for a shortage of 

laborers in agricultural regions such as the state of Punjab. Even though farmer-owners, 

 83 OECD, Agricultural Policies in Emerging Economies, 2009, 104. 84 Haq, “Seeds of Hope and Change,” July 7, 2009. 

85 Government official, interview by Commission staff, Mumbai, India, May 13, 2009. The budget was 

presented in February 2008 by Finance Minister Palaniappan Chidambaram. 86 The Economist, “Waiving, Not Drowning,” July 3, 2008. 87 India Knowledge@Wharton, “India’s 2008 Budget,” March 6, 2008; industry representative, interview 

by Commission staff, New Delhi, India, May 9, 2009. 88 Swaminathan, “Synergy between Food Security Act and NREGA,” June 1, 2009. 89 Mukherjee, “India to Quantify Climate Benefits from Poverty Project,” June 1, 2009. 90 Haq, “Seeds of Hope and Change,” July 7, 2009. 
4-15

known as zamindars, have doubled or tripled wages for rice paddy sowing in 2009 

compared to the previous year and offered other enticements such as free meals, liquor, 

and opium, migrant labor from the states of Uttar Pradesh and Bihar are not arriving in 

sufficient numbers to fill 750,000 planting jobs. 91 The migrants prefer available 

employment opportunities closer to home under NREGA. Punjab’s agriculture 

department is scrambling to purchase 700 farm machines to partially offset the shortfall 

in human labor.92 

NREGA is likely to increase India’s food price inflation in two ways. First, the rural poor 

are likely to use their NREGA wages to buy food, thus increasing the overall demand for 

food. In addition, since it diverts ever-larger numbers of laborers from actual work on 

farms, rising farm labor costs are likely to be passed on to consumers in the form of 

higher prices. 

Indian Government Policies Affecting Food Processing 

Recent Indian Government Incentives for the Food Processing 

Sector 

The Indian government considers the food processing sector to be an important driver of 

the Indian economy,93 as well as an important conduit for capturing some of the current 

wastage of perishable agricultural products.94 Changes in Indian society and economy are 

leading to a boom in the food processing sector, which grew 7 percent in 2002–03 and 

13 percent in 2006–07. 95 The government, through the Ministry of Food Processing 

Industries (MOFPI), has set targets to increase the level of processing of perishables from 

the current 6 percent to 20 percent, the share in global trade from the current 1.5 percent 

to 3 percent, and increase value added by an additional 20–35 percent by 2015.96 MOFPI 

plans include the establishment of 60 “agri export zones” and 53 “mega-food parks” to 

encourage food processing,97 duty-free import of capital goods and raw materials into 

these zones for export-oriented production, and income tax rebates for producers of fruits 

and vegetables.98 

The Indian government maintains a liberal policy regime regarding FDI in food 

processing.99 Nonetheless, although there is currently some FDI in the processed food 

sector, it accounts for a relatively small portion of the industry. U.S. firms are the primary 

contributors of FDI in this sector and include Coca-Cola, Pepsi, Heinz, Kellogg’s, and 

Cargill. Opportunities exist for investment in areas that support food processing, such as 

agricultural technology and postharvest treatment and equipment. Multinational firms 

bring international quality standards and business practices to the Indian food sector and 

are contributing to its growth. In addition, the emerging organized retail sector in India, 

including restaurant chains, is influencing the growth in processing because of its 

 91 Jolly, “Punjab Farmers Desperate As Migrant Workers Vanish,” May 31, 2009. 92 Ibid. 

93 IBEF, “Agriculture,” March 3, 2009. 

94 Industry representative, interview by Commission staff, New Delhi, India, June 1, 2009. 95 Dhankhar, India: Food Processing Sector, July 2, 2008, 3. 96 Ibid., 13. 

97 Ibid. 

98 IBEF, “Food Processing: Market and Opportunities,” 7. 

99 Industry representative, interview by Commission staff, New Delhi, India, June 2, 2009. 
4-16

increased backward linkages. It is likely that as the organized retail sector grows, 

backward integration will grow as well, triggering a push for more food processing.100

Food Safety Standards and Regulations 

Food safety standards are set nationally under the authority of the central government 

rather than state governments. Before 2006, Indian food standards were governed by 

several food laws enacted at different times and under the authority of different 

ministries, including the Prevention of Food Adulteration (PFA) Act of 1954, enforced by 

the Ministry of Health and Family Welfare; the Agricultural Produce (Grading and 

Marketing) Act of 1937, enforced by the Ministry of Agriculture; and the Standards and 

Weights Measure Act of 1976, enforced by the Ministry of Food and Civil Supplies.101

In August 2006, the central government passed the Food Safety and Standards Act of 

2006, in which eight separate laws were consolidated.102 This act regulates food safety 

standards related to the manufacture, storage, distribution, sale, and import of food for 

human consumption. Standards—still in the process of being formulated—will cover the 

specifications for ingredients, contaminants, pesticide residue, biological hazards, and 

labeling.103 The establishment and enforcement of science-based food safety standards for 

domestically produced and imported food is now carried out by the Ministry of Health 

and Family Welfare through a regulatory body called the Food Safety and Standards 

Authority (FSSA), which began operation in July 2008.104 Its activities include restricting 

ingredients used in food preparations, sampling foods for poisons and other toxic 

substances, licensing and registering businesses selling food for human consumption, and 

regulating food manufacturing practices and labeling. State commissioners of food safety 

will provide some of the staff and resources for enforcement.105

Because implementation and enforcement of laws by the FSSA only began in late 2008 

and certain authorities under the FSSA will not be operational until late 2009, it is too 

early to assess the impact of the FSSA on U.S. exports of agricultural goods.106 Early 

actions, however, suggest that U.S. exports of wine and spirits may be negatively affected 

by new labeling requirements. Under the law, each state has the right to require separate 

labels with different information for consumers. According to industry representatives, if 

Indian states permit stickers to be added after shipment and the original labels remain, the 

cost and administrative burdens are expected to be minimal. On the other hand, if states 

insist on entirely new labels, the additional cost could be very high, forcing wine and 

spirits manufacturers to exit certain markets, particularly Indian states without highvolume sales.107

Another open question is whether enforcement practices by the FSSA will match or 

exceed those that prevailed under previous laws. For example, some Indian sources assert 

 100 Dhankhar, India: Food Processing Sector, July 2, 2008, 3. 101 For a full list of the Indian laws impacting food safety, see Vision, Strategy and Action Plan for Food 

Processing Industries in India, April 2005, 115–116. 102 The Times of India, “Health Ministry to Oversee Food Safety,” April 11, 2007. 103 Panagariya, India: The Emerging Giant, 2008, 317. 104 Briggs, “India Sets Up Food Safety and Standards Authority,” July 8, 2008. 105 Food Safety and Standards Act 2006, ch. 7, sec. 29–30. 106 The Financial Express, “FSSA to Unveil New Food Safety Guidelines Soon,” July 7, 2009. 107 Industry representative, interview by Commission staff, New Delhi, India, May 8, 2009. 
4-17

that the PFA Act was strictly enforced for the organized sector. 108 Eight years ago, 

directors of companies were made directly liable for adulteration problems with food. As 

a result, all large companies, including multinationals, and many medium-sized 

companies remedied violations and began abiding by the law.109 However, other Indian 

sources paint a different enforcement picture, claiming that foreign companies and 

importers were subject to PFA Act enforcement but domestic companies were not.110

Whether sufficient government resources will be devoted to monitoring food safety, and 

whether FSSA enforcement will be strictly and fairly applied to all food companies 

operating in India, is uncertain. 

 

 108 The Prevention of Food Adulteration Act of 1954 focused on regulatory standards for primary food 

products (i.e., those products which constitute the bulk of the Indian diet). All imported products were 

regulated under this law, including labeling and marking requirements. Seth Associates, Food and Drug 

Industry in India: An Overview, 2006. 109 Industry representative, interview by Commission staff, New Delhi, India, May 9, 2009; Government 

of the National Capital Territory of Delhi, Directorate of Prevention of Food Adulteration. 110 Industry representative, interview by Commission staff, Mumbai, India, June 1, 2009.
4-18

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5-1

CHAPTER 5 

TARIFFS 

Overview 

Indian tariff policy is focused on supporting India’s domestic agricultural policy 

objectives discussed earlier: food security, food self-sufficiency, and supporting farmer 

incomes. As a result, Indian agricultural tariffs are among the highest in the world. The 

average Indian World Trade Organization (WTO) bound tariff rate for agricultural 

products is substantially higher than that of many other developing countries. Indian 

applied tariff rates vary substantially by product and average approximately 34 percent, 

creating an impediment to U.S. agricultural exports. India also levies additional duties 

that further increase the cost of imported goods. An additional problem noted by U.S. 

exporters is the large difference between India’s bound and applied tariff rates on many 

agricultural products, which allows the Indian government to modify its tariffs 

substantially while complying with its WTO commitments. For example, the Indian 

government tends to frequently modify tariffs on food staples, such as wheat, pulses, rice, 

sugar, and vegetable oils. This variability, as well as the complex process for notifying 

India’s trading partners of tariff-rate changes, creates uncertainty and acts as an 

additional impediment for certain U.S. exports.1

 

Commission modeling simulations estimated that, in the absence of Indian agricultural 

tariffs, U.S. agricultural exports to India would have been 42–61 percent higher in 2007, 

which is equivalent to $200–291 million. U.S. exports most affected by Indian 

agricultural tariffs in 2007 were almonds, fresh apples, cotton, soybean oil, and certain 

other vegetable fats and oils. 

Bound Tariffs and Tariff-Rate Quotas 

India bound its tariff rates on imports of all agricultural products as a part of its Uruguay 

Round commitments under the General Agreement on Tariffs and Trade. The average 

Indian bound tariff rate for agricultural products is 114 percent ad valorem, which is 

among the highest in the world and much higher than the average bound rates of other 

developing countries such as Brazil (36 percent) and China (16 percent).2

 In comparison, 

the average bound tariff rate for agricultural products in the top 10 markets for U.S. 

agricultural exports is 34 percent.3

 Moreover, the average Indian bound tariff rate for 

agricultural products is considerably higher than India’s average bound rates for 

nonagricultural products (36 percent).4

 

The majority of Indian bound tariff rates for agricultural products are between 50 and 

150 percent ad valorem. Only 4 percent of tariff rates for agricultural products are bound 

 1

 USIBC, written submission to the Commission, June 26, 2009, 7. 2

 Only 12 WTO member countries have higher average bound agricultural tariffs than India: Bangladesh, 

Lesotho, Malawi, Mauritius, Nigeria, Norway, Saint Lucia, Saint Vincent and the Grenadines, Tanzania, 

Tunisia, Zambia, and Zimbabwe. WTO, World Tariff Profiles, July 2008. 3

 The top 10 U.S. WTO agricultural export markets include Canada, Mexico, EU, Japan, China, Korea, 

Taiwan, Indonesia, Egypt, and Hong Kong. GTIS, World Trade Atlas Database (accessed May 6, 2009). 4

 WTO, World Tariff Profiles, July 2008, 94. 
5-2

at 25 percent or less, and although most tariffs are bound below 150 percent, some rates 

are bound at 300 percent.5

 Average bound tariff rates for agricultural products vary by 

product group, and most are higher than 100 percent (table 5.1). Product groups with the 

highest average bound tariff rates are those considered by the Indian government to be 

 5 WTO, World Tariff Profiles, July 2008, 94.

TABLE 5.1 India: Average bound and applied tariff rates by selected product groups and products, as of April 2009 (%)

Products Bound tariff Applied tariff

Vegetable fats and oils 227 24

 Palm oil, crude 300 0

 Soybean oil, refined 45 7.5

Alcoholic beverages and spirits 150 133

 Wine 150 150

Oilseeds 130 30

 Soybeans 100 30

Coffee, tea, spices 128 56

Certain food grain productsa

 127 33

Sugars and confectionery 125 40

 Sugar 150 60

Grains 113 40

 Wheatb 100 50

 Rice, semi-/wholly milled 70 70

 Corn (maize)c 60 50

Processed fruits and vegetables 111 30

 Prepared or preserved potatoes (french fries) 55 35

Live animals, animal meat, and other animal products 105 33

 Chicken cuts 100 100

 Chicken, whole 100 30

Miscellaneous vegetable extracts 105 28

Fresh and dried fruits, vegetables, and nuts, excluding almonds 100 30

 Potatoes 150 30

 Lentils 100 0

 Dried beans 100 0

 Pistachios 100 30

 Apples, fresh 50 50

 Grapes, fresh 40 40

 Pears, fresh 35 30

Dairy productsc 94 33

 Milk powder 60 60

 Whey 40 30

 Cheese 40 30

Nonalcoholic beverages 91 31

 Grape juice 85 30

Hides and skins 35 17

Sources: Government of India, Ministry of Finance, Central Board of Excise and Customs, Customs Tariff 2008/09; 

Government of India, Ministry of Finance, Central Board of Excise and Customs, various Notifications of Customs. 

Note: All average tariffs are rounded to whole numbers. 

a

Certain food grain products include products in chapter 11 (products of the milling industry, malt, starches, inulin, 

and wheat gluten) and chapter 19 (preparations of food grains, flour, starch or milk; bakers' wares) of the Harmonized 

System. b

The tariffs listed are for private-sector traders. State trading enterprises import wheat duty free. c

Subject to a tariff-rate quota. The applied tariff listed is the over-quota rate. 
5-3

sensitive. They include vegetable fats and oils; oilseeds; coffee, tea, and spices; certain 

grain products; alcoholic beverages; and sugars and confectionery.6

Since 2000, India has maintained tariff-rate quotas (TRQs) on six agricultural product 

tariff lines at the six-digit level of the Harmonized System (HS) of the World Customs 

Organization (table 5.2).7

 Indian private and government organizations designated by the 

Indian Ministry of Commerce and Industry can apply for TRQ allocations.8

According to the Indian government, except for sunflower and safflower seed oil 

importers, who regularly import under TRQs, there has been limited demand for TRQ 

access from the designated organizations. For example, India reports minimal interest in 

the milk powder TRQ, and allocations were only issued in 2003–04.9

 Both in-quota and 

over-quota tariffs on products to which TRQs apply are variable, and they are influenced 

by both market prices and supply conditions. For example, in February 2007, India 

announced that it would allow duty-free imports of corn through December 2007 to lower 

domestic market prices and encourage imports, effectively eliminating the quantitative 

limitation of the TRQ.10

 6

 Within these product groups, examples of specific agricultural products that are considered to be 

sensitive and that have very high bound tariff rates are palm oil and sunflower oil (300 percent); wine (150 

percent); cane and beet sugar (150 percent); coffee (150 percent); and pasta (150 percent). 7

 Previously under the General Agreement on Tariffs and Trade (GATT), these products had tariffs that 

were bound either at zero or at low levels. In 2000, as a result of negotiations with the United States, the 

European Community, and Australia, TRQs were established to replace the previous bound rates. 

Government of India, Ministry of Commerce and Industry, Negotiations under Article XXVIII of the GATT 

1994. 

8

 For example, organizations that can apply for milk powder quota allocations include the National Dairy 

Development Board (NDDB), State Trading Corporation (STC), National Cooperative Dairy Federation 

(NCDF), National Agricultural Marketing Federation (NAFED), Mineral & Metals Trading Corporation 

(MMTC), Projects & Equipment Corporation of India Limited (PEC), and Spices Trading Corporation 

Limited (STCL). Government of India, Ministry of Commerce and Industry, Procedure for Import of Various 

Items under Tariff Rate Quota (TRQ), October 4, 2002. 9 WTO, India Trade Policy Review, July 24, 2007, 44. Applications for access to in-quota TRQ rates for 

rapeseed, colza, or mustard oil have not been made since FY 2002–03. Demand for allocation of the milk 

powder and corn TRQs in India may be driven by other factors, including nontariff measures. See chapter 6. 10 Govindan, India: Grain and Feed, February 28, 2008, 12. In addition, duties for sunflower and 

safflower seed oil and rapeseed, colza, or mustard oil were lowered during 2008 for an unspecified time 

period. 

TABLE 5.2 India: Tariff-rate quotas on agricultural products, as of January 2008 

Product HTS TRQ (mt) 

Applied inquota tariff Applied

over-quota tariff

 Metric tons Percent 

Corn 1005.90 500,000 15 50

Crude sunflower and safflower seed oil 1512.11 150,000 50 75

Refined rapeseed, colza, or mustard oil 1514.19 

1514.99 

150,000 45 75

Milk powder 0402.10 

0402.20 

 10,000 15 60

Source: WTO, India Trade Policy Review 2007. 
5-4

Applied Tariffs 

High applied tariff rates are a major impediment to U.S. agricultural exports to India, 

according to U.S. agricultural exporters, because they increase the price of U.S. goods in 

relation to domestically produced products. Indian tariff rates are applied almost 

exclusively on an ad valorem basis and primarily range from 10 to 150 percent.11 The 

simple average of Indian applied tariff rates on agricultural products declined 

significantly from 113 percent in 1991 12 to approximately 34 percent during 2007; 

however, they remain among the highest in the world.13 Indian applied tariff rates on 

agricultural products are also substantially higher than its applied rates for 

nonagricultural products. As a result of the continuing sensitivity of the Indian 

agricultural sector and India’s preparations to implement a free trade agreement (FTA) 

with the Association of Southeast Asian Nations (ASEAN), the government has been 

reducing tariff rates on nonagricultural products faster than those for agricultural 

products.14 

India’s applied tariff rates vary substantially by product and product group. Certain 

agricultural product groups, such as sugar and grains, are considered sensitive because of 

employment and food security concerns; these generally have high average applied tariff 

rates.15 Market conditions, industry stability and employment, and the importance of the 

product to Indian consumers are other factors that contribute to significant differences in 

applied tariff rates for specific agricultural products within product groups. For example, 

among vegetable fats and oils, the tariff rate for margarine is 80 percent, while the tariff 

rates on crude soybean and palm oils were reduced to free in March 2009. Vegetable oils 

have traditionally been protected by high tariffs, although tariff rates on this product 

group have been reduced to an average of 24 percent in order to combat food price 

inflation. Similarly, the average tariff rate on animal products is 33 percent, with most 

products subject to a 30 percent tariff. However, imported fresh and frozen chicken cuts, 

which compete with the large domestic industry, are subject to a 100 percent applied 

tariff rate. Applied tariff rates on specific grains also differ widely. For example, the tariff 

rates on oats and rye are zero, while the tariff rates on other cereals, such as semi- and 

 11 In the Indian tariff schedule, specific tariffs are assessed only on two tariff lines for agricultural 

products: shelled and inshell almonds. The tariff on almonds was applied on an ad valorem basis before 

extensive negotiations between the Indian government and the U.S. almond industry resulted in a specific 

tariff. The specific tariff is advantageous for the U.S. industry because it has eliminated underinvoicing and 

reduced the risk of tariff variability. In addition, the spread between the specific tariff on shelled and inshell 

almonds provides a comparative advantage for U.S. producers. USITC, hearing transcript, April 21, 2009, 

77–78 (testimony of Mark Masten, Cal-Pure Pistachios, Inc., and Julian B. Heron, on behalf of Blue 

Diamond Growers). 12 Mattoo and Stern, “India and the WTO,” 2003, 16. 

13 During 2007–08, India’s average applied rate on agricultural products was the ninth highest among 

WTO members. The eight WTO member countries with higher average applied agricultural tariffs were 

Egypt, Iceland, the Republic of Korea, Morocco, Norway, Switzerland, Tunisia, and Turkey. World Tariff 

Profiles, July 2008. 14 The Indian government has lowered its tariffs on nonagricultural products in order to align them with 

rates established in the ASEAN FTA, which India is expected to sign in late 2009. The ASEAN FTA allows 

India to shield sensitive products (479 items) from tariff cuts. Most of the products India shields are 

agricultural products, and as a result, many tariffs on agricultural products have not declined. Consequently, 

the gap between average applied rates for nonagricultural products (11.5 percent in 2007) and agricultural 

products (34.4 percent in 2007) has widened. WTO, India Trade Policy Review, July 24, 2007, 37; Sen, 

“India Gets Kinder ASEAN Duty Cuts,” Economic Times, June 6, 2009; and WTO, World Tariff Profiles, 

July 2008, 94. 15 Priyadarshi, “Decision-Making Processes in India: The Case of the Agriculture Negotiations.” 
5-5

wholly milled rice and wheat, which are important for maintaining food self-sufficiency, 

are 70 percent and 50 percent, respectively.16 

U.S. exporters indicate that high tariffs raise the price of imported U.S. products to levels 

that can substantially dampen Indian demand for them. For example, the U.S. apple and 

pear industries estimate that U.S. exports could more than double if the tariff rates were 

reduced or eliminated.17 Both the U.S. apple and pear industries compete for market share 

with cost-competitive Indian producers. In some instances, the presence of high tariffs 

keeps U.S. exporters from trying to enter the Indian market.18

In addition to lower tariffs, some industry officials, including U.S. exporters and Indian 

importers, suggest that certain other changes to the current Indian tariff structure could 

increase U.S. access to the Indian market. For example, some Indian importers have 

requested that India follow the approach taken in the European Union on certain seasonal 

products by varying tariff levels on imports of those products based on the time of year, 

with higher rates applied when domestic production is available and a lower rate applied 

when domestic production is out of season.19 Some importers claim that this change 

would increase market access while not harming the domestic industry. In addition, 

certain importers have requested that the Indian government apply tariffs on a specific or 

per-kilogram basis, a method used currently only for almond imports, instead of on an ad 

valorem basis.20 This system would create more certainty for foreign exporters because 

industry officials report that tariffs assessed by volume are generally less likely to be 

manipulated than those assessed by value.21

Any changes to Indian tariff-rate levels or the structure of the Indian tariff schedule 

would likely be considered carefully by the Indian government, because tariffs are an 

important source of central government revenue. Despite a decline in the average applied 

tariff rate and in the importance of tariff revenue in overall government receipts, customs 

revenue accounted for approximately 23 percent of Indian federal net government 

revenue in fiscal year (FY) 2008/09. 22 In comparison, U.S. customs duties and fees 

accounted for 1.2 percent of total U.S. federal government receipts during FY 2008.23

Some U.S. industry representatives suggest that India’s revenues might actually increase 

if tariffs are lowered and market access is expanded for certain agricultural imports; the 

reason, they argue, is that the volume of imports would rise more than enough to offset 

 16 European Commission, India’s Role in World Agriculture, December 2007, 3. 17 NHC, written submission to the USITC, June 24, 2009, 2. Industry estimates of the impact of Indian 

tariffs on these and other U.S. agricultural products can be found in appendix D, Positions of Interested 

Parties. 18 Industry representative, interview by Commission staff, New Delhi, India, May 26, 2009; industry 

representative, telephone interview by Commission staff, March 4, 2009. 19 The United States also uses seasonal tariffs for a few horticultural products, such as tomatoes. Industry 

representative, interview by Commission staff, Mumbai, India, June 1, 2009. 20 Industry representative, interview by Commission staff, Mumbai, India, June 1, 2009. 21 Practices such as underinvoicing reportedly occur frequently. Industry representative, telephone 

interview by Commission staff, March 26, 2009; industry representative, interview by Commission staff, 

Mumbai, India, June 1, 2009. 22 Government of India, Ministry of Finance, Union Budget 2009–2010, Abstract of Receipts, 1. 23 U.S. Government Printing Office, 2009 Fiscal Year Budget of the United States Government, 2008, 50. 

To compare Indian customs revenue to that of a country at a similar level of economic development, 

Brazilian customs receipts contributed 1.8 percent of total federal tax revenue in 2006, the most recent year 

for which data are available. Government of Brazil, Secretariat of the Federal Revenue of Brazil, The Fiscal 

Load in Brazil 2006, July 2007, 10. 
5-6

0

50

100

150

200

250

Animal prod

Hides & skins

Dairy products

Processed fruits & veg

Fruits, veg, & nuts 

Coffee, tea, spices

Cereals 

Certain cereal prodMisc. veg. extracts

Oilseeds 

Fats & oils 

Sugars & conf. 

Beverages 

Average applied tariff rates Average bound tariff rates

FIGURE 5.1 India: Average applied and bound tariff rates by selected product groups, 2009 Tariff rates (%)

Source: Government of India, Ministry of Finance, Central Board of Excise and Customs, Customs Tariff 

2008/09 ; Government of India, Ministry of Finance, Central Board of Excise and Customs, various 

Notifications of Customs .

the lower return on each transaction. 24 For example, according to an industry 

representative, India cut the tariff rate on almonds in half in 2001; by 2006, India’s 

revenues from the tariff on almonds had increased by 71 percent over prior levels.25

Tariff Variability 

The difference between high Indian average bound tariff rates and lower average applied 

tariff rates for agricultural products allows the government to raise applied tariffs on most 

agricultural products without violating its WTO commitments (fig. 5.1). The Indian 

government has used this authority to modify rates on certain agricultural products 

frequently, especially for staple food products. Industry sources claim that tariff-rate 

variability is an impediment for U.S. agricultural exports because frequently changing 

tariff rates create uncertainty, making negotiating future sales and determining financial 

plans difficult.26

 24 Industry representative, interview by Commission staff, Washington, DC, March 3, 2009; industry 

representative, interview by Commission staff, Mumbai, India, June 1, 2009. 25 USITC, hearing transcript, April 21, 2009, 33 (testimony of Mark Masten, Cal-Pure Pistachios, Inc.). 26 Industry representative, telephone interview by Commission staff, April 14, 2009; industry 

representative, telephone interview by Commission staff, June 25, 2009. 
5-7

The Indian government views the ability to adjust tariff rates as a necessary trade 

instrument, as long as the system is WTO compatible.27 The rationale for adjusting tariff 

rates is to protect farmers and maintain domestic price stability when domestic 

production and international prices fluctuate. The Indian government strives to balance 

competing interests of producers and consumers by adjusting tariff rates in reaction to 

market conditions, typically lowering them when domestic prices are rising and domestic 

production cannot meet domestic demand. Conversely, the Indian government often 

increases tariff rates when international market prices are falling and there is a surplus in 

domestic production or government buffer stocks, decreasing the country’s need for 

imports.28 In addition to government-directed changes, domestic industry associations can 

petition the Ministry of Finance to lower tariffs. In response, the Ministry of Finance will 

determine the reduction’s impact on the budget before lowering tariff rates.29 Concerns 

about the impact of tariff-rate adjustments on government revenue are generally 

secondary to their impact on producers and consumers.30 

The history of Indian applied tariff rates for certain products, especially food staples, 

illustrates the frequent variability that occurs. Between 2005 and 2008, production 

shortfalls and rising international prices caused Indian domestic food prices to rise 

sharply. To minimize the burden on consumers, India decreased tariff rates on many 

staple food products. As prices declined, however, tariff rates generally were returned to 

their previous levels to support Indian farm prices (figs. 5.2 and 5.3). This is shown by 

recent changes in applied tariff rates for wheat, rice, pulses, and vegetable oils: 

 Wheat: The tariff rate on wheat was lowered as poor harvests caused domestic prices 

 to increase. The rate was lowered from 50 percent to 5 percent in June 2006 before 

 being reduced to zero in September 2006. As a result, India imported wheat in 2006 

 for the first time since 2001.31 As domestic production increased and prices declined, 

 India returned the rate to 50 percent on January 1, 2009. 

 Rice: Concerns about the rising price of rice caused India to lower the tariff rate on 

 rice from 70 percent to zero in March 2008. When market prices stabilized in March 

 2009, the tariff rate was returned to 70 percent. 32

 Pulses: The wholesale price index for pulses rose by 45.6 percent between 2003 and 

 2006.33 As a result, on June 8, 2006, the Indian government exempted pulses from the 

 applicable 10 percent import duty in order to control prices. The duty exemption has 

 been extended until March 31, 2010.34 

 Vegetable oils: In order to support farm prices, India raised tariff rates in early 2005 

 on crude palm oil from 65 percent to 80 percent and on refined palm oil from 

 70 percent to 90 percent. In early 2007, edible oil prices began rising quickly because 

 of lower domestic production, which led the government to reduce rates three times 

 during 2007 on both crude and refined palm oils, before reducing the tariff rates on 

 27 Government of India, “High-level Committee Report.” 28 Government of India, Planning Commission, Eleventh Five Year Plan 2007–12, vol. 3, 2008, 15. 29 Industry representative, interview by Commission staff, Mumbai, India, May 28, 2009. 30 Industry representative, interview by Commission staff, New Delhi, India, June 4, 2009. 31 Govindan, India: Grain and Feed, February 20, 2009, 8. 32 Indian Express.com, “Government Allows Duty-Free Rice Imports,” March 21, 2008. 33 Aradhey, India: Grain and Feed, December 14, 2007, 5. 34 Govindan, India: Grain and Feed, May 6, 2008, 5; Government of India, Ministry of Finance, Central 

Board of Excise and Customs, Notification No. 28/2009-Customs, March 26, 2009. 
5-8

0

10

20

30

40

50

60

70

80

Jan-06

Apr-06

Jul-06

Oct-06Jan-07

Apr-07

Jul-07

Oct-07Jan-08

Apr-08

Jul-08

Oct-08Jan-09

Apr-09

Date

Tariff rates (%)

Wheat Rice, semi/w holly milled

FIGURE 5.2 India: Applied tariffs for wheat and rice, by quarter, Jan. 2006–

April 2009

Source: USDA, FAS, various India Grain and Feed GAIN Reports.

0

20

40

60

80

100

Jan-05

Apr-05

Jul-05

Oct-05Jan-06

Apr-06

Jul-06

Oct-06Jan-07

Apr-07

Jul-07

Oct-07Jan-08

Apr-08

Jul-08

Oct-08Jan-09

Date

Tariff rates (%)

Crude palm oils Refined palm oils Crude soy oil Refined soy oil

FIGURE 5.3 India: Applied tariffs for selected vegetable oils, by quarter, 

Jan. 2005–Jan. 2009

Source: USDA, FAS, various India Oilseeds and Products GAIN Reports.

 

crude soybean and crude palm oils to zero and on all refined edible oils to 7.5 percent on 

April 1, 2008.35 During the remainder of 2008 and through early 2009, prices and import 

levels of soybean oil continued to fluctuate, and as a result, the tariff rate on crude 

soybean oil also continued to vary.36

 35 Dankhar, India: Oilseeds and Products, May 18, 2007. 36 Because palm oil imports increased after palm oil duties were cut and a tariff was restored on crude 

soybean oil (a substitute product), the domestic palm oil industry pressed to impose a duty on imports of 

crude palm oil. Officials from the Ministries of Finance, Agriculture, and Commerce evaluated market 

conditions in December 2008 and decided not to reimpose the duty on crude palm oil because of inflationary 

concerns. Aradhey, India: Oilseeds and Products, February 2, 2009, 3. 
5-9

India also reportedly raises its applied tariff rates on products in isolated instances to 

increase market prices. The Indian government raised tariff rates on at least 30 

agricultural products between 2002 and 2008.37 In some cases tariffs were raised to 

protect growing industries. For example, the tariff rate on cut flowers was increased from 

30 percent to 60 percent in the FY 2005/06 budget, reportedly to protect an infant 

industry with expanding employment and export potential.38 Other examples of tariff-rate 

increases during 2002–08 involve natural honey, margarine, garlic, coffee, cigars, and 

pepper. 

Tariff Adjustment Process 

Not only does the Indian government adjust tariff rates frequently, but the rates are 

adjusted under two different methods, which adds complexity and confusion to the tariff 

system. 39 The first method involves changes made annually through the budgetary 

process, under which tariff revenues still represent a significant source of revenue for the 

Indian government. During February of each year, the Minister of Finance presents the 

government’s budget to the Indian Parliament for the new fiscal year, which begins 

April 1.40 The budget is enacted after parliamentary review and approval. The proposed 

budget, which is released to the public, may propose changes to any number of applied 

tariff rates. The budget approved for FY 2008/09, for example, adjusted tariff rates on 

four agricultural products: tariffs on two were reduced (unworked corals and feed 

additives), and tariffs on two were increased (cigars and cigarillos).41

The second and more common method is for tariffs to be changed on an ad hoc basis by 

the Indian Ministry of Finance’s Central Board of Excise and Customs in notifications 

published in the Gazette of India, the national government’s official publication. During 

2008, the Indian government issued 138 tariff-rate amendment notifications.42

Because tariff-rate adjustments can be made frequently and through more than one 

government process, and because they may be effective for either a set period of time or 

an indefinite period, exporters to the Indian market generally describe the process as 

lacking transparency and certainty.43 Other complications compound the difficulties. For 

example, tariff-rate changes in many notifications are referenced by serial numbers 

established and designated to goods in previous notifications, rather than providing 

 37 WTO, India Trade Policy Review, July 24, 2007, 32 (documenting 27 tariff increases); Government of 

India, Ministry of Finance, Union Budget 2002–2008, 2008. 38 Acharya, Keya, “Thorns in India’s Cut-Rose Industry,” Asia Times Online, December 6, 2007. In 

addition to the duty increase, the government has supported commercial cultivation through tax holidays and 

subsidies for cold storage facilities, greenhouse construction, improved packaging material, and 

transportation. Saffron, “Indian Flowers! Backward Flip,” Issue 1, October 8, 2008. 39 Industry representative, telephone interview by Commission staff, May 20, 2009. 40 The Indian parliament often does not pass the budget until May. As a result of the gap between the 

when the fiscal year begins and when budget passes, the government typically seeks an interim budget that 

authorizes expenditures until the budget has been approved. 41 Government of India, Ministry of Finance, Union Budget 2008–2009, 2008, 1. 42 The 138 notifications include changes to both agricultural and nonagricultural tariffs. A notification 

can amend the duties on one or many tariff lines. Notifications also amend previous changes and announce 

tariff changes due to rulings in antidumping cases. Government of India, Ministry of Finance, Indian Central 

Board of Excise and Customs, Tariff Notifications of Customs in Year 2008. 43 Industry representative, interview by Commission staff, Mumbai, India, May 28, 2009; industry 

representative, telephone interview by Commission staff, May 20, 2009; and industry representative, 

telephone interview by Commission staff, June 18, 2009. 
5-10

descriptive product language or specific tariff codes.44 The research required to determine 

which serial numbers apply to which goods reportedly increases costs to exporters. To 

keep track of the current tariff rates, market participants state that they must monitor the 

Customs and Excise website daily because tariff-rate changes come into effect 

immediately unless otherwise specified.45 Additionally, the large number of notifications 

reportedly also makes the system more susceptible to error, irregular or arbitrary 

administrative discretion, or corruption. 46 U.S. industry officials report that Indian 

customs agents may not be aware of which tariff rate applies to certain imports, and 

unless the importer knows for certain that a specific tariff rate has been reduced, customs 

agents may charge the higher rate previously in effect.47 In addition, many notifications 

incorporate changes to a wide variety of products, both agricultural and nonagricultural, 

while amending notifications from previous years. 48 The Indian Minister of Finance 

recognized the complexity of the system in his February 2006 budget speech and called 

for the system of notifications to be simplified.49

 

 Adjustments to Product Classifications 

Certain adjustments to applied tariff rates are made based on the end use of the product or 

product descriptions that are not specified in the tariff schedule, reportedly creating 

uncertainty for foreign exporters to India. For example, in the FY 2006/07 budget, India 

reduced its tariff rate from 20 percent to 12.5 percent “on non-edible grade oils (other 

than crude palm oil), falling under {HS} headings 1507 to 1515, having 20 percent {free 

fatty acid} when imported for manufacture of soaps, industrial fatty acids and fatty 

alcohols by a manufacturer having a plant for splitting up of such oils into fatty acids and 

glycerols.”50 Because the Indian tariff schedule does not classify edible oils by their free 

fatty acid content for duty purposes, the customs determination regarding classification of 

those edible oil imports may require interpretation. Consequently, an exporter may be 

uncertain at the time of shipment whether the higher or lower tariff rate will ultimately be 

applied.51 In addition, this tariff-rate reduction only applied to oils that are destined for 

use in a specific type of manufacturing, and it is unclear how customs agents determine 

the end use of the imported product in such cases. 

 44 For example, Notification No. 27/2009-Customs amended Notification No. 21/2002-Customs and 

lowered the tariff on certain edible oils. The amendment states that “[i]n the said notification, in the Table, 

against S. No. 29A, for the entry in column (4), the entry ‘Nil’ shall be substituted.” Neither the HTS number 

nor the product name is explicitly stated, only a reference to a serial number that was established in a prior 

notification. Government of India, Ministry of Finance, Central Board of Excise and Customs, Notification 

No. 27/2009-Customs, March 24, 2009. 45 Industry representative, interview by Commission staff, New Delhi, India, May 26, 2009; government 

official, telephone interview by Commission staff, July 23, 2009. 46 WTO, India Trade Policy Review, July 2007, 37. 47 Industry representative, telephone interview by Commission staff, March 3, 2009. 48 The Indian government attempted to simplify the notifications in 2002 by consolidating all the 

previous changes into a single notification (Notification No. 21/2002-Customs). 49 Chidambaram, Union Budget, February 28, 2006. 50 Government of India, Ministry of Finance, Union Budget, 2006, 1. 51 Government official, telephone interview by Commission staff, July 23, 2009. 
5-11

Reference Prices 

Reference prices, which are set by the Indian government based on international market 

prices, are used to determine actual duties paid on vegetable oils and poppy seeds. The 

reference price, rather than the actual import value of the product, is used in conjunction 

with the ad valorem tariff rate to determine the total import duty. This system, reportedly 

established to prevent any loss of revenue resulting from underinvoicing by importers,52

results in dramatic shifts in the effective ad valorem tariff rate based on fluctuations in 

the established reference price. Moreover, these fluctuations can lead to speculation in the 

Indian market as well as to increased uncertainty and costs.53 

Until late 2006, the Indian government reportedly adjusted reference prices regularly to 

reflect world prices. When the reference price is higher than the invoiced price on the 

shipment, the effective applied tariff rate can be higher than India’s bound tariff rate, a 

scenario that has occurred for soybean oil imports.54 For example, in August 2005, the 

tariff reference price for crude soybean oil was $558 per metric ton,55 but the average unit 

value of U.S. exports to India of crude soybean oil during August was $485 per metric 

ton.56 As a result, even though the bound rate is 45 percent, the U.S. exporter paid an 

effective applied tariff rate of 51.8 percent. 57 Since late 2006, when the Indian 

government began lowering tariffs on vegetable oils (fig. 5.3), reference prices have 

remained unchanged. By March 2008, the use of reference prices had no impact on 

imports of certain vegetable oils because the tariff rate was reduced to zero. 

Additional Border Fees and Taxes 

In addition to applied tariffs, imports may be subject to a number of additional fees and 

duties that lower demand for agricultural imports and increase the cost and complexity of 

trading in the Indian market.58 The commonly cited fees are (1) the additional duty, 

(2) the additional duty of customs, (3) the educational cess (surcharge), and (4) landing 

fees.59 

Additional Duty 

The additional duty, or “countervailing duty,” levied on certain agricultural imports is 

equal to the central excise duty (generally 8 percent) that is assessed on similar products 

 52 Industry representative, interview by Commission staff, Mumbai, India, May 28, 2009. 53 Shunmugan, India: Oilseeds and Products; Government Increases Reference Prices, October 5, 2005. 

In reaction to the negative consequences of the reference price system on vegetable oil exporters, one 

industry representative has advocated that the reference price system be replaced with tariffs applied on a 

specific per-kilogram basis. Industry representative, interview by Commission staff, Mumbai, India, 

June 1, 2009. 54 Govindan, India: Oilseeds and Products, May 15, 2006. 55 Shunmugan, India: Oilseeds and Products; India Revises Tariff Rates and Reference Prices, 

April 5, 2005. 56 USITC, Dataweb (accessed June 24, 2009). 

57 The tariff paid was calculated as 45 percent of the reference price of $558 per metric ton. The effective 

tariff rate was calculated by dividing the $251.10 in duties paid by the $485 per metric ton import unit value. 58 Indian Express.com, “Excise Duty Drops from 16% to 8% in One Year,” February 25, 2009. 59 Government of India, Taxation-Types of Customs Duties. 
5-12

produced domestically.60 Assessed primarily on manufactured goods, the additional duty 

applies only to certain agricultural products, such as malt, some starches, biscuits, some 

bakery products, custard powder and spices, soft drink concentrates, confectionery 

products, cocoa products, and certain vegetable oils.61 The additional duty is levied on the 

c.i.f. value of the imported good, plus the applied tariff and certain other landing fees.62 

During 2008 and early 2009, the central excise duty rate was reduced from 16 percent to 

8 percent in three different adjustments. 63 The reduction of the excise duty not only 

lowers the additional duty but also the impact of the 4 percent special additional duty on 

the price of imported goods (see below) because the special additional duty is applied to 

the aggregated total of all duties and the value of the imports.64 

Additional Duty of Customs 

In the FY 2006/07 budget, India introduced a 4 percent additional duty of customs 

(special additional duty, or special countervailing duty) that applies to most imports, 

including many agricultural goods.65 Some agricultural products are exempted from the 

special additional duty including staple food products such as pulses, fresh fruits and 

vegetables, rice, wheat, and coarse grains. In some cases, the Indian government uses the 

special additional duty to maintain price stability, exempting certain products from this 

duty to lower domestic market prices. 

The special additional duty is applied to the c.i.f. value of the imported product plus all 

applicable taxes, including the applied tariff and the additional duty described above. As 

a result, the effective rate of the special additional duty is greater than 4 percent. The 

special additional duty applies even to goods that have tariff rates equal to the bound rate, 

such as raisins and almonds.66 A credit can be provided for the special additional duty for 

products that are also subject to the additional duty.67 However, according to one source, 

the refund generally takes at least 12 months to receive and further adds to the short-term 

cost of importing goods.68

 60 The Indian government often refers to the “additional duty” as a countervailing duty. This term is not 

related to the WTO definition of a countervailing duty. Government of India, Customs Tariff Act, 1975, 4. 

Domestic producers are liable for the central excise duty as soon as the good is produced. Government of 

India, Taxation-Excise Duty. 61 USDA, FAS, India-Agriculture Economy and Policy Report, January 2009, 3; government official, 

e-mail message to Commission staff, July 20, 2009. 62 The c.i.f. value is the delivered value of the product which includes cost, insurance, and freight. 

Government of India, Taxation-Types of Customs Duties. For certain products, the additional duty may be 

charged as a percentage of the Indian government established maximum retail price. Importers and retailers 

are then required to print the maximum retail price on the product label. Industry representative, e-mail 

message to Commission staff, July 10, 2009. 63 The central excise rate is not the rate applied to all goods. Some goods were previously charged 

4 percent or 8 percent, but those rates only apply to a limited number of commodities, and the rates have 

remained stable despite changes to the primary rate. In the FY 2008/09 budget, India initially lowered the rate 

from 16 percent to 14 percent. Later in December 2008, the central excise duty was again reduced from 

14 percent to 10 percent. The acting Indian Minister of Finance, Shri Pranab Mukherjee, announced the final 

reduction to 8 percent in February 2009 as part of an economic stimulus plan. 64 Government of India, Customs Tariff Act of 1975, 4. 65 Government of India, Ministry of Finance, Central Board of Excise and Customs, Customs Tariff 

Notification No. 19/2006, March 1, 2006. 66 Govindan, India: The Indian Budget, March 1, 2006, 2. 67 Government of India, Ministry of Finance, Union Budget, 2005, 1. 68 Industry representative, e-mail message to Commission staff, June 10, 2009. 
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BOX 5.1 The Impact of Tariffs and Additional Fees on Wine Retail Prices

High tariffs and additional fees levied at the Indian border substantially increase the retail price of U.S. wine 

in the Indian market. The applied tariff (150 percent) is assessed on the c.i.f. value plus a 1 percent landing 

charge. Other fees are added as shown below (table A). The applied tariff and the additional fees together 

increase the total cost of a $10 bottle of U.S. wine (c.i.f. value) to $26.73. Consequently, the effective tariff 

rate on wine is 167.3 percent. The resulting disparity between retail prices of imported wine in the Indian 

market and retail prices for the same bottle in the United States illustrates the impact of high tariffs and the 

additional fees. For example, a 750 ml bottle of Blossom Hills Chardonnay, a California wine, can be 

purchased for approximately $27 (1,344 Rs.) in Mumbai, while the suggested retail price in U.S. stores for 

the 1.5 liter bottle (which holds twice the volume) is $9.99.a

TABLE A Cost structure of wine imported into India, 2009 

C.i.f. value of imported shipment $10.00 

Landing charge (1% of c.i.f.) $0.10 

Assessible value (AV) (= c.i.f. + landing fee) $10.10 

Tariff (150% of AV) $15.15 

Education cess (3% of the assessed tariff) $0.45 

Total cost after tariff and education cess $25.70 

Special additional duty (4% of total cost) $1.03 

Total cost including all duties $26.73 

Source: Commission staff calculations. 

The additional fees for imported wines in India have been adjusted in recent years. The additional customs 

duty, which was equivalent to the domestic excise tax and is charged on various other imported agricultural 

products, is no longer assessed on all alcoholic beverages. In July 2007, the Indian government repealed the 

additional customs duty after the European Union and United States filed for WTO dispute settlement 

proceedings and claimed that the additional fees violated India’s WTO commitments by bringing its tariff rate 

above its maximum bound rate. However, following the removal of the additional customs duty, the Indian 

government raised the tariff rate on wine from 100 percent to the bound rate of 150 percent and gave states 

the power to institute “special fees” on alcohol products.b

 

______________ 

a

 A 750 ml bottle of Blossom Hills Chardonnay is not marketed in the United States. Price calculated 

using the average exchange rate in May 2009 of $1 to 49 Rs. b

 United States Trade Representative, “WTO Appellate Body Reverses Panel and Finds in Favor of the 

United States,” October 30, 2008; JBC International Inc., Comprehensive Study of the Indian Wine Market, 

August 21, 2008, 18.

Landing Fees and Educational Cess 

A 1 percent landing fee is levied on the c.i.f. value of all imports, and a 3 percent 

educational cess (surcharge) is charged on agricultural imports and domestically 

produced products. Revenue from the educational cess contributes to the Indian 

educational budget. The 3 percent educational cess is assessed on the aggregate of the 

customs duties payable, not the value of the good. The educational cess was established 

in the FY 2003/04 budget and increased from 2 percent to 3 percent in the FY 2007/08 

budget. Products with applied rates that equal the bound rate are exempt from the 

educational cess, but the cess reportedly is charged on some agricultural products even 

when it pushes the effective tariff rate above the bound rate (box 5.1).69 

 69 JBC International Inc., Comprehensive Study of the Indian Wine Market, August 21, 2008, 18. 
5-14

Free Trade Agreements 

India provides tariff preferences to selected countries through regional and bilateral free 

trade and other agreements, but the impact of these agreements on agricultural trade 

appears to be limited. With the exception of the benefits that India extends to Sri Lanka 

under their FTA and to the least-developed-country participants in the South Asian Free 

Trade Agreement (SAFTA),70 the number of agricultural products receiving preferences 

is low. In addition, the preferences themselves are not significant, only marginally 

reducing India’s average applied tariff rates on agricultural products below the average 

most-favored-nation (MFN) applied rates on such products.71 The agreements currently in 

force are SAFTA and the Asia-Pacific Trade Agreement (APTA), FTAs with Sri Lanka 

and Singapore, and preferential trade agreements (PTAs) with Chile, Bhutan, and the 

Common Market of the South (Mercosur). India has also signed an economic partnership 

agreement with the Republic of Korea, which is not yet in force. 

India provides preferences that cover a limited number of agricultural products72 and 

offer minimal tariff-rate reductions 73 in its agreements with Chile, Singapore, 74 and 

Mercosur,75 as well as in APTA and SAFTA.76 The preferences in these agreements are 

concentrated primarily in meats, preparations of meat, hides and skins, and miscellaneous 

edible preparations. Owing to the restricted nature of these concessions, the impact on 

Indian agricultural imports is limited. For example, since 2005 when the India-Singapore 

FTA entered into force, total Indian agricultural imports from Singapore grew by about 

$17 million, but agricultural products covered in the FTA accounted for only $3 million 

of that growth.77 

India does provide more substantial tariff-rate reductions on agricultural products in its 

FTA with Sri Lanka, which covers 92.5 percent of agricultural tariff lines.78 As a result, 

the average tariff rate on Indian agricultural imports from Sri Lanka is 7.6 percent, 

compared to the MFN average rate of 34.4 percent in 2007.79 Since 2003, when the 

majority of Sri Lankan products were given duty-free access, Sri Lankan agricultural 

exports to India have increased significantly, especially cloves and certain vegetable fats 

and oils.80 

 70 The least-developed-country members of SAFTA are Bangladesh, Bhutan, Maldives, and Nepal. 71 WTO, India Trade Policy Review, July 24, 2007, 104. 72 For example, the APTA covers only 8.4 percent of agricultural tariff lines. WTO, India Trade Policy 

Revie, July 24, 2007, 104 73 For example, in the Chile FTA, the MFN rate was reduced only 15–20 percent. Government of India, 

Ministry of Finance, Central Board of Excise and Customs, Customs Tariff Notification No. 101/2007-

Customs, September 11, 2007, 1. 74 The FTA with Singapore provides phased concessions or tariff eliminations. 75 RTTNews, “India-Mercosur Trade to Touch $10 Bln. in 5-years,” June 4, 2009. 76 India provides greater tariff preferences to the least developed countries of the SAFTA agreement; the 

average applied rates on agricultural products from those countries are lower than similar provisions in other 

FTAs. 77 GTIS, World Trade Atlas Database (accessed September 17, 2009). 78 Approximately one-third of the total tariff lines were granted duty-free access to the Indian market in 

2000, and the remaining two-thirds, with a few exceptions, were granted duty-free access in 2003. 79 WTO, India Trade Policy Review, July 24, 2007, 104. 80 Sri Lankan exports of certain vegetable fats and oils and cloves increased from $0 and $3.7 million, 

respectively, in 2003 to $33.8 million and $31.1 million, respectively, in 2008. GTIS, World Trade Atlas 

Database (accessed June 16, 2009). 
5-15

Simulated Effects of Indian Food and Agricultural Applied 

Tariffs 

Model simulations prepared by Commission staff suggest that Indian agricultural tariffs 

reduced U.S. agricultural exports to India in 2007 by $200–291 million; in the absence of 

Indian tariffs, U.S. agricultural exports to India would have been 42–61 percent higher in 

2007.81 Among U.S. products most affected by Indian agricultural tariffs were almonds 

(U.S. exports to India were reduced by $26.9–32.7 million), fresh apples ($16.6–

21.2 million), soybean oil ($17.1–21.7 million), cotton ($3.0–26.4 million), and certain 

vegetable fats and oils ($17.8–27.2 million). 

The simulation results suggest that Indian agricultural imports from all countries would 

have expanded from $7.51 billion in 2007 to $10.7–11.3 billion in the absence of Indian 

tariffs in 2007. Because India applies the same tariff rates on imports from the United 

States as on imports from other countries, the U.S. share of those imports would have 

expanded from 6.36 percent in 2007 to 6.37–6.81 percent in the absence of Indian tariffs. 

The simulated tariff effects were obtained from model simulations of the absence of 

Indian applied tariffs on agricultural imports from all countries. The simulations are 

based on 2007 statistics. 82 The simulations were performed with an interrelated 

framework that links a partial equilibrium trade model, specified at the six-digit level of 

the Harmonized System (HS6), to an economy-wide trade model, the Global Trade 

Analysis Project (GTAP) model. The simulation framework is described in appendix H. 

The simulated tariff effects are the marginal effects of applied Indian tariffs and do not 

incorporate any other effects. In the absence of Indian tariffs and in the span of a few 

years, U.S. exports could expand by more than indicated here because of possible 

additional effects of economic growth in India and the results of market development by 

U.S. exporters.83 The tariff simulations focus on applied tariffs and do not consider other 

policies that reduce demand for U.S. products in India.84 The quantitative effects of 

certain Indian nontariff measures and domestic subsidies are discussed in chapter 6. 

 81 A range of simulated effects was obtained by varying the magnitude of trade elasticities to account for 

the degree of statistical uncertainty in the econometric estimates of the elasticities. See appendix H. 82 Indian applied tariff rates for staples fluctuate from year to year. Thus the simulated effects for 2007 

could be different than effects for other years. 83 These macroeconomic factors are considered in estimates provided by U.S. tree nut industry 

representatives. Blue Diamond Growers estimated that, using 2009 duty rates, the Indian market has the 

capacity to grow substantially, such that U.S. almond exports to India in the next few years could rise to 

$350–400 million. Also, U.S. industry representatives indicated that, absent the tariff, total Indian annual 

consumption of pistachios could expand from the 17 million pounds recorded in 2007 to an estimated 115–

165 million pounds and that, at the current U.S. market share in India of 8 percent, U.S. exports to India 

could reach a value of $30–45 million. Blue Diamond Growers, written submission to the Commission, 

March 24, 2009; industry representatives, interview by Commission staff, Washington, DC, March 3, 2009. 84 Additional Indian border fees and taxes discussed in this chapter are not considered in the tariff 

simulations. The additional duty is levied on imported and domestic products, and a simulation would not 

show significant effects for U.S. exports. The special additional duty and the educational cess surcharge are 

not considered in the tariff simulations because products are often exempted from them and because a 

definite list of those products cannot be assembled. The exceptions seem to have been provided when 

domestic prices were high. It is not clear, however, that the exemptions were given because of prices. 
5-16

The simulated effects in table 5.3 have been aggregated to 26 broad product groups.85

The table shows 2007 U.S. exports, corresponding Indian applied tariff rates, and 

simulated U.S. export effects for these product groups, which contain all U.S. agricultural 

products under consideration in this report. In 2007, U.S. agricultural exports to India 

were $477.6 million. The trade-weighted import tariff levied by India on agricultural 

imports from the United States was about 24 percent. 

There is a wide variation in simulated effects by product group. For example, in the 

absence of Indian tariffs, U.S. exports to India of the product group “vegetables, fruits, 

and nuts” would have expanded by a large dollar value, $48.5–60.2 million.86 In contrast, 

U.S. exports of “vegetable oils and fats” would experience a large percentage expansion, 

232–324 percent. 87 In general, the simulated U.S. export effects are positive and are 

driven by the magnitude of the tariff and the degree of sensitivity of Indian consumers to 

prices. General equilibrium effects, however, may contribute to lower U.S. exports for 

certain product groups. In the absence of Indian tariffs, agricultural sectors in India would 

contract and release productive resources to the rest of the Indian economy. Other sectors 

would absorb these resources and thus expand their level of production. Because of the 

relatively small average Indian tariff for “cereal grains, not elsewhere specified” (i.e., 

corn and sorghum), this product group could be one of the expanding domestic sectors, 

and thus Indian imports in this sector would decline. 

Table 5.4 reports U.S. export effects for the 50 HS6 product categories with the highest 

U.S. export effects in dollar terms. These 50 product categories accounted for 

$380.7 million, or 79.7 percent, of total U.S. agricultural exports to India in 2007. In the 

absence of Indian tariffs, U.S. exports of these 50 products to India would have been 

$189.7–279.2 million greater, a 50–73 percent expansion. Almonds, certain vegetable 

fats and oils, soybean oil, fresh apples, cotton, and fresh grapes accounted for 

$301.7 million, or 63.2 percent, of U.S. agricultural exports to India in 2007. In the 

absence of Indian tariffs, these exports would have expanded by $85.2–134.2 million, or 

37–54 percent. 

Several other studies have analyzed Indian tariffs. One study that used methodologies 

similar to those used in this report found that, in the absence of Indian tariffs, Indian 

imports of agricultural commodities from all countries would have expanded by 

$6.5 billion, or 93.9 percent, in 2001.88 The study found that Indian imports of “vegetable 

oils and fats” would have expanded by $3.9 billion, or 127.7 percent; “vegetables, fruits 

 85 The 26 product groups are those specified in the Global Trade Analysis Project (GTAP) global trade 

model, one of the models used in this analysis. The GTAP model is discussed in appendix H. For more 

information about the GTAP model, see Hertel, Global Trade Analysis: Modeling and Applications, 1997; 

and Narayanan and Walmsley, Global Trade, Assistance, and Production: The GTAP 7 Data Base, 2008. 86 Table 5.4 shows that the expansion in this product group is driven by growth in three products: 

almonds (product rank 2 in table 5.4), fresh apples (rank 5), and fresh grapes (rank 10). These three products 

account for about 97 percent of the expansion in the aggregate group. 87 Table 5.4 shows that the expansion in this product group is driven by growth in two products: (1) fixed 

vegetable fats and oils and their fractions (product rank 3 in table 5.4), and (2) soybean oil (rank 4). These 

two products account for about 98 percent of the expansion in the aggregate group. 88 For an analysis of the effects of the 2001 Indian agricultural tariffs using the GTAP model, see 

Ganesh-Kumar, Panda, and Burfisher, “Reforms in Indian Agro-processing and Agriculture Sectors in the 

Context of Unilateral and Multilateral Trade Agreements,” 2005. 
5-17

and nuts” by $0.9 billion, or 65.8 percent; and “food products n.e.c.” by $0.3 billion, or 

85.7 percent.89

 89 Other studies have analyzed the combined effects of Indian food and manufacturing tariffs, and they do 

not provide simulated effects either for Indian agricultural imports or U.S. agricultural exports. See Panda 

and Quizon, “Growth and Distribution Under Trade Liberalization in India,” 1999; Panda and Ganesh-Kumar, 

“Trade Liberalization, Poverty and Food Security in India,” 2008; Hertel and Keeney, “What Is at Stake: The 

Relative Importance of Import Barriers, Export Subsidies and Domestic Support,” 2006; Anderson, Martin, 

and van der Mensbrugghe, “Market and Welfare Implications of Doha Reform Scenarios,” 2006; and Polaski 

et al., India's Trade Policy Choices: Managing Diverse Challenges, 2008. 
5-18

TABLE 5.3 India: U.S. food and agricultural exports and simulated effects of the absence of Indian tariffs, by product group, 2007

Simulated effects in ranges 

Product groups containing food and 

agricultural products 

2007 U.S. food 

and agricultural 

exports to India

Average, 

tradeweighted, 

Indian 

applied 

tariff rate

U.S. food and 

agricultural exports to 

India in the absence 

of Indian tariffs 

Change in U.S. food and agricultural 

exports to India in the absence 

of Indian tariffs 

Million $ Percent Million $ Million $ Percent 

Paddy rice 0.22 80 1.24─12.04 1.02─11.82 462─5,342

Wheat 0 0 0─0 0─0 0─0

Cereal grains n.e.c. 1.13 1 1.11─1.09 -0.02─ -0.04 -2─ -4

Vegetables, fruit, nuts 282.69 18 331.21─342.89 48.53─60.20 17─21

Oil seeds 0 32 0─0 0─0 0─0

Sugar cane, sugar beet 0 30 0─0 0─0 0─0

Plant-based fibers 78.55 10 81.55─104.97 3.00─26.43 4─34

Crops n.e.c. 8.26 20 13.45─14.31 5.19─6.06 63─73

Bovine cattle, sheep and goats, horses 0.12 30 0.17─0.20 0.06─0.09 47─73

Animal products n.e.c. 6.95 8 7.32─7.44 0.37─0.49 5─7

Wool, silkworm cocoons 5.84 15 8.87─11.75 3.03─5.91 52─101

Forestry 0.75 30 1.26─1.49 0.51─0.74 69─99

Fishing 0.08 10 0.09─0.10 0.01─0.01 9─15

Bovine meat products 0.05 30 0.10─0.16 0.05─0.11 102─214

Meat products n.e.c. 0.11 49 0.16─0.17 0.05─0.06 44─53

Vegetable oils and fats 15.35 52 50.92─65.11 35.57─49.76 232─324

Dairy products 8.20 34 19.07─23.67 10.87─15.46 133─189

Processed rice 0.06 76 0.13─0.54 0.07─0.48 107─781

Sugar 1.51 98 4.76─18.23 3.25─16.72 215─1,107

Food products n.e.c. 45.96 61 115.09─121.51 69.13─75.55 150─164

Beverages and tobacco products 4.19 103 6.74─7.96 2.55─3.77 61─90

Textiles 0.25 26 0.50─0.51 0.25─0.26 98─102

Wearing apparel 0.01 13 0.01─0.01 0.00─0.00 20─21

Leather products 2.58 25 4.81─5.03 2.23─2.45 86─95

Chemical, rubber, plastic products 14.72 30 28.70─29.31 13.99─14.59 95─99

Manufactures n.e.c. 0.03 30 0.06─0.06 0.03─0.03 112─121

Total 477.61 24 677.35─768.57 199.74─290.96 42─61

Source: Commission calculations with simulation framework discussed in appendix H. 

Notes: (1) Simulated effects for 699 HS6 products have been grouped in 26 broad product groups as these groups are specified in the 

GTAP global trade model. Most of the product groups are composed of only agricultural products. The following product groups, however, 

contain other products—forestry; fishing; textiles; wearing apparel; leather products; chemical, rubber and plastic products; and 

manufactures n.e.c. (2) Indian tariff rates for staples fluctuate from year to year. Thus, the simulated effects for 2007 shown here could be 

different than effects for other years. (3) A range of simulated effects was obtained by varying the magnitude of trade elasticities to account 

for the degree of statistical uncertainty in the econometric estimates of the elasticities. (4) The acronym n.e.c. means not elsewhere 

classified. 
TABLE 5.4 India: U.S. food and agricultural exports and simulated effects of the absence of Indian tariffs, top 50 HS 6-digit products, 200

Simul

Rank HS6 product description (abbreviated) 

HS6 

number 

2007 

U.S. 

exports 

to 

India 

Average 

Indian 

applied 

tariff 

rate 

U.S. exports to 

India in the absence of 

Indian tariffs 

 Million $ Percent Million $ 

1 Food preparations n.e.s.o.i.a 210690 11.48 150 64.26–69.84 

2 Almonds, fresh or dried, in shell 080211 174.24 20 201.09–206.94 3 Fixed vegetable fats and oils and their fractions 151590 3.01 100 20.79–30.23 

4 Soybean oil, and its fractions, refined 150790 11.63 40 28.75–33.33 

5 Apples, fresh 080810 26.78 50 43.36–47.98 

6 Cotton, not carded or combed 520100 78.55 10 81.55–104.97 7 Cane or beet sugar and chemically pure sucrose, refined 170191 1.04 100 3.33–12.79 

8 Essential oils of peppermint (mentha piperita) 330124 3.96 30 9.07–9.30 

9 Milk and cream, powered 040210 1.13 60 4.84–6.88 

10 Grapes, fresh 080610 7.50 30 11.35–12.46 

11 Rice, husked (brown) 100620 0.22 80 1.24–12.03 

12 Bulgur wheat, in grain form or in form of flakes 190430 6.03 30 9.39–9.55 13 Wool, not carded or combed, other 510119 4.34 15 6.59–8.66 

14 Lactose and lactose syrup containing by weight 99% lactos 170211 2.64 30 5.37–6.32 15 Peptones and derivatives; other proteins and derivatives, n.e.s.o.i. 350400 4.04 30 7.08–7.20 16 Whey and modified whey, whether or not concentrated 040410 1.68 30 3.67–4.42 17 Cane or beet sugar and chemically pure sucrose, refined 170199 0.42 100 1.35–5.22 

18 Lactose in solid form and lactose syrup, n.e.s.o.i. 170219 2.32 30 4.16–4.74 19 Wine of fresh grapes (other than sparkling wine) 220421 1.56 150 3.02–3.68 20 Mucilages and thickeners, whether or not modified 130239 3.95 30 5.23–5.30 

21 Seeds of flowering herbaceous plants 120930 1.28 30 2.46–2.65 22 Essential oils, n.e.s.o.i. 330129 1.30 30 2.52–2.57 

23 Potatoes, including french fries, prepared or preserved 200410 2.15 35 3.29–3.35 24 Mucilages and thickeners, whether or not modified 130232 1.93 30 3.06–3.13 

25 Potatoes, n.e.s.o.i., prepared or preserved 200520 2.03 30 3.16–3.22 

26 Wool, not carded or combed, shorn 510111 1.51 15 2.28–3.08 

27 Concentrates of essential oil; other than resinoids 330190 0.85 30 1.98–2.03 

28 Whiskies 220830 0.83 150 1.70–2.13 

See footnote at end of table. 

5-19 
TABLE 5.4 India: U.S. food and agricultural exports and simulated effects of the absence of Indian tariffs, top 50 HS 6-digit products, 200

Simul

Rank HS6 product description (abbreviated) 

HS6 

number 

2007 

U.S. 

exports 

to 

India 

Average 

Indian 

applied 

tariff 

rate 

U.S. exports to

India in theabsence of

Indian tariffs

 Million $ Percent Million $ 

29 Pistachios, fresh or dried, whether or not shelled 080250 3.69 30 4.60–4.84 

30 Vegetable seeds for sowing 120991 3.68 10 4.64–4.75 

31 Essential oils of mints, n.e.s.o.i. 330125 0.67 30 1.55–1.59 32 Milk albumin, including concentrates of two or more whey proteins 350220 1.62 30 2.50–2.54 

33 Seeds of coriander 090920 0.69 30 1.40–1.52 34 Animal feed preparations (mixed feeds, etc.) 230990 2.59 30 3.31–3.34 

35 Starches, n.e.s.o.i. 110819 0.81 50 1.42–1.45 

36 Protein concentrates and textured protein substances 210610 1.01 30 1.59–1.62 

37 Natural gums, gum resins, resins and balsams, n.e.s.o.i. 130190 0.72 30 1.21–1.43 

38 Essential citrus fruit oils of orange 330112 1.00 30 1.57–1.59 39 Full grain unsplit whole bovine and equine leather 410711 0.44 25 0.98–1.04 

40 Seeds of forage plants for sowing, n.e.s.o.i. 120929 0.52 30 1.04–1.13 41 Tobacco, partly or wholly stemmed/stripped 240120 0.41 30 0.88–0.97 42 Essential oils of citrus fruit, n.e.s.o.i. 330119 0.44 30 0.93–0.95 43 Sauces and prep. Therefor, n.e.s.o.i. 210390 0.78 30 1.23–1.25 

44 Products consisting of natural milk constituents 040490 0.30 30 0.66–0.80 

45 Mixes and doughs for the preparation of bread, pastry, cakes 190120 0.65 30 1.02–1.04 46 Bovine and equine leather, not whole, n.e.s.o.i. 410799 0.29 25 0.63–0.67 

47 Edible mixtures or preparations of animal or vegetable fats or oils 151790 0.49 30 0.82–0.86 

48 Vegetable saps and extracts, n.e.s.o.i. 130219 0.65 30 0.98–1.00 49 Starch, corn (maize) 110812 0.30 50 0.63–0.65 

50 Bread, pastry, cakes, biscuits and similar baked products, n.e.s.o.i. 190590 0.51 30 0.79–0.81 

 Total for 50 HS6 product categories 380.65 28 570.31–659.84 

Source: Commission calculations with simulation framework discussed in appendix H. Notes: (1) This table focuses on the 50 HS6 product categories with the largest simulated expansions in U.S. exports in dollar terms. (2) Indian tariff rates f

year. Thus, the simulated effects for 2007 shown here could be different than effects from other years. (3) A range of simulated effects was obtained by va

elasticities to account for the degree of statistical uncertainty in the econometric estimates of the elasticities. (4) The acronym n.e.s.o.i. means not elsewhe

aThe basket category “Food preparations n.e.s.o.i.” is composed of several other basket categories, the largest of which in 2007 were $7.8 million of e

frozen, not containing cane and/or beet sugar, n.e.s.o.i. (HTS 2106907090) and $1.3 million of preparations for the manufacture of beverages, n.e.s.o.i. (H

5-20 
5-21

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Agriculture Exports, June 26, 2009. 

U.S. Department of Agriculture (USDA). Foreign Agricultural Service (FAS). India-Agriculture 

Economy and Policy Report, January 2009. 
5-24

U.S. Government Printing Office. 2009 Fiscal Year Budget of the United States Government, 2008. 

http://www.gpoaccess.gov/USbudget/fy09/browse.html. 

U.S. International Trade Commission (USITC). Hearing transcript in connection with inv. No 332-504, 

 India: Effects of Tariffs and Nontariff Measures on U.S. Agricultural Exports, April 21, 2009. 

U.S. Trade Representative (USTR). “WTO Appellate Body Reverses Panel and Finds in Favor of the 

United States: Offsetting Duties on Imports In Excess of Taxes on Like Domestic Products Break 

WTO Rules.” News release, October 30, 2008.

Welch’s. Written submission to the U.S. International Commission in connection with inv. No 332-504, 

 India: Effects of Tariffs and Nontariff Measures on U.S. Agricultural Exports, June 23, 2009. 

World Trade Organization (WTO), India Trade Policy Review 2007. Geneva: WTO, July 24, 2007. 

———. World Tariff Profiles 2008: India, Geneva: WTO and International Trade Centre, July 2008. 

http://www.wto.org/english/news_e/news08_e/world_tariff_profiles_1sep08_e.htm. 
6-1

CHAPTER 6 

Nontariff Measures 

Overview 

U.S. agricultural exports to India face a wide array of nontariff measures (NTMs), whose 

application either raises the cost of exporting U.S. agricultural products to Indian 

consumers or bars those exports completely.1

 As international agreements have resulted 

in the general lowering of agricultural tariff rates worldwide, the prominence of NTMs in 

certain countries as the next “line of defense” has increased.2

 Unlike tariffs, which are 

normally applied equally to all trading partners, NTMs can affect agricultural imports 

from some countries disproportionately.3

 Furthermore, certain NTMs have no practical 

effect when other NTMs are more trade restricting; U.S. exporters of agricultural 

products are well aware that resolving one NTM may only make others more prominent.4

Indian NTMs identified as hindering U.S. agricultural exports include quality standards 

on certain processed foods, fumigation requirements for pulses, and government 

monitoring of import volumes of fruits and nuts, cotton, and alcoholic beverages. Indian 

NTMs reported to effectively block U.S. agricultural exports include unattainable 

standards for purity in wheat exports; non–science-based health standards for poultry, 

swine, and dairy exports; and effective bans on most U.S. products containing genetically 

modified organisms (GMOs). More broadly, all U.S. exports are affected by certain types 

of systemic and nontransparent Indian NTMs, such as inefficient regulatory notice and 

comment procedures, corruption at the ports of entry, and burdensome or irregular 

customs procedures. 

Identifying trade conditions that are covered by rules or guidelines in World Trade 

Organization (WTO) agreements as NTMs can be difficult, and negotiating to lower or 

remove the measures can be time consuming.5

 Certain NTMs facing U.S. agricultural 

 1

 Mattson, Koo, and Taylor, “Non-Tariff Trade Barriers in Agriculture,” March 2004, 1. The World 

Trade Organization (WTO), the World Bank, and the United Nations Conference on Trade and Development 

(UNCTAD) hosted a recent trade conference during which NTMs were defined using a fairly common 

construction: “government measures other than ordinary tariffs that can potentially have an economic effect 

on international trade in goods, changing quantities traded, or prices or both.” WTO Secretariat, “Data Day at 

the WTO: Trade and Market Access Data for Policy Makers,” May 18–19, 2009, 25. See also Nicita, “Non 

Tariff Measures,” May 18, 2009. The conference definition distinguished nontariff barriers as NTMs having 

a “protectionist intent.” As the Indian government and U.S. exporters of agricultural products to India differ 

on the intent or purpose of Indian NTMs, this chapter will focus on NTMs identified as already having had an 

economic effect on existing or potential U.S. agricultural exports to India. 2

 For example, in discussing U.S. exports of processed foods, one industry group states that although 

Indian tariffs have been reduced and Indian barriers to investment have decreased, regulatory barriers that 

effectively bar U.S. exports have simultaneously increased. Industry representative, telephone interview with 

Commission staff, May 8, 2009. 3

 A number of the Indian NTMs examined here affect all imports, although sometimes to varying degrees. 

This chapter will focus on the effect of Indian NTMs specifically on U.S. agricultural exports. 4

 For example, imports of U.S. processed agricultural goods containing genetically modified organisms 

(GMOs) would be hindered by Indian labeling regulations that differ from internationally accepted norms. 

Such goods are already effectively banned from the Indian market, however, by rules on the importation of 

products containing GMOs, thus rendering labeling regulations presently irrelevant as an NTM. 5

 Kulkarni, “Non-Tariff Barriers and NAMA Negotiations,” September 2005, 1–4; Kumar, Mukherjee, 

and Simi, “Negotiations on Nontariff Barriers Under NAMA,” 2007. 
6-2

exports to India have existed for some time, but the elimination or easing of NTMs to 

promote smoother trade flows has occurred only for a few select products. A summary of 

the NTMs facing U.S. agricultural exports to India is presented in table 6.1. 

TABLE 6.1 India: Nontariff measures facing certain U.S. agricultural exports, 2009 

Measure Application Products 

Sanitary/phytosanitary measures 

 Health standards 

 Contamination standards 

 Rules for genetically modified 

 organisms 

 

 Fumigation requirements 

Exceed internationally accepted standards 

Inconsistent with international practices 

Effectively ban imports because of 

burdensome approval process 

Require destructive or unavailable 

treatment processes 

Poultry, swine, dairy 

Wheat, barley 

Corn, certain processed foods 

Pulses, certain fruits 

Quality standards Exceed internationally accepted standards Certain processed foods, 

hides and skins, bovine 

semen 

Labeling and packaging rules Preclude agricultural product distribution 

without mandated disclosures 

Processed foods 

Bans, monitoring, and licensing 

 requirements 

Place restrictions on free movement of 

imports 

Beef, poultry, edible oils, 

grains, nuts, corn 

State trading enterprises Restrict imports to certain statesanctioned entities Food grains 

Customs procedures Create uncertainty regarding paperwork 

and valuation 

All 

Notice and comment procedures Hinder information dissemination about 

rules affecting imports 

All 

Corruption Raises costs through payment of bribes All 

Source: Compiled by Commission staff. 

Following identification of the NTMs, Commission staff conducted economic modeling 

simulations to estimate possible increases in certain U.S. agricultural exports to India if 

the NTMs specifically affecting those products were removed. Using 2007 data, the 

estimated increase in U.S. agricultural exports would be $187–391 million, the majority 

of which would be from exports of wheat. 

Sanitary and Phytosanitary Issues 

Use of sanitary and phytosanitary (SPS) restrictions to manage the flow of agricultural 

imports, including those from the United States, has been a consistent tool of the Indian 

government since the general import licensing system was eliminated in 2001. Indian 

SPS measures have substantive and implementation shortcomings stemming from several 

factors: (1) the nontransparent process for issuing SPS standards; (2) a lack of expertise 

on the part of the Indian government bureaucracy issuing the standards, which can 

produce unintended consequences such as overly broad restrictions or unclear 

benchmarks; and (3) unequal enforcement of Indian SPS standards on domestic and 
6-3

foreign sources.6 For example, SPS measures become noticeably less restrictive when 

Indian policymakers determine that market shortages require imports.7

 Because of these 

shortcomings, Indian SPS measures create difficulties for U.S. exporters in building 

consistent and large-scale business relationships with Indian customers.8

The WTO agreements, including GATT 1994, recognize the right of WTO member 

countries to maintain animal health and food safety measures to protect their animal and 

human populations. The WTO Agreement on the Application of Sanitary and 

Phytosanitary Measures (SPS agreement) establishes a framework to ensure that these 

measures are not used as a means to protect a domestic industry from import competition. 

Article 3 of that agreement allows a member to set standards other than the international 

standards, guidelines, or recommendations only when there is scientific justification for 

doing so, or if scientific evaluation of the international standards, guidelines, or 

recommendations reveals that they do not afford the level of safety the member 

determines to be appropriate.9

International Health Standards 

Indian import standards regarding organic contaminants often either exceed widely 

accepted international norms without providing a recognized scientific justification or 

exceed Indian standards for the corresponding domestic product. India continues to ban 

imports of U.S. poultry and swine products because of the presence of low-pathogenic 

avian influenza (AI) in the United States. These imports are approved for entry into 

markets where low-pathogenic AI is not present, such as India, under internationally 

accepted health standards in the World Organization for Animal Health (OIE).10 Despite 

numerous requests for a scientific justification for the AI bans, India has not provided an 

explanation that the United States, Canada, and the European Commission accept as 

compatible with OIE guidelines.11 Also, India’s standards for dairy imports with regard to 

hormones and certain bacteria are more stringent than its domestic dairy standards 

(box 6.1).

 6 Government official, interview by Commission staff, New Delhi, India, May 4, 2009; government 

official, interview by Commission staff, New Delhi, India, May 26, 2009; and industry representative, 

interview by Commission staff, Mumbai, India, June 1, 2009. 7

 Government official, interview by Commission staff, New Delhi, India, June 2, 2009; industry 

representative, interview by Commission staff, New Delhi, India, June 4, 2009; and industry representative, 

interview by Commission staff, Gurgaon, India, June 5, 2009. 8

 Government official, interview by Commission staff, New Delhi, India, June 2, 2009; industry 

representative, interview by Commission staff, New Delhi, India, June 4, 2009; and industry representative, 

interview by Commission staff, Gurgaon, India, June 5, 2009. 9 Agreement on the Application of Sanitary and Phytosanitary Measures, art. 3, para. 3. The SPS 

agreement explicitly recognizes three relevant international organizations that develop and review accepted 

standards, guidelines, and recommendations: the OIE, which focuses on animal health (the organization 

changed its name to the World Organization for Animal Health in 2003, but is still widely known by its 

former French acronym, OIE); the Codex Alimentarius (Codex) Commission, which focuses on food safety; 

and the International Plant Protection Commission. Agreement on the Application of Sanitary and 

Phytosanitary Measures, art. 3, para. 4. The Codex Commission was created in 1963 by the Food and 

Agricultural Organization of the United Nations (FAO) and the World Health Organization (WHO) to 

develop international food standards, guidelines, and codes of practice. 10 USTR, 2009 National Trade Estimate Report on Foreign Trade Barriers, 2009, 239; WTO, “Trade 

Policy Review: Report of the Secretariat: India,” July 24, 2007, 47. 11 USTR, 2009 National Trade Estimate Report on Foreign Trade Barriers, 2009, 239. 
6-4

BOX 6.1 Milk and Milk Products 

New requirements for India’s sanitary certificate regarding certain bacteria and hormones: In November 

2003, the Indian government revised its import permit requirements for milk and milk products. The government 

required new attestation statementsa

 on India’s sanitary certificate, which included a certification that the milkproducing animals had not been treated with bovine growth hormones and bovine somatotropin hormones (BST) 

or been subjected to estrogenic treatments. In addition, the sanitary certificate must include an attestation 

statement that the milk and milk products were free from organisms causing tuberculosis, brucellosis, listeriosis, 

paratuberculosis, Q fever, and any toxic substances.b

 The U.S government does not provide such attestation 

statements for its dairy exports.c

 Moreover, these standards are higher than the standards typically enforced for 

milk and milk products produced in India.d 

During 2004–05, U.S.-Indian consultations were conducted without progress. In October 2005, the U.S. Food and 

Drug Administration (FDA) submitted a revised dairy sanitary certificate to the Indian Ministry of Agriculture with 

new language for their consideration and possible adoption. No answer was received. In May 2006, additional 

bilateral consultations yielded only a request from the Indian government for more information on U.S. regulations 

and inspection programs. In October 2006, the U.S. government provided the Indian government with a sanitary 

dairy certificate that certified various U.S. practices and government regulations pertaining to the new Indian 

requirements. At a meeting in December 2006, the Indian government rejected the proposed certificate.e 

In early February 2009, the U.S. Department of Agriculture (USDA) Foreign Agriculture Service (FAS) proposed 

the use of a new dairy export certificate modeled after a template certificate approved by the Codex Commission 

in July 2008.f

 In late July 2009, the Indian government responded to the alternative certificate proposed by the 

U.S. government, stating that India’s current certificate is already in line with the Codex Committee standard on 

Model Export Certificate for Milk and Milk Products. The Indian government also stated that although the United 

States has maintained that the use of BST by U.S. dairy producers does not pose a public health risk, the 

research on which it is based was generated by the manufacturer of BST. The Indian government is not certain 

whether the results of that research are unbiased and complete. Furthermore, it contends that using BST in 

animals for longer periods is harmful to animal health. Indian government officials also stated that countries such 

as Canada, the EU, Japan, and New Zealand have imposed a ban on BST, and therefore, a requirement in the 

Indian certificate banning the use of BST in dairy products is justified. U.S. government officials note that although 

these countries ban the use of BST by their own producers for various reasons, all of them allow imports of milk 

from animals treated with BST.

New requirements for India’s sanitary certificate regarding chemical and heavy metal residue limits: In 

December 2006, during negotiations over the attestation statements discussed above, the Indian government put 

forward new trade requirements regarding residue levels for pesticides, veterinary drugs, heavy metals, and 

mycotoxins in imported U.S. dairy products. Indian officials asserted that because U.S. action levels were above 

the limits prescribed by Codex Committee levels for these products, they were in violation of the Indian import 

regulations and would be banned.g The U.S. government and representatives of the U.S. dairy indusry responded 

that (1) India’s own domestic maximum residue levels for several of those pesticides were higher than the Codex 

Committee levels they were seeking to impose on imports of milk and milk products; (2) the Indian government is 

not regularly testing Indian dairy products for these residues but is seeking to impose blanket restrictions on 

imported products, which the U.S. government notes is a violation of national treatment provisions in the WTO; 

and (3) milk and milk products that U.S. exporters ship globally meet Indian and Codex Committee residue testing 

______________ 

a

 Attestation requirements are government guarantees that claims made on a sanitary certificate are truthful. b Industry representative, e-mail message to Commission staff, March 12, 2009. c The USDA does not attest (certify) that U.S. agricultural products meet non-U.S. standards (even Codex 

Committee standards), only that they meet the appropriate health and safety standards for human consumption in 

the United States, as required under U.S. law. Government official, interview by Commission staff, Washington, 

DC, March 5, 2009. d Industry representative, e-mail message to Commission staff, April 17, 2009. e Industry representative, e-mail message to Commission staff, March 12, 2009. f U.S. and Indian delegates to the Codex Commission actively participated in the Codex Committee on Milk 

and Milk Products to create the template certificate. Government official, interview by Commission staff, 

Washington, DC, March 5, 2009. g

 The term “action level” refers to the levels recommended by the U.S. Environmental Protection Agency to 

trigger enforcement actions by the FDA and USDA when pesticide residues occur in food or feed commodities for 

reasons other than the direct application of the pesticide. Action levels are set for inadvertent residues resulting 

from previous legal use or accidental contamination. 
6-5

Contamination Standards 

India enforces phytosanitary standards on some agricultural imports that exceed 

commonly accepted international standards for those products. When pressed, the Indian 

government frequently does not offer a scientifically based and widely accepted 

justification for the heightened standards. For example, the United States has exported 

wheat to India on very few occasions over the past six years because India has enacted a 

strict tolerance limit for the presence of weed seed in wheat shipments.12 U.S. producers 

assert that they cannot economically meet this limit and have unsuccessfully engaged the 

Indian government in attempts to prove that wheat imports meeting the U.S. tolerance 

limits would pose no threat to Indian agriculture (box 6.2). 

The Indian government also rejects U.S. barley, corn (maize), and wheat exports because 

they do not meet Indian requirements that the shipments be free from ergot (a fungus 

contaminant), even though exports of similar quality are accepted in other countries 

around the world. The current Codex Alimentarius Commission standard for ergot 

contamination in shipments of barley, corn, and wheat is 0.05 percent, a standard that is 

accepted by the United States. Prior to January 2008, the Indian standard was 

0.01 percent. After that time, India’s Ministry of Agriculture began to require that all U.S. 

grain shipments have “freedom” from ergot contamination. The U.S. Department of 

Agriculture (USDA) states that they are unable to certify U.S. grain shipments to such a 

standard because it is unreasonable. Furthermore, the USDA states that ergot 

contamination is a quality issue rather than a quarantine issue, as India contends, because 

 12 WTO, “Trade Policy Review: Report of the Secretariat: India,” July 24, 2007, 46; industry 

representative, interview by Commission staff, New Delhi, India, June 4, 2009. 

BOX 6.1 Milk and Milk Products–Continued 

levels. The U.S. government noted that the pesticides in question have been banned in the United States since 

the 1970s and that U.S. action levels are outdated and much higher than residue levels actually contained in U.S. 

dairy exports.h

In response to the national treatment issue, the Indian government responded that although it is holding imports 

to a higher standard than domestic product in some cases, it is attempting to move toward the higher standards 

for all products. It did not identify a timetable for imposing these higher standards on domestic products. U.S. 

government officials raised this issue with their Indian counterparts at bilateral consultations during the WTO SPS 

committee meeting in February 2007. Later that spring, USDA officials provided Indian officials with data 

covering several years for pesticide residue testing on milk produced in the United States. The data demonstrated 

the safety of U.S. products. During 2007 and 2008, U.S. officials repeatedly brought the issue to the attention of 

Indian officials, seeking permanent resolution.i

 In late July 2009, the Indian government responded to U.S. 

concerns, stating that India’s certification requirement on chemical contaminant residues is in accordance with 

Codex Committee standards, which are based on scientific risk analysis. The U.S. government believes the 

Indian government interpretation of Codex Committee certification is overly restrictive, and U.S. officials indicate 

that they will discuss this topic with Indian officials in the future.j

 

______________ 

h Industry representative, e-mail message to Commission staff, March 12, 2009. i Ibid. 

j

 Government official, telephone interview by Commission staff, August 17, 2009; government official, e-mail 

messages to Commission staff, August 13 and 17, 2009. 
6-6

BOX 6.2 Wheat 

India has imported several million tons of wheat in recent years because of weather-related production shortfalls, 

despite the fact that normally it is able to achieve its overall food security goal of having the capability to produce 

enough wheat to satisfy its domestic requirements. Even with the market demand for U.S. wheat, however, no 

U.S. shipments have been able to overcome the nontariff measures that have effectively foreclosed one of the 

world’s largest wheat markets to U.S. producers. 

Although Indian wheat production fluctuates annually because of its variable water supply and government 

support programs that have created cyclical, distorting production incentives, India has largely satisfied its 

domestic demand in recent years. It has also been a major exporter since 2000, although its exports declined 

sharply in 2006–08 because of higher global prices that led to stronger government efforts to maintain domestic 

supplies. To retain stocks for distribution to the poor, as well as to adjust for storage waste, India imported wheat 

each year during 2006–08, primarily from Russia, Argentina, and Canada. Indian food processors that expressed 

an interest in importing high-quality U.S. wheata

 indicated that they were prevented from doing so by Indian tariffs 

and certain long-standing phytosanitary issues.b

For Indian private sector importers of wheat, the applied tariff rate is 50 percent; but for Indian state trading 

enterprises, through which most wheat is imported, the applied rate is zero. The private sector applied rate is the 

primary tariff tool used by the Indian government to manage domestic stocks; that rate dropped from 50 percent 

to 5 percent to zero within three months in 2006 to encourage private sector imports. 

Although tariffs on wheat vary with market conditions, the most vexing problem facing U.S. wheat producers is the 

Indian phytosanitary standard for the presence of weed seed in wheat shipments, which has effectively banned 

sales of U.S. wheat in India. The Indian government mandates that levels of weed seed, a contaminant reportedly 

present in practically all wheat shipments worldwide, not exceed a very low threshold (1 seed per 2 kilograms, or 

effectively zero) and that the seller’s government provide certification to that effect. The U.S. government 

maintains that because the wheat is imported for consumption, not planting, the plant health risk posed by weed 

seed is low and the standard is unreasonable.c

As a matter of course, U.S. wheat producers “clean” their wheat to remove a number of contaminants and may 

unknowingly remove enough weed seed during this process to satisfy Indian requirements in any single shipment, 

but they cannot reliably and consistently meet the Indian standard as a practical matter. The Animal and Plant 

Health Inspection Service (APHIS) of the U.S. Department of Agriculture only provides certification that a 

contaminant is not present when the pest does not exist in the United States or a treatment precludes the 

possibility of a pest, because sampling and testing margins of error will always be greater than zero. Neither 

scenario applies to all of the weed seeds for which India has quarantine requirements.d Therefore, APHIS cannot 

certify that U.S. wheat shipments meet the very low Indian threshold, and consequently, U.S. wheat shipments to 

India are almost nonexistent. 

______________ 

a

 The high protein content, relative to the majority of Indian wheat production, is one of the most attractive 

features of U.S. wheat. Industry representative, interview by Commission staff, New Delhi, India, May 8, 2009; 

industry representative, interview by Commission staff, Mumbai, India, May 11, 2009. b

 Industry representative, interview by Commission staff, New Delhi, India, May 6, 2009; industry 

representative, interview by Commission staff, New Delhi, India, May 8, 2009; and industry representative, 

interview by Commission staff, New Delhi, India, June 2, 2009. c

 All other purchasers of U.S. wheat reportedly also recognize the risk as low. Government official, e-mail 

message to Commission staff, September 22, 2009. d

 Ibid. 
6-7

BOX 6.2 Wheat—Continued 

Yet, India imports wheat from other sources that likely also have weed seed in their shipments but that certify 

these shipments as meeting Indian contaminant thresholds. Because India reportedly cannot test for the 

presence of weed seed in shipments after arrival at the port and has only a limited ability to test offsite, 

acceptance of these wheat imports is dependent on the certifications by the origin country.e

 Questions are 

routinely raised by U.S. private sector and government officials regarding the ability of India’s foreign wheat 

suppliers, especially Russia and Ukraine, to provide this certification. Furthermore, although the U.S. government 

has made concerted attempts to engage the Indian government on the continued effectiveness of the weed seed 

standard, most recently in 2007, no progress has been made.f

The Indian government eases weed seed tolerances and other phytosanitary standards when it decides more 

wheat supplies are necessary for the Indian market.g

 For example, another Indian standard for wheat imports 

involves a tolerance for ergot (a fungus) that is nominally zero, meaning completely free from ergot. India relaxed 

those standards for a short period in 2007 when policymakers determined that the Indian market was 

experiencing a wheat shortage.h

______________ 

e

 Tracy, written testimony to the USITC, April 22, 2009. 

f

 Ibid. 

g

 Government official, interview by Commission staff, New Delhi, India, June 2, 2009. h

 Industry representative, interview by Commission staff, New Delhi, India, June 4, 2009; industry 

representative, interview by Commission staff, Gurgaon, India, June 5, 2009. 

the disease already exists in India. 13 Similarly, India recently issued proposals for 

maximum acceptable residue levels in carbonated beverages that U.S. producers state 

exceed international norms and are not justified by scientific standards.14

Rules for Genetically Modified Organisms 

Other than a standing exception for soybean oil, Indian rules prohibit importation of any 

product containing GMOs (e.g., U.S. corn or certain processed foods) without prior 

Indian regulatory approval (box 6.3).15 The approval must be obtained from the Genetic 

Engineering Approval Committee (GEAC), an Indian administrative authority that 

industry sources regard as underresourced and not fully capable of exercising its 

oversight functions, such as testing and trials of new products.16 The GEAC is at the 

center of a GMO approval process that can involve four Indian ministries and result in 

serial delays, even for products containing GMOs undergoing testing for cultivation in 

India.17 As a result, import bans on U.S. agricultural products containing GMOs are 

 13 Government officials, interview by Commission staff, Washington, DC, March 5, 2009. 14 Rochette, International Council of Grocery Manufacturer Associations (ICGMA), to Dr. Chattapadhya, 

Ministry of Health, Government of India, September 30, 2008. The final version of these regulations 

containing tolerance limits were issued on June 17, 2009; became effective that same day; and had not been 

notified to the WTO as of a week later. Dhankhar, “GOI Amends PFA Rules Relating to Carbonated Water,” 

June 30, 2009. 15 Industry representative, interview by Commission staff, New Delhi, India, June 4, 2009; Singh, India: 

Agricultural Biotechnology, July 24, 2009; Hindu Business Line, “Bt Brinjal: No Outstanding Bio-safety 

Issues,” July 17, 2009; and Das, “ICAR Body to Study Socio Economic Impact of BT Brinjal,” 

August 13, 2009. 16 Industry representative, interview by Commission staff, Mumbai, India, May 11, 2009; industry 

representative, interview by Commission staff, Mumbai, India, May 12, 2009. 17 Singh, India: Agricultural Biotechnology, 2009 July 24, 2009; Hindu Business Line, “Bt Brinjal: No 

Outstanding Bio-safety Issues,” July 17, 2009; and Das, “ICAR Body to Study Socio Economic Impact of BT 

Brinjal,” August 13, 2009. 
6-8

BOX 6.3 Corn 

The Indian government’s focus on self-sufficiency in corn production has left few market opportunities open for U.S. 

corn exports, even when U.S. and Indian corn prices are competitive.a

 Those opportunities that do exist for foreign 

corn in the Indian market are constrained primarily by nontariff uncertainties that hinder U.S. corn producers in 

particular. 

On a relative and an absolute basis, Indian import demand for corn has been modest since 1999, although import 

levels have been climbing since reaching their nadir in 2003. India essentially produces all the corn it consumes and 

had a small amount of exports (less than $1 million) in 2008. Approximately two-thirds of Indian corn production is 

consumed as animal (primarily poultry) feed. Increased domestic corn production has kept pace with increased 

domestic poultry production, and as a result, demand for corn imports has not increased.b India’s corn imports were 

valued at only $2.4 million in 2007 and $3.7 million in 2008 despite increased corn prices worldwide in 2007 and 

2008. Approximately 80–90 percent of this amount originated in Argentina, and the remainder came from the United 

States.c

U.S. and Argentine corn exports face the same tariff-rate quota (TRQ) rates of 15 percent in-quota and 50 percent 

over-quota, but when India lowers its tariff rates to encourage imports, U.S. corn producers cannot take advantage of 

the change principally because of restrictions on importation of agricultural products containing genetically modified 

organisms (GMOs). For example, in February 2007, the Indian government abolished its corn TRQ and lowered the 

duty to free for 11 months, but imports of U.S. corn did not rise significantly.d

The most important Indian trade measure affecting U.S. corn exports is the restriction on agricultural imports 

containing GMOs. India has not approved for import and will not knowingly import corn containing GMOs. Growers in 

Argentina and the United States have cultivated one variety of GMO corn, Bt corn, at least since the late 1990s.e

India requires GMO-free certifications for its corn imports, which the Argentine government provides but the U.S. 

government does not.f U.S. growers can supply non-GMO corn, but growing and channeling the corn separately adds 

significantly to the cost, a process that should prevent any supplier of truly GMO-free corn from being price 

competitive in the Indian market.g Furthermore, the complexity of India’s GMO approval process, the lack of 

specificity and transparency in Indian GMO regulations and procedures, and overlapping Indian agency jurisdictions 

for GMO import administration all serve to block possible increases in U.S. corn exports.h

Certain specific Indian consumption factors indicate an increased demand for corn in the future, but U.S. corn export 

opportunities may remain limited. For example, a U.S. quick-service restaurant chain that features corn products is 

intending to expand its presence in India and will require increased corn imports because the Indian supply will likely 

be insufficient. However, these imports are projected to come from the EU because U.S. corn exports contain 

varieties with unapproved GMOs.i

 Similarly, although consumption of processed food products containing corn is 

expected to rise over the next few years, Indians may hesitate to import U.S. corn to use in making these products, 

even if import approval is granted, because standard U.S. yellow corn is not as orange in color as Indian corn. 

According to one U.S. agricultural products company operating in India, use of U.S. corn would change the 

appearance of Indian processed food products to a great degree.j

______________ 

a

 Industry representative, interview by Commission staff, New Delhi, India, June 4, 2009. b

 Industry representative, interview by Commission staff, Mumbai, India, May 28, 2009. c

 Indian industry representatives stated that U.S. corn has a higher moisture content than domestic and Argentine 

corn, which may make it less suitable for Indian consumption. Industry representative, interview by Commission staff, 

Mumbai, India, May 28, 2009, and industry representative, interview by Commission staff, Mumbai, India, May 29, 

2009. A U.S. industry source indicated that the moisture level issue can be addressed by the U.S. corn exporter. 

Industry representative, e-mail message to Commission staff, July 23, 2009. d

 Indian imports of U.S. corn were approximately $376,000 in 2007 and $364,000 in 2008. GTIS, World Trade 

Atlas Database (accessed November 3, 2009). Because of the low value, industry sources declined to speculate on 

the composition of these corn shipments. Industry representatives, telephone interview by Commission staff, 

September 9, 2009. e

 Robertson, “Biotechnology: Information on Prices of Genetically Modified Seeds in the United States and 

Argentina,” June 29, 2000, 2. f

 Industry representative, interview by Commission staff, New Delhi, India, May 8, 2009. See box 6.2. g

 Industry representatives, telephone interview by Commission staff, September 9, 2009. h

 NCGA, written submission to the USITC, June 19, 2009. i

 Industry representative, interview by Commission staff, New Delhi, India, May 8, 2009. j

 Industry representative, interview by Commission staff, Mumbai, India, May 11, 2009. 
6-9

perpetuated continuously. The import ban stands in contrast to the range of responses by 

the Indian market regarding the sale of products containing GMOs, from some support at 

the retail level to some resistance within the Indian domestic supply chain and from 

nongovernmental organizations.18

Fumigation Requirements 

For certain agricultural products, India requires designated fumigation treatments that can 

be administratively difficult or prohibited for U.S. producers to implement, and it has 

resisted allowing other scientifically justified treatments to be used. For example, the 

Indian government has allowed U.S. pulses to be imported under a short-term exception 

to Indian requirements for fumigation treatment of U.S. shipments with methyl bromide 

prior to export.19 Methyl bromide treatment is not available in the United States to U.S. 

pulses producers, who have proposed that the treatment be completed following arrival in 

India, which is occurring now, or that the treatment requirement be ended because it is 

unnecessary.20 The exception is renewed at six-month intervals, creating uncertainty for 

U.S. exporters. 21 Similarly, U.S. shipments of sweet cherries to India are not 

commercially viable because methyl bromide fumigation would reduce quality and shelf 

life. The U.S. horticultural industry states generally that a nonfumigation systems 

approach would obviate the need for fumigation.22

Quality Standards 

Demands by the Indian government for the highest possible quality of certain agricultural 

imports effectively bar their importation into India, despite the acceptance of lesserquality goods throughout the global trading system. For example, in the recent past, the 

Indian government issued import standards for hides and skins that producers could not 

meet because of the government’s requirement for perfectly unblemished imports; the 

standards were subsequently relaxed in 2009, and there has been a report that trade has 

improved.23 The Indian government has placed quality requirements on imports of bovine 

semen that would exclude most of the product that is traded worldwide.24

 18 Industry representative, interview by Commission staff, Mumbai, India, May 11, 2009; industry 

representative, interview by Commission staff, New Delhi, India, May 26, 2009; and industry representative, 

interview by Commission staff, New Delhi, India, June 4, 2009. 19 Industry representative, interview by Commission staff, New Delhi, India, June 4, 2009; USTR, 2009 

National Trade Estimate Report on Foreign Trade Barriers, 2009, 239; and Aradhey, India: Grain and Feed; 

Pulse Situation and Outlook, December 14, 2007, 7. 20 Government official, interview by Commission staff, New Delhi, India, May 26, 2009; industry 

representative, interview by Commission staff, Mumbai, India, May 28, 2009. Fumigation with methyl 

bromide continues to occur legally for very select agricultural purposes in the United States because of ozone 

depletion concerns. See U.S. Environmental Protection Agency, “The Phaseout of Methyl Bromide,” 

August 3, 2009. 21 Govindan, India: Grain and Feed, February 20, 2008, 20; Govindan, India: Grain and Feed, 

February 20, 2009, 21. 22 NHC, written submission to the USITC, June 24, 2009. 23 Government official, interview by Commission staff, New Delhi, India, May 26, 2009; industry 

representative, e-mail message to Commission staff, September 16, 2009. 24 Dhankhar, India: Livestock and Products, September 14, 2009, 8; USTR, 2009 National Trade 

Estimate Report on Foreign Trade Barriers, 2009, 239. 
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Labeling and Packaging Rules 

The right of countries to implement their own labeling and packaging requirements for 

the health and safety of their people is well established in the WTO Agreement on 

Technical Barriers to Trade (TBT).25 Governments use labeling requirements to protect 

consumers from deceptively labeled products as well as to protect producers against 

unfair competition.26 Diverse and confusing labeling rules among markets served by the 

same globally traded agricultural products can hinder free trade. 27 Specific labeling 

requirements in a given market can restrict trade by differing from generally accepted 

international labeling norms, creating a burdensome label acquisition and approval 

process, or constructing a perception that one product is inferior to a competing product.28 

India amended its Prevention of Food Adulteration Rules (PFA Rules) in March 2009 to 

institute updated labeling rules for imported food products, but it is unclear what effect 

the new rules, once implemented, will have on foreign exports to the Indian market. 

Similar to U.S. rules, Indian labeling rules require that the packaging list the ingredients 

used, in descending order of their composition by weight or volume; the month and year 

of manufacture or packaging; the expiration date; and the “best before” consumption date, 

among other things.29 Requirements for certain other information, such as recipes and 

other trade or proprietary information, were not included in the updated rules, although 

U.S. producers and Indian processed food companies have had to confront these 

possibilities in the past as part of a frequently nontransparent Indian regulatory process 

that is still moving toward internationally accepted standards.30

The administration of Indian labeling laws can also present challenges for foreign food 

processing companies, who find themselves managing a variety of labeling mandates. 

Issuance and enforcement of labeling requirements under the PFA Rules are the 

responsibility of the central government, but the labels themselves on occasion may have 

to be written in the language of the locality where the product is ultimately sold. India has 

16 official languages, and food processing companies often will not know which pallet of 

food products will be transported to any specific state. Similarly, the packaging must 

specify the maximum retail price of the product, including any taxes. Some applicable 

taxes are levied at the state level, raising the same state-by-state shipment problem.31

Certain other requirements, such as individual container labels for bulk products and 

 25 WTO Agreement on Technical Barriers to Trade, 1995, preamble (“Desiring however to ensure that 

technical regulations and standards, including packaging, marking and labeling requirements, ... do not 

create unnecessary obstacles to international trade; Recognizing that no country should be prevented from 

taking measures necessary ... for the protection of human, animal or plant life or health, of the environment, 

or for the prevention of deceptive practices, at the levels it considers appropriate, subject to the requirement 

that they are not applied in a manner which would constitute a means of arbitrary or unjustifiable 

discrimination between countries where the same conditions prevail or a disguised restriction on international 

trade...”). 26 Organisation for Economic Co-operation and Development (OECD), “Analysis of Nontariff 

Measures,” November 13, 2003, 6 and 10. 27 Office of the Spokesman, U.S. Department of State, “U.S. Concerned That EU’s Biotech Labeling 

Could Be Burdensome,” July 4, 2003; “Labeling,” American Apparel and Footwear Association, n.d. 

(accessed August 24, 2009); and Mattson, Won, and Taylor, “Nontariff Trade Barriers in Agriculture,” 

March 2004, 9. 28 OECD, “Analysis of Nontariff Measures,” November 13, 2003, 13. 29 WTO, “Trade Policy Review: Report of the Secretariat: India,” July 24, 2007, 46. Infant milk 

substitutes and infant foods, bottled mineral water, and milk products have other labeling requirements. 30 Industry representative, interview by Commission staff, Washington, DC, April 8, 2009. 31 Government representative, interview by Commission staff, New Delhi, India, May 26, 2009. 
6-11

notices that must be integrated with the packaging as opposed to affixed using a sticker 

label, add to processing costs for producers. 32 The scope of the labeling rules has 

unintended effects on certain agricultural products, such as alcoholic beverages, that 

differ from everyday packaged foods. For example, the U.S. distilled spirits industry has 

complained about nutritional, ingredient, and expiration labeling requirements that it 

views as inappropriate for spirits products.33 

Processed foods that contain genetically modified (GM) ingredients may face unique 

issues as a result of Indian labeling laws. Proposals made in 2006 required food packages 

containing GM ingredients to state that fact on their labels, with a declaration that the 

product has been cleared for sale in the exporting country.34 A U.S. food organization 

noted that the proposals contained no explanation for such individual treatment of foods 

containing GM ingredients and that they might penalize U.S. products because the U.S. 

government does not “clear” food products for sale and does not establish any standards 

or analytical methods that food processing companies could reference in an attempt to 

meet the requirements.35 Implementation of these labeling proposals has been deferred 

indefinitely.36 Because the GEAC has not approved imports of any agricultural products 

containing GMOs, except for soybean oil, almost all U.S. agricultural products 

containing GMOs are prohibited in India in any case. 

Bans, Monitoring, and Licensing Requirements 

India eliminated import licensing during the early 1990s for all but roughly 3,000 

agricultural products and consumer goods, placing these items on a “negative list.”37 For 

the various categories of agricultural goods on the negative list, importation can be 

prohibited, monitored, or licensed in some form.38

Bans 

The Indian Government, under the authority of the 1962 Customs Act and following 

requisite notice in the Gazette of India, may prohibit the importation of any agricultural 

good for reasons such as a potential market surplus, balance of payment issues, or health 

standards. India currently bans imports of beef (because of religious sensitivities) and 

related products; live pigs and pig meat products; tallow, fats, and oils of animal origin; 

and poultry from countries reporting outbreaks of AI, citing health reasons.39 

Monitoring 

Once India removed its final quantitative restrictions on agricultural imports in 2002, it 

established a monitoring mechanism (a committee chaired by the Secretary of the 

 32 Industry representative, interview by Commission staff, New Delhi, India, May 26, 2009. 33 DISCUS, written submission to the USITC, June 2, 2009. 34 WTO, “Trade Policy Review: Report of the Secretariat: India,” July 24, 2007, 58. 35 AgBiotech Planning Committee to Assistant Director General (PFA), Directorate General of Health 

Services, Government of India, n.d. 36 Government official, e-mail message to Commission staff, September 22, 2009. 37 Hoque, “India Relaxes Restraints on Agricultural Imports,” November 2000, 14 and 16. 38 Importation only through state trading enterprises (STEs) is another type of negative list restriction and 

is addressed elsewhere in this chapter. 39 WTO, “Trade Policy Review: Report of the Secretariat: India,” July 24, 2007, 46–47; OECD, 

Agricultural Policies in Emerging Economies, 2009, 109. 
6-12

Department of Commerce) for some imports it considered to be “sensitive.” These 

products include edible oil, cotton, milk and milk products, grains, fruit and vegetables, 

nuts, spices, tea, coffee, and alcoholic beverages. 40 Should the Indian government 

determine that imports of these sensitive products are disrupting the domestic market, the 

government may adjust the applied tariff rates, sometimes as frequently as several times 

annually in the case of grains, to maintain a sufficient domestic supply of or a stable 

market price for these products.41 The existence of the monitoring process itself creates 

uncertainty for U.S. exporters of agricultural products, who face the prospect of planned 

shipments becoming uncompetitive in terms of price because of Indian restrictions 

announced and implemented within a short time frame.42

Licensing Requirements 

Specific import licensing requirements by the Indian government directly affect certain 

U.S. agricultural exports or would affect them in the absence of other applicable NTMs. 

Starting in 1998, the Indian government began gradually dismantling its general import 

licensing system, which the government had used as a primary method of restricting 

certain agricultural as well as nonagricultural imports through the refusal to issue 

licenses.43 In April 2001, the government abolished the general import licensing system 

itself and replaced it with a collection of other measures for protecting Indian producers, 

including specific import licensing.44

For example, over the last four years India has allowed importation of live animals only 

under license because of sanitary concerns, which according to the USDA has restricted 

or effectively banned the import of live animals.45 Furthermore, the licensing process 

must begin at least 30 days prior to import; spans two government ministries, depending 

on whether the livestock product is freely traded or restricted; and involves 

approximately three levels of administrative review before issuance. Some of these 

administrative bodies meet only twice per month.46 This restriction affects U.S. equine 

(horses and mules) exports to India.47 Similarly, an industry representative indicated that 

no corn is imported within the Indian tariff-rate quota (TRQ), thereby qualifying those 

imports for the lower in-quota duty rate, because the process for obtaining a license to 

 40 WTO, “Trade Policy Review: Report of the Secretariat: India,” July 24, 2007, 46–47; OECD, 

Agricultural Policies in Emerging Economies, 2009, 109. 41 See Govindan, India: Grain and Feed, February 20, 2008; Govindan, India: Grain and Feed; 

Quarterly Lock up Report, May 6, 2008; and Pursell, Gulati, and Gupta, “Distortions to Agricultural 

Incentives in India,” December 2007, 7. See also chapter 5. 42 A source indicates that the Indian government has withdrawn the monitoring list of trade-sensitive 

items from use without a formal announcement. Pursell, Gulati, and Gupta, “Distortions to Agricultural 

Incentives in India,” December 2007, 7. The Indian Department of Commerce, however, publishes details on 

a monthly basis about the sensitive agricultural imports it monitors, including the countries of origin for those 

imports. Food grains and edible oils are frequently highlighted items in the monthly Press Notes. Ministry of 

Commerce and Industry, “Import of Sensitive Items” (accessed September 22, 2009). 43 A general import license allows the importation of goods covered by the license from any applicable 

country. FAO, “Import Policy Instruments,” n.d. (accessed September 17, 2009). 44 Some of the other measures are occasionally sharp increases in tariffs, the use of STEs to control 

agricultural imports, the use of tariff-rate quotas (TRQs), and the issuance of new technical and SPS 

standards. Pursell, Gulati, and Gupta, “Distortions to Agricultural Incentives in India,” December 2007, 7. 45 Shunmugam, India: Livestock and Products, August 30, 2005, 4–5; Singh, India: Livestock and 

Products, August 23, 2006, 4–5; Dhankhar, India: Livestock and Products, October 1, 2007, 10; and 

Dhankhar, India: Livestock and Products, September 2, 2008, 9–10. 46 Dhankhar, India: Livestock and Products, October 1, 2007, 10. 47 USITC, DataWeb (accessed September 18, 2009). 
6-13

import corn under the TRQ is too bureaucratically cumbersome.48 U.S. corn exports in 

any significant volumes are already effectively blocked by Indian restrictions on the 

approval and importation of agricultural products containing GMOs. 

State Trading Enterprises 

State trading enterprises (STEs)—commercial entities created and usually wholly owned 

by the national government or granted special or exclusive economic privileges—play a 

central role in India in managing the supply and price of certain commodity agricultural 

imports for the benefit of the Indian consumer, as they have since the 1950s.49 India 

imports specific bulk grains, such as wheat and corn, in which U.S. producers are highly 

competitive globally, primarily through these limited and preferential STE channels. 

The use of STEs by governments in developing countries is widespread and longstanding. The WTO recognizes their prevalence in economies where agriculture is an 

important trade factor and states that it does not seek to prohibit or discourage the use of 

STEs.50 Yet trade distortions may occur when the Indian STEs, unlike private sector 

traders, do not act as independent commercial actors seeking profit maximization, but 

instead promote government policies favoring domestic production. 51 The Indian 

government facilitates the preeminent role of STEs in agricultural trade, as well as their 

ability to further government objectives, by granting STEs preferential treatment in the 

tariff rates applicable to their imports compared to private sector Indian importers. An 

example is the current 50 percent tariff on private sector wheat imports versus the zero 

percent duty on STE wheat imports.52

The four primary STEs in India for agricultural imports are the State Trading Corporation 

of India Ltd. (STC), established in 1956; the National Agricultural Cooperative 

 48 Industry representative, interview by Commission staff, New Delhi, India, June 4, 2009. 49 WTO, “Technical Information on State Trading Enterprises” (accessed June 11, 2009). For one listing 

of the numerous and varied Indian STEs, see India’s Homepage (accessed June 9, 2009). 50 Article XVII of the GATT 1994 is the principal provision dealing with STEs and their operations. 

Work on this subject in the WTO is undertaken mainly by the Working Party on State Trading Enterprises. 51 See WTO, “Technical Information State Trading Enterprises” (accessed June 11, 2009). The Indian 

government stated in its “Foreign Trade Policy 2004–2009” document that STEs should import “solely in 

accordance with commercial considerations ... in a non discriminatory manner and shall afford enterprises of 

other countries adequate opportunity, in accordance with customary business practices, to compete for 

participation in such purchases or sales.” Government of India, Ministry of Commerce and Industry, 

Department of Commerce, “Foreign Trade Policy 2004–2009,” April 11, 2008, 25. This wording is very 

similar to WTO text on the optimal operation of STEs. 52 STEs also assist Indian government goals with “balancing” Indian imports and exports through the use 

of countertrade, which involves an agreement for one country to sell goods to another in exchange for goods 

(perhaps also involving some cash or services) of an equal value from the second country. The practice is 

most prevalent between countries that have foreign exchange constraints or balance of payments issues, as 

India had in the past. Ministry of Commerce and Industry, “Foreign Trade Policy 2004–2009,” 

April 11, 2008, 82; Hindu Business Line, “Beware the Palm Oil Cartel,” March 12, 2004; and Reuters, “India 

Steps Up Countertrade Deals to Cut Trade Gap,” n.d. (accessed September 17, 2009). 

India has stated there is no countertrade requirement, although private companies are reportedly 

“encouraged to use countertrade” and MMTC promotes its countertrade operations on its Web site. WTO, 

“Trade Policy Review: Report of the Secretariat: India,” July 24, 2007, 62; USTR, 2009 National Trade 

Estimate Report on Foreign Trade Barriers, 2009, 247–48; and “MMTC Inside” (accessed June 17, 2009). 

Some of the most recent uses by India of countertrade involve capital goods, but India has used countertrade 

in agricultural products as recently as 2002–03. Mohanty, “Offsets in Indian Defence Sector,” May 22, 2009; 

FDIMagazine, “Countertrade Still Thrives,” December 8, 2003; Indonesian Commercial Newsletter, 

“Indonesia—India Agrees on Counter Trade,” March 26, 2002; and AsiaPulse News, “India to Use ‘Counter 

Trade’ to Boost Grain Export,” March 25, 2002. 
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Marketing Federation of India Ltd. (NAFED), established in 1958; the Minerals and 

Metals Trading Corporation (MMTC), established in 1963; and PEC Ltd., established in 

1971. They import edible oils, sugar, wheat, fatty acids, pulses, soybean meal, rice, and 

corn.53 

Importation of these bulk commodities through STE channels exclusively is known as 

canalization. The United States and India concluded a quantitative restrictions agreement 

eliminating this import method in December 1999, following a WTO dispute settlement 

ruling.54 The dispute settlement panel recommended that India bring its STE practices 

into accord with the GATT provisions addressing STEs, an adjustment that the Indian 

government continues to implement. 

Indian STEs are forthright about the role they play in trying to stabilize agricultural 

commodity domestic supply and prices and seeking to provide for food security at the 

direction of the Indian government, an activity that can include indemnification with 

government funds.55 In its most recent notification to the WTO on state trading, the 

Indian government confirmed its goals: “a fair return to the farmers as well [as] food 

security i.e. availability of adequate food for all sections of the society at prices 

affordable by them.”56

The effects of STE actions that hinder trade, as outlined above, are compounded by a 

corresponding lack of transparency about STE activities in the market. The WTO 

attempts to gather information on STEs routinely through its requirement that WTO 

member states file notifications every three years on their STE activities.57 India last filed 

its STE notification in 2001. Furthermore, despite a WTO requirement that member states 

furnish statistics on products imported by STEs, such as value, quantity, and the 

breakdown of imports between STEs and private traders, Indian authorities do not collect 

such data.58

 53 OECD, Agricultural Policies in Emerging Economies, 2009, 109. Certain STEs have focused on 

particular agricultural commodities of high interest to the Indian marketplace, and some were merged with 

more general STEs. See “Welcome to The Jute Corporation of India Ltd.—A Govt. of India Enterprise,” 

http://www.jutecorp.com/index.htm (accessed June 9, 2009); “Business India Info: State Trading Corporation 

of India Ltd.,” http://money.newkerala.com/company-profile-id-16610053.00.html (accessed June 9, 2009) 

(information on the Cashew Corporation of India); and “STCL Ltd.,” 

http://www.stclindia.com/html/profile/about.html (accessed June 9, 2009) (information on STCL Ltd., a 

trading company for cardamom and other spices). 54 WTO Appellate Body, “India—Quantitative Restrictions on Imports of Agricultural, Textile and 

Industrial Products,” August 23, 1999. The ruling concluded that canalization, as implemented by India under 

its then-existing balance of payments regime, was no longer justified. USTR, 2002 National Trade Estimate 

Report on Foreign Trade Barriers, 2002, 175; USTR, 2003 National Trade Estimate Report on Foreign 

Trade Barriers, 2003, 168–70. 55 For example, STC states that it “imports ... to cover the domestic shortfalls and hold the price line. 

STC serves the national objective by arranging timely imports at most competitive prices.” “Imports Into 

India” (accessed June 10, 2009). During 2007–08, “[i]n [o]rder to arrest the rising price trend of pulses” in 

the Indian market, NAFED imported pulses “on behalf of” the Indian government, which “agreed to 

reimburse the losses to NAFED to the extent of 15%.” “International Trade of Nafed” (accessed 

June 10, 2009). 56 WTO Working Party on State Trading Enterprises, “State Trading,” October 8, 2001, 7. 57 WTO, “Technical Information State Trading Enterprises” (accessed June 11, 2009). 58 WTO, “Trade Policy Review: Report of the Secretariat: India,” July 24, 2007, 61. 
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Customs Procedures 

India has put into place many of the characteristics of a modern customs clearance 

process, which should enhance speedy and low-cost importation of all products.59 Several 

of the advances that India has implemented, however, have less effect on agricultural 

imports, including those from the United States, entry for which requires additional 

approvals, an out-of-transaction reference valuation, or both. 

For example, the handlers of import documents for agricultural imports must obtain any 

necessary health and sanitary certificates, or import permits for goods under restriction, 

prior to import and must submit them with the customs declaration, adding to the time 

required for import transactions even prior to entry and placing a premium on customs 

operational efficiency.60 Furthermore, one Indian industry representative stated that if the 

agricultural imports require an SPS certificate, the transaction may be delayed while 

parties wait for an SPS officer to arrive and process the necessary paperwork 

personally.61 Delays from inefficiently handled or excessive documentation requirements 

can lead to storage and loss costs for the exporter.62

Except for the launching of the National Import Database in 2002, India’s customs 

valuation procedures have changed little since the September 2001 amendments to the 

1998 Customs Valuation (Determination of Price of Imported Goods) Rules, which at 

first glance accord with international norms. However, as described in chapter 5, those 

rules do not cover valuation for all major Indian agricultural product imports. India uses 

reference prices for edible oils to determine the value of imports and applicable duties.63

Indian customs officials have sometimes rejected the declared value of soybean oil 

imports from the United States, for example, because they believe the price to be lower 

than market prices. The higher reference prices used by Indian customs officials 

effectively increase the amount of duty owed on the transaction. According to Indian 

officials, the reference prices are adjusted to align with international market prices, but 

the edible oil reference prices remained unchanged from late 2006 to mid-2009. The 

uncertainty about what price will be applied to the transaction adds to the risk and cost of 

agricultural shipments to India.64

Notice and Comment Procedures 

A number of countries, including the United States, have persistent concerns about 

India’s irregular and occasionally abbreviated process for notifying its trading partners of 

 59 India introduced electronic processing of import documents in 1995 and processes 85–90 percent of 

total imports electronically, according to its most recent declaration and private sector sources. India also 

implemented a risk management system in 2005 that has greatly reduced the need for inspections of most 

import shipments. Together, these improvements reportedly have reduced the time for customs clearance to 

eight hours. WTO, “Trade Policy Review: Report of the Secretariat: India,” July 24, 2007, 35; WTO Trade 

Policy Review Body, “Trade Policy Review: Report by India,” April 18, 2007, 17–18. 60 WTO, “Trade Policy Review: Report of the Secretariat: India,” July 24, 2007, 34–35. 61 Industry representative, interview by Commission staff, Mumbai, India, May 29, 2009. 62 See Beghin, “Nontariff Barriers,” December 2006, 2. 

63 The 1962 Customs Act authorizes the relevant Indian government bodies to set the reference prices “if 

satisfied that it is necessary or expedient to do so.” Customs Act, 1962, ch. 5, sec. 14.2 (“Levy of, and 

Exemption From, Customs Duties: Valuation of Goods”). 64 WTO, “Trade Policy Review: Report of the Secretariat: India,” July 24, 2007, 103; USTR, 2009 

National Trade Estimate Report on Foreign Trade Barriers, 2009, 238. 
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legal or regulatory changes that affect the import of agricultural goods, for example, 

changes affecting U.S. exports of hides and skins and certain beverages to India. A 

routinized, clearly understandable, and fully participatory process for notice and 

comment65 on regulations affecting international agricultural trade can encourage trade 

by, among other things, removing the risk of unexpected, unexplained, or unexamined 

government action. The process commonly consists of three parts—notice, comment, and 

implementation period—and India’s trading partners have cited areas for improvement by 

India at each step. 

Two methods of notice, each serving specific purposes, are publication in the Gazette and 

notification to the WTO of these measures. Publication in the Gazette generally provides 

for public comment and establishes a deadline for comment submission, if any. 

Notification to the WTO is one aspect of India’s commitments to allow its trading 

partners an opportunity to review proposals or actions that affect trade and comment on 

their adherence to international trade agreements. 66 The U.S. government, U.S. and 

international business groups, and other countries have complained to the WTO about 

India’s late notifications, most recently involving labeling amendments to the PFA 

Rules;67 import requirements for hides and skins;68 and certain fumigation requirements, 

among others.69

Once a rule or regulation is notified to the WTO or published in the Gazette, the period 

for submission of comments prior to implementation has frequently been an issue for 

India’s trading partners. WTO members protested that the comment period for the 

fumigation requirements mentioned above was insufficient, a charge India disputed.70

More recently, the U.S. Grocery Manufacturers Association (GMA) urged the Indian 

government in a 2008 letter to delay implementation of the PFA Rules amendments so 

that relevant comments could be fully considered.71 The International Council of Grocery 

Manufacturer Associations (ICGMA) noted that once those amendments were notified to 

the WTO, the comment deadline was 36 days later and the amendments were to be 

implemented on day 37.72 By comparison, the SPS and TBT Committees in the WTO 

recommend at least a 60-day period for comments, if possible. 

 65 Notice and comment is a term used to describe the official processes by which a government regulatory 

agency publishes a new or changed regulation and receives comments from entities outside the government, 

such as private citizens, companies, or other governments, expressing opinions about the regulation. For more 

information, see Galligan, Due Process and Fair Procedures, 1997, 494; Warren, Administrative Law in the 

Political System, 2004, 218. 66 See WTO Agreement on Technical Barriers to Trade, 1995, arts. 2.9 and 5.6 and annex 3. 67 Rochette, Food Processors Association (FPA), to Michael Riedel, Foreign Agricultural Service (FAS), 

USDA, January 17, 2006; Rochette, ICGMA, to Dr. Chattapadhya, Ministry of Health, Government of India, 

September 30, 2008. The final version of these regulations containing tolerance limits were issued on 

June 17, 2009; became effective that same day; and had not been notified to the WTO as of a week later. 

Dhankhar, “GOI Amends PFA Rules Relating to Carbonated Water,” June 30, 2009. 68 USTR, 2009 National Trade Estimate Report on Foreign Trade Barriers, 2009, 239. 69 WTO, “Trade Policy Review: Report of the Secretariat: India,” July 24, 2007, 56–57; WTO Committee 

on Sanitary and Phytosanitary Measures (SPS Committee), “Specific Trade Concerns: Note by the 

Secretariat,” February 15, 2002; WTO SPS Committee, “Specific Trade Concerns: Note by the Secretariat,” 

March 26, 2003; WTO SPS Committee, “Specific Trade Concerns: Note by the Secretariat,” March 2, 2004; 

WTO SPS Committee, “Specific Trade Concerns: Note by the Secretariat,” February 25, 2005; and WTO 

SPS Committee, “Specific Trade Concerns: Note by the Secretariat,” May 19, 2006. 70 WTO, “Trade Policy Review: Report of the Secretariat: India,” July 24, 2007, 56–57. 71 Rochette, FPA, to Directorate General of Health Services, Government of India, July 30, 2008. 72 Rochette, ICGMA, to Dr. Chattapadhya, Ministry of Health, Government of India, September 30, 2008. 
6-17

Interests within India’s trading partner countries have also expressed concern regarding 

the implementation period for new or revised Indian agricultural regulations. For example, 

the GMA in 2008 protested to the Indian government that the May 2008 PFA labeling 

amendments mentioned above were to take effect after only six months following public 

notification and, as a counterpoint, highlighted examples from Canada and the United 

States in which authorities allowed years to elapse (to allow for redesign, distribution, 

and marketing changes) before implementing analogous labeling rules.73 In addition, the 

proposed rules were “significantly modified” five months into the six-month period, but 

no implementation extension was granted.74

Corruption 

Corruption injects uncertainty into U.S.-Indian agricultural trade relations and increases 

the costs for exporting U.S. agricultural products to India. 75 In international trade 

transactions, corruption most commonly occurs as improper payments to customs or port 

officials.76 Acknowledgement of corruption as an issue requiring transnational action has 

grown in recent years; the United States and India are among 140 signatories to the 2003 

United Nations Convention Against Corruption.77 More directly, some U.S. and Asian 

business advocacy organizations have explicitly recognized corruption as a barrier to 

trade.78

One widely used measurement of global business risk that examines corruption on a 

country-specific basis, the Opacity Index, placed India in the bottom one-third of the 

world’s largest economies in 2008 for corruption. 79 Similarly, Transparency 

International’s 2008 Corruption Perceptions Index ranked India tied for 85th of 

180 countries, with a score that indicates “a serious corruption problem in the [Indian] 

public sector.”80 The scores underlying India’s ranking on the index improved from 2004 

 73 Rochette, FPA, to Directorate General of Health Services, Government of India, July 30, 2008. 74 Rochette, Association of Food, Beverage and Consumer Products Companies, to Gloria Blue, U.S. 

Department of Commerce, November 6, 2008. 75 See Asia-Pacific Council of American Chambers of Commerce (APCAC), “Corruption,” n.d. (accessed 

June 11, 2009); Begovic, “Trade Liberalization: The Way Forward,” October 25–27, 2006, 8–9. Corruption is 

popularly defined broadly as “the abuse of public office or public position for private gain.” United Nations 

Development Programme (UNDP) and Global Integrity, “A Users’ Guide to Measuring Corruption,” 

September 2008, 6. The World Bank and Transparency International have used a slight variation of this 

definition as well. Ibid., 12. 76 Corruption at this level of government can be characterized as petty corruption (low- to midlevel 

officials and small monetary amounts), as opposed to grand, or political, corruption (larger amounts of money 

and effects undermining the legitimacy of government). UNDP and Global Integrity, “A Users’ Guide to 

Measuring Corruption,” September 2008, 8. 77 The United States has ratified the convention; India has not. United Nations Office on Drugs and 

Crime, “United Nations Convention against Corruption” (accessed June 11, 2009). 78 See USAEngage, “NFTC and USAEngage Commend U.S. Senate for Approving Corruption 

Convention,” September 15, 2006; National Foreign Trade Council, “Bill Reinsch’s Speech on Impact of 

Corruption on Global Business,” September 17, 2008; and APCAC, “Corruption” (accessed June 11, 2009). 79 Kurtzman and Yago, “Opacity Index 2007–2008,” April 2008, 3. On the Opacity Index, India was 

ranked 40th of 48 countries overall. The index examines factors such as corruption, regulatory effectiveness, 

and economic and enforcement policies to measure the costs and frequency of risks to business. 80 Transparency International, “2008 Corruption Perceptions Index,” September 23, 2008; Transparency 

International, “2008 Corruption Perceptions Index: Regional Highlights: Asia-Pacific,” n.d. (accessed 

June 11, 2009). 
6-18

to 2008, but the country has remained near the 50th percentile of all countries ranked 

each year, lower than comparable economies such as Brazil and China.81

U.S. and foreign government and industry officials with experience in Indian agricultural 

operations offer supporting evidence regarding corruption among low-level officials in 

India. Among the examples provided are rejection of U.S. agricultural products at certain 

Indian ports owing to different levels of bribery required by each port’s officials, Indian 

government agricultural development programs in which participation is contingent on 

bribery, clearance delays of perishable shipments absent bribes to port officials, waivers 

of required certifications following bribe payments, and the use of Indian food safety 

regulations as a pretext to close port operations until shippers or importers pay bribes to 

officials.82 One Indian industry representative termed the payment of bribes at this level 

“speed money” and estimated the required amount to be 2 percent of the transaction 

value.83

Modeling of Nontariff Measures 

Commission staff conducted economic modeling simulations on a set of U.S. agricultural 

product sectors for which Indian import prices were higher than world prices—i.e., they 

have positive price gaps that can be interpreted as tariff equivalents—and for which 

Commission staff research indicated that NTMs were impeding U.S. agricultural exports. 

The estimated increase in U.S. exports of agricultural products to India following 

removal of Indian NTMs, relative to a 2007 baseline, is $187–391 million, most of which 

is an increase in U.S. exports of wheat of $146–334 million (U.S. wheat exports 

worldwide in 2007 were $8.3 billion). Increased exports of U.S. dairy products and wine 

composed most of the remaining increase in exports. These estimates include a sensitivity 

analysis for a range of elasticities, similar to that used in the estimates for effects of tariff 

reductions (table 6.2).84

The products in table 6.2 are subject to NTMs that have a distinct effect on that specific 

product. Examples include issues relating to phytosanitary certification and state trading 

for wheat and other food grains; sanitary issues for meat products, dairy products, and 

 81 On a scale of 0 (highly corrupt) to 10 (highly clean) relating to perceptions of the degree of corruption 

as reported by business people and country analysts, India scored 2.8 in 2004 and 3.4 in 2008. Transparency 

International, “2008 Corruption Perceptions Index,” September 23, 2008. See WTO, “Trade Policy Review: 

Report of the Secretariat: India,” July 24, 2007, 20 n.13. 

The Worldwide Governance Indicators project at the World Bank, which measures control of corruption, 

also ranked India lower than the 50th percentile in six of seven years from 2002 to 2008. Worldwide 

Governance Indicators Project, “Governance Matters 2009,” n.d. (accessed September 20, 2009). 82 Government officials, interviews by Commission staff, New Delhi, India, May 4, 2009; industry 

representatives, interview by Commission staff, New Delhi, India, May 4, 2009; industry representative, 

interview by Commission staff, Mumbai, India, May 30, 2009; industry representative, interview by 

Commission staff, Mumbai, India, June 1, 2009; government official, interview by Commission staff, New 

Delhi, India, June 2, 2009; industry representative, interview by Commission staff, Washington, DC, 

June 19, 2009; and Tracy, written testimony to the USITC, April 22, 2009. 83 Industry representative, interview by Commission staff, Mumbai, India, May 29, 2009. 84 Estimates of economic effects are affected by estimates of the elasticity of substitution affecting traded 

goods. The methods for estimating economic effects for tariffs and NTMs are broadly similar but differ in 

some details. See appendix H for further discussion. 
6-19

hides and skins; import bans for poultry; and labeling and import monitoring 

requirements for wine and alcoholic beverages.85 NTM issues affecting importation of 

U.S. agricultural products generally, such as customs procedures, notice and comment 

procedures, and corruption, may also affect these products, as well as products not 

modeled. 

Estimation of the NTM effects involves three steps: estimation of price gaps, 

identification of policies associated with those gaps, and simulation of economic effects. 

Because the presence of an NTM raises domestic prices and reduces quantities of imports 

much as a tariff does, Commission staff first identified products in the study for which 

Indian import prices are higher than export prices for the same goods from the same 

suppliers elsewhere in the world, after adjusting for transport costs. Commission staff 

estimated tariff equivalents for these products (table 6.3),86 using data from the three-year 

period 2005–07 in order to take into account the annual variability both in agricultural 

prices and the policies involved. Commission staff also considered products for which the 

share of U.S. exports in Indian imports is unusually low relative to the share of U.S. 

exports in other markets or for which Indian imports are effectively zero. Second, among 

those products identified in the first step, Commission staff distinguished those products 

for which staff was able to document Indian NTMs that restrict imports. These products 

include corn and other cereal grains, pork and poultry, dairy products, wine, and leather 

products, which have positive NTM price gaps, and wheat, for which U.S. exports to the 

 85 As noted below, the estimates of NTM price gaps make use of data from the three-year period from 

2005 to 2007. The policies mentioned are applied in different ways in different years. All of the policies 

mentioned may not have been applied to all of the products in question in each of the three years, or 

subsequently. For example, as noted, certain policies pertaining to hides and skins (leather products) were 

relaxed in 2009. 86 These price gaps are estimated at the Harmonized System (HS) six-digit subheading level. Separate 

price gaps are estimated for U.S. exports to India and rest-of-world exports to India. Estimates of economic 

effects are presented at the GTAP sector level and not the HS six-digit subheading level for computational 

reasons. See appendix H. 

TABLE 6.2 India: Estimated economic effects of removing NTMs on U.S. exports, 2007 

Range of simulated 

U.S. exports to India 

in the absence of 

Indian NTMs 

Range of simulated change in U.S. exports 

to India in the absence of Indian NTMs 

Commodity groups 

containing food and 

agricultural products 

2007 U.S. food 

and agricultural 

exports to India Low High Low High Low High

Million $ Million $ Million $ Million $ Percenta 

 

Wheat 0.00 145.51 334.25 145.51 334.25 (b) (b)

Cereal grains n.e.c. 1.13 2.67 8.64 1.54 7.50 135 661

Meat products n.e.c. 0.11 0.19 0.22 0.08 0.10 71 93

Dairy products 8.66 23.26 29.10 15.04 20.44 183 216

Beverages and 

 tobacco products 4.19 10.39 13.53 6.20 9.34 146 223

Leather products 7.65 5.16 4.96 -2.50 -2.70 -33 -35

 Total 21.75 187.18 390.68 165.67 396.67 96 165

Source: Commission staff calculations. 

Note: “Low” and “High” refer to elasticities, not effects on U.S. exports; “not elsewhere classified” is denoted as 

“n.e.c.” 

a

Total percentage changes for U.S. exports exclude wheat. 

b

Not applicable. 
6-20

TABLE 6.3 India: Estimated tariff equivalents of Indian NTMs, 2005–07 

Estimated ad valorem tariff 

equivalent of Indian NTMs on 

U.S. exports

 Estimated ad valorem tariff equivalent 

of Indian NTMs on rest-of-world 

exports 

Commodity groups containing food 

and agricultural products 

For identified 

products 

For GTAP 

sector 

 For identified 

products 

For GTAP 

sector

Percent 

Wheat (a) (a) 45.4 45.4

Cereal grains n.e.c. 260.6 150.5 85.8 77.4

Meat products n.e.c. 22.1 8.3 13.8 1.4

Dairy products 49.0 26.7 43.7 11.2

Beverages and tobacco products 199.2 75.1 199.7 20.0

Leather products 183.4 2.2 43.7 12.9

 Average tariff equivalent 81.7 13.1 46.0 34.6

Source: Commission staff calculations. 

Note: Averages for total calculated from Harmonized System six-digit subheading level data; “not elsewhere 

classified” is denoted as “n.e.c.” 

a

Not applicable. 

world are large although U.S. exports to India are zero. Using this narrowed list of 

products, Commission staff then estimated the economic effects of removal of the Indian 

NTMs using the Global Trade Analysis Project (GTAP) model, using 2007 trade data as 

the baseline. 
6-21

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7-1

CHAPTER 7 

Marketing and Distribution System 

Overview 

The agricultural marketing and distribution system consists of all commercial agricultural 

activities, from the point where raw agricultural products leave the farm to the point 

where they are consumed by the final purchaser. These activities include transportation, 

private and public storage, wholesaling, food processing, and retailing. Their cumulative 

cost creates a marketing margin, which is the difference between what farmers receive 

and what consumers pay. An efficient marketing and distribution system leads to lower 

marketing margins, which results in higher prices for farmers, lower prices for 

consumers, more production, and greater consumption. 

Unfortunately, India’s agricultural marketing and distribution system is considered to be 

largely inefficient. It is characterized by high levels of government intervention, poor 

quality and availability of storage and transportation infrastructure, a lack of alternative 

sales outlets for farmers, several layers of middlemen, limited access to marketing 

information, inadequate grades and standards, and few tools for risk management. As a 

result, large marketing margins exist for Indian agricultural products.1

 

Most agricultural products are affected by the same inefficiencies as they move through 

the Indian marketing and distribution system, whether they are domestically produced or 

imported. These inefficiencies generally do not disadvantage U.S. exports relative to 

Indian-produced agricultural products. Goods sold as differentiated products are the 

exception. Because most agricultural products in India are sold as commodities, 

undifferentiated by grade or quality, there is a lower supply of high-quality differentiated 

products—a market niche imports could occupy. Characteristics of India’s agricultural 

marketing and distribution system, and its effects on imports, are presented in table 7.1. 

Market Structure 

The majority of India’s agricultural output is produced on a subsistence basis by small 

family farms.2

 Most food products are consumed after only primary processing, such as 

milling and crushing of grains.3

 Consequently, much of India’s agricultural production 

never enters formal marketing channels but is instead consumed “on-farm,” meaning that 

it is eaten by farming households, used as in-kind payment to farm laborers, or bartered 

for other goods. The share of agricultural production that is marketed is the “marketed 

 1

 Mattoo, Mishra, and Narain, From Competition at Home to Competing Abroad, 2007, xvii–xviii. 2

 Nearly three-fourths of India’s population lives in rural areas, and more than 60 percent of total national 

employment is in the agricultural sector. Government of India, Ministry of Statistics, Statistical Pocket Book, 

2007, 5–6; Government of India, Ministry of Agriculture, National Policy for Farmers 2007, 1. 3

 Dhankhar, India: Food Processing Sector, July 2, 2008, 3. 
7-2

surplus.” Approximately half of the cereals and pulses that account for the bulk of the 

Indian diet are marketed, as shown in the following tabulation.4

India: Share of marketed surplus for certain cereals and pulses (%) 

Commodity Marketed surplus 

Paddy (rice) 52 

Wheat 54 

Corn (maize) 46 

Barley 57 

Red gram (pigeon peas) 54 

Green gram (mung beans) 60 

Bengal gram (chick peas) 52 

Lentils 49 

Source: Ministry of Agriculture, “Abstract of Reports on Marketable Surplus 

and Post-Harvest Losses of Foodgrains in India,” March 2005. 

Note: Data are for the three-year period ending marketing year 1998/99, 

the latest data published. 

 4

 The concept of marketed surplus is important in understanding the reactions of subsistence farmers to 

commodity prices. If prices for major food crops decline, subsistence farmers in India may market a larger 

share of their production, because the lower prices reduce farm income. Reddy, “Factor Productivity and 

Marketed Surplus of Major Crops in India,” May 2009, 44. Therefore, a policy that results in lower prices for 

major food crops at the farm level could lead subsistence farmers to market a larger share of the crop, 

reinforcing the price decline. Similarly, an improvement in marketing, distribution, or infrastructure might be 

expected to result in higher returns to farmers, letting subsistence farmers offer a smaller share to the market 

and keep more for home consumption. 

TABLE 7.1 India: Characteristics of the agricultural marketing and distribution system and its effects on imports

Characteristic Effect on imports 

Most small farmers restricted to on-farm consumption or 

to sales within a state-regulated mandi (market) with few 

buyers. 

Lower prices for domestic products with which imports 

compete.

Government regulations and market structures vary by 

state. 

Added uncertainty and complexity. 

Limited crop- and market-specific price information. Lower prices for domestic products with which imports 

compete. Increased risks for processors buying domestic 

products. 

Limited grades and standards. Lack of an attribute on which imports can compete. 

Limited risk management tools. Lower prices for domestic products with which imports 

compete. Increased risks for processors. 

High storage costs and product losses. Increased costs, reduced quality. 

Poor transportation infrastructure. Increased costs; limits on market opportunities, 

particularly in rural areas. May present opportunities for 

imports in areas near major ports. 

Unreliable and expensive electrical power. Limited 

availability of electrical power to rural population. 

Increased cost and risk, particularly for processing. 

Limited market for chilled or frozen products. 

Uneven application of some regulations in the organized 

retail sector.a

 

Increased costs for imports relative to domestic products. 

Source: Compiled by Commission staff.

 a The organized retail sector can be generally characterized as modern retail businesses, owned by companies 

who hire employees to work in the store. The unorganized retail sector consists of small traditional outlets, which are 

primarily if not exclusively family owned and operated. 
7-3

Source: Compiled by Commission staff. 

a

Under the decentralized procurement scheme, state governments purchase products on behalf of the 

Government of India. b

Commodities are distributed monthly to state/union territory (UT) governments for public distribution. 

Stocks are held in order to ensure (1) minimum buffer stocks for food security, (2) monthly releases to state/UT 

governments, (3) ability to address emergency situations, and (4) ability to intervene in the market. c

Farmer cooperatives may also be considered a type of direct marketing. Farmer cooperatives may act as 

processors, wholesalers, and retailers. 

Figure 7.1 depicts the flow of agricultural products through India’s marketing and 

distribution system. The first point of sale for marketed commodities is typically a stateregulated market, or mandi.5

 Prior to 2003, all agricultural products were required to be 

sold in mandis. Since that time, alternative marketing structures have been allowed in 

some states and territories. Government agencies procure commodities through the 

mandis, and private wholesalers and processors buy agricultural commodities from the 

mandis or alternative markets. Products reach Indian consumers through government 

distribution, the unorganized retail sector, and the organized retail and hotel, restaurant, 

and institutional (HRI) sectors.6

 

FIGURE 7.1 India: Agricultural marketing and distribution structure

 5

 Farmers may also sell their products in rural village markets to brokers or consolidators who will then 

sell in a mandi. Farmers may also sell rice and sugar to a mill for processing, or may have their rice milled 

either for sale or for on-farm consumption. 6

 The unorganized retail sector consists of small traditional outlets, which are primarily family owned and 

operated. The organized retail sector can be generally characterized as modern retail businesses, owned by 

companies who hire employees to work in the store. 

Production First point of sale Further distribution Consumption

Agricultural 

production 

On-farm 

consumption State -

regulated

mandis 

Alternative marketing: 

direct marketing (may 

include sales to final 

consumers),c

private mandis, 

contract farming 

Government 

procurement: 

Food Corp. of 

India (rice 

and wheat), 

other central 

and state 

government 

agenciesa

Central 

Pool b

(buffer stocks)

Processors 

and 

wholesalers 

Organized 

retail and HRI 

Unorganized 

retail and HRI 

Imports 

Fair Price Shops 

Other public 

distribution, 

supplemental 

nutrition 

programs 

Exports 

Domestic 

market 

intervention 
7-4

 First Point of Sale

State-Regulated Mandis 

Over time, mandis, originally designed to protect the farmers from large purchasers with 

market power to set prices, have become controlled by traders and middlemen; they now 

act to limit farmer incomes.7

 The large number of small farmers selling their products in 

mandis and the limited number of buyers, traders, and brokers, increases the buyers’ 

market power. The mandis reduce the marketing opportunities available to India’s 

farmers and keep farm-level prices low. 

The system of regulated markets, or mandis, was created over a period of several years 

following India’s independence.8

 There are more than 7,500 mandis in India.9 Mandis 

guarantee agricultural producers a minimum support price (MSP) for agricultural 

commodities deemed essential by the Indian government. 10 Most products are sold 

without distinction as to grade or quality standards, and therefore farmers have little 

incentive to provide higher-quality products. Farmers pay a fee to access the mandi to 

maintain the storage infrastructure and rural roads, normally equal to 1.5–3.5 percent of 

the value of their crops, depending on the state.11 

Alternative Markets 

Alternative market structures were authorized by India’s central government in the State 

Agricultural Produce Marketing (Development and Regulation) Act of 2003 (Model Act) 

to counter the market power of traders and brokers in the mandi. The Model Act allows, 

but does not require, states to create alternative marketing arrangements for farmers.12

Most states and union territories used the opportunity presented by the Model Act to 

implement reforms to their state agricultural produce marketing acts, but implementation 

varies considerably from state to state.13 Under most of the revised state marketing laws, 

mandis, regulated by local government committees (agricultural produce marketing 

committees, or APMCs), continue to operate as they did under the old system, but three 

principal alternative market arrangements have emerged: (1) direct marketing, which 

allows farmers to sell produce directly to consumers; (2) private mandis, owned by 

individuals or firms that may be granted a license by the state government to purchase 

directly from farmers; and (3) contract farming, which allows farmers to sell their harvest 

directly to purchasing companies under mutually agreed upon contract terms without 

 7

 Government official, interview by Commission staff, Jaipur, India, June 3, 2009. 8

 Acharya, “Agricultural Marketing and Rural Credit,” 2004, 9. 9

 Tiwari, “Post-Harvest Management and Marketing,” 2009. 10 See chapter 4 for a discussion of MSPs. 

11 As a technical matter, traders and middlemen pay the infrastructure fee, but these fees are passed back 

to the farmers in the form of lower prices for their goods. As a consequence, farmers bear the economic 

burden of the fee because they have few other options to sell their crops. Traders sometimes pay the 

infrastructure fee twice if they sell purchased crops to another mandi market area. Fees are intended for local 

infrastructure projects to benefit the mandi, although the funds are often not used by local governments for 

their intended purpose. Industry representative, interview by Commission staff, New Delhi, India, May 5, 

2009; industry representative, interview by Commission staff, New Delhi, India, May 6, 2009. 12 As noted in chapter 4, agricultural policy implementation is largely controlled by the states rather than 

the central government. The central government formulates broad agricultural policies, which the states tailor 

to fit their specific economic and political needs. The Model Act encourages state agricultural marketing 

boards to promote standards, grading, quality certification, and farmer training. Chadha et al., “Competition 

and Regulation Issues in Indian Agricultural Markets,” June 5, 2008, 5. 13 See appendix G for a description of India’s central and state government jurisdiction on agriculture. 
7-5

going through local markets.14 The farmer cooperative is another marketing form that 

existed prior to the Model Act and has proved successful in increasing the pricing power 

of small farmers (box 7.1). 

Direct marketing 

Most agricultural products, even those that undergo little or no processing, change hands 

many times between the farmer and the consumer. Direct sales markets, also known as 

farmers’ markets, facilitate the selling of perishable agricultural products, such as fruits 

and vegetables, directly from farmers to rural and urban consumers (including retailers in 

some areas).15 By eliminating many of the intervening transactions, both buyers and 

sellers attain better prices. 

The reach of direct marketing has been limited. Markets in rural areas are not easily 

accessible to many urban consumers. In addition, certain states and territories do not 

permit direct marketing, and some allow sales only to consumers and not to retailers. 

Other states have approved the practice under an administrative order that must be 

renewed annually and can be changed at any time.16 

 14 Panagariya, India: The Emerging Giant, 2008, 315. 15 Examples include uzhavar sandhai markets in Tamil Nadu and rythu bazaars in Andhra Pradesh. Shibu, 

“Rural Marketing in India,” October 2008, 7; Hindu Business Line, “AP Rythu Bazaars,” August 8, 2004. 16 Industry representative, interview by Commission staff, New Delhi, India, May 9, 2009. 

BOX 7.1 Farmer Cooperatives: The Anand Pattern and Mother Dairy 

Farmer cooperatives in India were established largely in response to a system in which individual small farmers 

have little market power. One cooperative that epitomizes this idea is Mother Dairy. 

Between 1951 and 1970, milk production in India grew approximately 1 percent per year. The majority of milk 

producers were, as they are today, small or marginal farmers or landless laborers. Dairying was largely 

unorganized, and most dairies obtained their milk through middlemen who consolidated milk production into larger 

batches.a

Dairy cooperatives enable small dairy producers to reach the economies of scale of a large producer. Because 

farmers own the processing plants, more profits flow back to dairy producers rather than to middlemen. The Kaira 

District Cooperative Milk Producers’ Union (AMUL) was established in 1946, originally to ship milk to Mumbai 

(Bombay). Under what has become known as the Anand Pattern, the milk producers formed a cooperative society 

at the village level. The village cooperatives formed a district-level union, and as the system expanded, the districtlevel unions formed a state-level federation.b The governing bodies of the cooperatives, unions, and federations 

were made up entirely of milk producers. 

The largest dairy cooperative in India, Mother Dairy in Delhi, was established in 1974 by the National Dairy 

Development Board under the Operation Flood Programme that was formed to replicate the success of the Anand 

Pattern throughout India. Today, Mother Dairy is the most popular brand of milk in India and markets more than 

2 million liters of milk per day. In addition to a wide range of dairy products, Mother Dairy sells edible oils, fresh 

fruits and vegetables, frozen vegetables, and fruit juices through the same network of vendors. All milk, and most 

fruits and vegetables, are sourced from village-level associations.c 

______________ 

a

 Banerjee, Dairying Systems in India, n.d. (accessed July 30, 2009). b Joseph et al., Impact of Organized Retailing on the Unorganized Sector, May 2008, 170. c Ibid., 171. 
7-6

Private mandis 

Some private companies are attempting to set up their own mandis, where permitted 

under state law. 17 Advantages of owning a mandi include (1) the ability to grade 

purchased crops (quality discovery), since middlemen from state mandis typically dilute 

the quality of the crops they sell; (2) the ability to determine the current price for a 

commodity (price discovery); (3) increased profits from the bundling of services with 

physical inputs such as the provision of seeds and fertilizers to farmers; (4) savings on 

fees to brokers and traders; (5) savings on labor, storage, and transportation costs; and (6) 

guaranteed access to warehouse space. According to industry sources, this advantage is 

important, because when bumper crops occur in India, the government may break 

contracts with private firms for the limited space available in public warehouses. A 

company that owns a private mandi, and thus the warehouses, avoids this problem.18 

Contract farming 

 

Contract farming creates a direct link between farmers and food processors or restaurants 

for the supply of a particular commodity of a certain quality at a specified price. Contract 

farming ensures purchasers a stable supply at a specified quality and lowers the 

transactions costs of dealing with large numbers of small-scale farmers.19 Some contracts 

give the purchaser control over the seeds, other inputs, and farming techniques used by 

farmers. Contracts can benefit farmers by increasing their access to inputs, lowering 

business risk, and providing a better-paying market for a differentiated product. Some 

U.S.-based firms, as well as other multinational producers and domestic firms, have been 

involved in contract farming. Examples include PepsiCo’s contracts with farmers in 

Maharashtra and Karnataka for potatoes and Agrocel’s contracts for organic basmati 

paddy rice in Haryana.20 

Successful contract farming arrangements have been those in which the contracting firm 

has (1) established a long-term relationship with the farmers, with additional financial 

incentives for loyalty to the contract; (2) set up a third-party arbiter with the ability to 

enforce the contract; and (3) contracted for a product that offers few marketing 

opportunities beyond the contracting purchaser (e.g., mint grown in Punjab).21 In other 

cases, the contracting system has not been as successful. Problems with contract farming 

have arisen because the contracts are not legally enforceable, and breaches by both 

farmers and firms have occurred.22 

Further Distribution 

Government Procurement 

 

Government purchases account for a large share of all agricultural sales each year. For 

example, either the Food Corporation of India (FCI), a government-owned entity, or a 

state agency acting on its behalf is obligated to buy rice and wheat at the MSP. The 

 17 Industry representative, interview by Commission staff, New Delhi, India, May 8, 2009. 18 Ibid. 

19 Industry representative, interview by Commission staff, New Delhi, India, May 6, 2009. 20 Singh, “Leveraging Contract Farming,” 2007, 4–10. 

21 Ibid., 7–10. 

22 Industry representative, interview by Commission staff, Mumbai, India, May 29, 2009; industry 

representative, interview by Commission staff, New Delhi, India, June 2, 2009. 
7-7

government bought more than one-half the estimated marketed surplus of rice and wheat 

(the two largest Indian food crops by volume) produced in marketing year 2008/09. 

The Indian government purchases farm products for two purposes: maintaining stocks for 

food distribution to the poor and ensuring a minimum price to those farmers by buying 

from farmers at MSPs. The FCI procures food grains (wheat and rice), and under the 

Department of Agriculture and Cooperation’s Price Support Scheme, the National 

Agricultural Marketing Federation (NAFED) purchases oilseeds, pulses, and cotton.23

Under the Market Intervention Scheme, NAFED and designated state agencies purchase 

perishable commodities at the request of the states, if prices fall below the respective 

MSPs.24 

Government purchases of rice and wheat at the MSPs set market prices for these two 

commodities. This price support encourages higher production levels of wheat and rice. 

By contrast, most of the other crops subject to MSPs sell at higher market prices, 

rendering MSPs ineffective in stimulating more Indian production. In addition, industry 

representatives state that crops other than rice and wheat receive less government support 

than the two main staple crops.25 Many of the 25 crops with announced MSPs do not 

have any designated government agency that purchases product at the MSP. If prices fall 

below the MSP, the only available recourse is to petition state governments for relief.26 

Wholesale and Processors 

As noted in chapter 4, most agricultural processing in India is primary processing such as 

milling of rice, oilseeds, and pulses, and processing accounts for only a small share of the 

total value of agricultural production. In contrast, wholesaling accounts for a large share 

of expenditure on agricultural products.27 Even products such as pulses that undergo only 

minimal processing change hands multiple times in the marketing and distribution chain. 

Decisions on pricing, transportation across state lines, storage fees, and stocking volume 

are all subject to state regulation, which increases the complexity and cost of operating 

within India’s marketing and distribution system. 

Consumption 

Government Distribution 

The Indian Public Distribution System (PDS) supplies rationed quantities of basic food 

items (e.g., rice, wheat, sugar, and edible oils) at below-market prices primarily to the 

 23 In 11 states, state agencies procure wheat and rice on behalf of the central government. Government of 

India, Department of Food and Public Distribution, Annual Report, 2008, 12. 24 Additionally, NAFED and the Cotton Corporation of India are responsible for procurement of cotton, 

and the Jute Corporation of India procures jute. Commodities other than rice and wheat are purchased 

through a decentralized program in the various states. Government of India, Ministry of Finance, Economic 

Survey, 2009, 180–181. Another central government agency, the Central Warehouse Corporation, and 17 

state warehousing corporations are involved in the storage of food grains and other essential commodities. 

Government of India, Department of Food and Public Distribution, Annual Report, 2008, 90, 52. 25 Industry representatives, interviews by Commission staff, May 26 and 28, June 4 and 5, 2009. 

26 Government of India, Ministry of Finance, Economic Survey, 2009, 180–181. 27 Industry representative, interview by Commission staff, Mumbai, India, June 1, 2009; Khan, The 

Domestic Food Market, n.d., 9. 
7-8

approximately 65 million households “below the poverty line” or BPL.28 These basic 

food items are distributed through a network of outlets, called Fair Price Shops, as well as 

through other nutrition programs targeted to specific populations. Public distribution 

policy is set by the central government but implemented by the states and territories. 

Commodities are transferred to the states and territories at the central issue price (CIP). 

Government distribution of agricultural products through the PDS and other subsidy 

programs has an impact on the wholesale price in the private market. Increases in the CIP 

have been shown to have a positive impact on wholesale prices.29 The CIPs for rice and 

wheat have been unchanged since July 2002.30 

By design, the large volume of essential commodities distributed at subsidized prices 

holds down consumer prices. Buffer stocks held in a central pool not only ensure the 

viability of the distribution programs but are also used to directly restrain wholesale price 

increases. At the direction of the central government, wheat is sold at predetermined 

prices during the off-season in order to moderate price increases. Additionally, rice that is 

old or otherwise unacceptable for distribution to state governments is sold through public 

tenders.31 

Retail and Hotel, Restaurant, and Institutional (HRI) Sales 

Food is available to consumers through both organized and unorganized retail channels. 

Indian consumers purchase food primarily in the unorganized retail sector. Unorganized 

retail outlets are generally small traditional shops, which are primarily, if not exclusively, 

family owned and operated. More than 99 percent of food and beverage retail sales in 

India were made by unorganized retailers in fiscal year (FY) 2005/06. 32 Types of 

unorganized retail outlets include bazaars, roadside stands, and small mom and pop stores 

(kiranas). In 2006, the number of kiranas was estimated at 6.5 million.33 Although rural 

kiranas may often have limited offerings, in large urban centers such as New Delhi and 

Mumbai they may offer a wide range of products, including imported and multinational 

branded goods.34 

Despite their generally crowded ambiance, kiranas reportedly have a distinct advantage in 

customer service when compared to organized grocery stores, largely because kiranas are 

family-owned and -operated stores with low labor costs.35 Services offered by kiranas 

include phone orders, home delivery, credit sales, and small-quantity sales (e.g., 

individual cigarettes or a few pieces of bread). Further, by knowing their regular 

 28 Tritah, “The Public Distribution System in India,” July 7, 2003, 2; Government of India, Department of 

Food and Public Distribution, Annual Report 2007–2008, 27. The number of BPL households is reported by 

state, based on poverty estimates of the Registrar General of the Government of India as of March 1, 2000. 

The Indian PDS was renamed the “Targeted Public Distribution System” in 1997, although PDS is still more 

commonly used to describe this antipoverty program. 29 Ramaswami and Balakrishnan, “Food Prices and the Efficiency of Public Intervention,” 2002, 420. 30 Ibid., Government of India, Department of Food and Public Distribution, Annual Report 2007–2008, 

19. 31 Government of India, Department of Food and Public Distribution, Annual Report 2007–2008, 19–20 

and 45–46. 32 Singh, India: Retail Food Sector, December 21, 2006, 2. 33 Ibid. 

34 Govindan, India: Exporter Guide, October 1, 2007, 100; Govindan and Dhankhar, India: Exporter 

Guide, October 1, 2008, 10; observation of Commission staff when visiting markets and stores in New Delhi 

and Mumbai, India, May 27, 29, and 30, 2009. 35 Observation of Commission staff when visiting markets and stores in New Delhi and Mumbai, India, 

May 27, 29, and 30, 2009; industry representative, interview by Commission staff, New Delhi, India, 

May 9, 2009. 
7-9

customers, the operators of kiranas offer the ability to anticipate habits and needs for 

special occasions.36 

Organized retail outlets, or supermarkets, can be generally characterized as modern retail 

businesses, owned by companies who hire employees to work in the store. They include 

small chain stores, grocery stores, and hypermarkets.37 The sales share of such stores in 

the Indian marketplace is very small. The sector caters mainly to a small slice of the more 

affluent urban population for a small fraction of their overall grocery purchases. In 

FY 2006/07, only 0.8 percent of India’s estimated $168 billion in food and beverage sales 

were made by organized retailers.38 In theory, supermarkets offer a wide range of Indian 

and imported products and cater to a population wanting a wider selection of foods.39 In 

reality, Indian supermarkets often have a rather small product range, although they offer 

multiple types of each product, whereas some kiranas have a large variety of products.40

Reducing the costs of the “back end” of retail and controlling purchase costs has been a 

key feature in organized retail in many developing countries. The same is true in India. 

Organized retailers in India have tried to increase efficiency by eliminating some of the 

middlemen.41 The expansion of organized retail in developing economies has generally 

led to lower consumer prices and higher quality, with the effects noted first for sales of 

fruit and of processed and semiprocessed foods.42 Research suggests that information on 

quality particularly benefits organized retailers more than those in the unorganized sector, 

as larger firms have more ability not only to supply high-quality goods but advertise 

them.43 To date, organized retailers in India have not been able to significantly lower 

prices on the majority of grocery products below those charged by the unorganized sector 

because organized retailers have not been successful in reducing the complexity of the 

supply chain. 44 As the organized retail and the HRI sectors grow, the demand for 

processed agricultural products and branded products is expected to expand. For a 

discussion of foreign direct investment (FDI) regulations on organized retail, see chapter 

8. Information on grocery products offered by type of establishment is presented in 

table 7.2. 

 36 Industry representative, interview by Commission staff, New Delhi, India, May 9, 2009; government 

official and industry representative, interview by Commission staff, New Delhi, India, May 26, 2009; 

industry representative, interview by Commission staff, Mumbai, India, June 3, 2009; and Singh, India: 

Retail Food Sector, December 21, 2006, 12. 37 Hypermarkets are large supermarkets that offer a variety of nonfood items. 38 Singh, India: Retail Food Sector, December 21, 2006, 2; Joseph et al., Impact of Organized Retailing 

on the Unorganized Sector, May 2008, 10. Organized retail in the grocery segment has lagged development 

in other sectors. In FY 2006/07, the share of organized retail in India’s total retail sales of all products was 

approximately 4.1 percent. 39 Govindan, India Exporter Guide, October 1, 2007, 10; Govindan and Dhankhar, India: Exporter Guide, 

October 1, 2008, 10. 40 Industry representative, interview by Commission staff, Mumbai, India, June 2, 2009. 41 Industry representatives, interviews by Commission staff, New Delhi, India, May 26, and 

May 27, 2009. 42 Reardon and Berdegue, “The Retail-led Transformation of Agrifood Systems,” November 2006, 2. 43 Reardon and Hopkins, “The Supermarket Revolution in Developing Countries,” December 2006, 543. 44 Retailers have generally been unable to significantly reduce the number of middlemen, even for 

products that undergo little processing. Industry representatives, interviews by Commission staff, New Delhi, 

India, May 29, 2009, and Mumbai, India, June 1, 2009. 
TABLE 7.2 India: Food retail establishments and characteristics by outlet type

Type of outlet The central plazas/bazaars 

Street markets and roadside stands Small stores/kiranas Midsize grocery stores 

Estimated number 1,000 10–12 million Over 6.5 million Unknown, but certainly a 

retail is estimated at 

Estimated store size Groups of approximately 100 

stalls. Average stall size is 5–10 ft by 10–15 ft. 

Varies greatly. Can range from a table to a large shop with multiple vendors. 

Less than 2,000 square ft 3,000-6,500 square ft 

Type Unorganized Unorganized Mostly unorganized, but some organized chains Organized Characteristics Groups of stalls that together 

sell a large range of items, usually within a building 

complex. 

Generally, little to no ambiance. 

Variety of range of products from limited amount to a wide range of products, although not necessarily a large number of each product. Generally, little to no ambiance, but good customer service. 

Often clean and well lit. Self-service. 

Typical refrigeration None None Some, mostly small beverage units. Some refrigerated cases Types of goods sold A wide selection of goods, including local fruits and 

vegetables, pulses, snack foods (including chips and nuts), and spices. Some processed and consumer goods. Small amount of imported fruit. 

Selection of goods can range from a handful of items at small stores to a wider range (20–30 different fresh items) at large stores. Imported fruit available. Limited information on other products available.

Produce selection averages 15–30 items. Also dry goods. Some have bakeries and/or meat counters. Mainly at organized outlets: domestic food brands, including regional and specialty brands and some imported foods. Imported fruit available. Some outlets carry dairy and/or frozen foods. 

Produce selection avera20–50 products, althougsome chains offersignificantly more selectiDomestic food brands available, including regioand specialty brands and some imported foods. Imported fruit available. Many have bakeries and dairy sections. Some havfrozen food section. 

Sources: Florida Department of Agriculture and Consumer Services, India: Road to Success, 2007; Singh, India: Retail Food Sector; 2006; Commission sta

officials, Mumbai and New Delhi, India, May 4 to June 5, 2009; Commission staff observation of various food retail outlets, Mumbai and New Delhi, India, MMay 27, 2009. Note: There are no clear dividing lines between categories of unorganized retail, and even the number of outlets varies according to the different definitions

7-10 
7-11

As with the retail food sector, the restaurant sector has organized and unorganized 

segments. The unorganized restaurant sector includes snack shops, tea shops, roadside 

eateries, and other informal restaurants, on which there are insufficient data.45 Organized 

restaurants and hotels in India are likely to buy imported food to satisfy their clientele; in 

fact, imported food and beverages are primarily consumed in the HRI sector. Imported 

foods are often served because the items in question are not available domestically or the 

domestic quality is not high. 46 One study found that hotels constitute an especially 

important potential market for imported foodstuffs because they are normally among the 

first users of imported products and often cater to an international clientele.47 

Attributes of an Efficient Marketing and Distribution 

System

Characteristics of competitive markets that contribute to efficient marketing and 

distribution systems include (1) many sellers and many buyers, so that both are “price 

takers;” (2) the availability of timely and reliable information to all potential sellers and 

buyers; and (3) low transaction costs resulting from modern transportation networks, few 

middlemen, and no administrative restrictions on movement of products within the 

country. Inefficiencies in the Indian agricultural marketing and distribution system, 

stemming from shortcomings in these characteristics, drive a price wedge between 

producers and consumers. 

Concentration 

One of the characteristics of a competitive, efficient market is a large number of buyers 

and sellers, none with enough market power to influence prices by themselves. India’s 

marketing system does not fit this profile. There are a relatively small number of buyers 

and a large number of farmers in the mandi system. Although the mandi system was set 

up to counter the market power of corporations or other large purchasers and give farmers 

a better profit margin, traders now maintain significant market power.48 For commodities 

other than rice and wheat, MSPs have little impact on market prices in major producing 

states, and the market power of buyers is unhindered.49

Market Information 

Access to price and quality data is one of the cornerstones of an efficient competitive 

market, but the typical Indian farmer has little up-to-date information on the price, 

quality, and volume of agricultural products in specific markets. The small size of most 

Indian farms and the small volume marketed by these marginal farmers mean that the 

benefits of price discovery are slight for the individual farmer. A low literacy rate and 

 45 Bryant Christie Inc., “India Research Study for California Agricultural Exporters,” January 31, 2008, 

13; Singh, India: HRI Food Service Sector, December 14, 2007, 2. 46 Singh, India: HRI Food Service Sector, December 14, 2007, 4. 47 Imported seafood, cheeses, and high-end cuts of lamb are reportedly highly demanded by hotels. 

USMEF, “India’s Pork Market,” March 2007, 18. 48 USIBC, written submission to the USITC, June 26, 2009. 49 Agmarknet Web site, http://www.agmarknet.nic.in. Numerous interviews with industry representatives 

in India confirm that, except for wheat and rice, government support programs for most major agricultural 

products have little impact on prevailing prices. 
7-12

poor communications infrastructure contribute to the lack of information. 50 National 

policy on futures markets is another problem: in some countries, futures markets serve as 

one avenue of price discovery; but in India, many futures markets are banned or 

restricted. 

There have been some advances in market information, such as the arrival of e-Choupal, 

Agriwatch, and similar programs that provide time- and location-specific prices on 

commodities. These programs, however, do not reach all farmers in India.51 

Grades and Standards 

The lack of a widespread, well-functioning system of grades and standards is another 

factor impairing the efficiency of Indian agricultural markets. Not only does such a 

system enable the participant to characterize a product precisely enough that price 

information is meaningful, but use of the system also minimizes inspection costs. The 

lack of well-defined quality standards in India limits opportunities for buyers to purchase 

specific high-quality products that they seek. With the majority of Indian agricultural 

products sold as undifferentiated commodities, producers have no incentive to provide 

goods with unobserved higher-quality attributes. Some information is provided from 

producers to wholesalers, but not from wholesalers to retailers.52 Even when it is known 

that certain buyers are paying a price premium for quality, high costs for storage and 

transportation often make it impossible for the typical Indian farmer to transport a 

product to a more lucrative market. 

Indian agricultural products for domestic consumption, as well as for export, can be 

certified under standards of quality or safety established by the Agricultural Produce 

(Grading and Marking) Act, commonly known as the Agmark grading system; but in 

practice, most domestic products for internal consumption are not graded. 53 The 

Agricultural Marketing Information Network (Agmarknet) database maintained by the 

Ministry of Agriculture provides market-specific information on approximately 300 

commodities in 1,900 markets, but information on quality is lacking. Most grain, for 

instance, sold in mandis is not sold through a strict grading system, but simply as fair to 

average quality (FAQ).54 One reported advantage to a processor or wholesaler of buying 

in a local mandi is the opportunity to inspect the product for quality attributes.55 

 50 Approximately 75 percent of farmers are illiterate or semiliterate, and languages and dialects vary from 

region to region. Shibu, “Rural Marketing in India,” October 2, 2008, 5. Official statistics report that 60 

percent of adults in India were literate as of FY 2004/05. Government of India, Ministry of Statistics and 

Programme Implementation, Statistical Pocket Book, 2007, 47. 51 ITC, Ltd.’s e-Choupal service, for example, currently serves 4 million farmers in 40,000 villages across 

10 states with a series of 6,500 internet kiosks, but expects to double its reach over the next 5 years. ITC Ltd. 

e-choupal Web site, http://www.itcportal.com/rural-development/echoupal.htm (accessed September 10, 

2009). Other services disseminate information through internet services and the postal system. Industry 

representatives, interviews by Commission staff, New Delhi, India, May 26 and Mumbai, India, June 1, 2009. 52 Government official, interview by Commission staff, New Delhi, India, May 26, 2009. Reportedly, 

Indian consumers are very price sensitive. There is some brand loyalty, but only if a quality difference is 

visible to consumers. 53 Government official, interview by Commission staff, New Delhi, India, May 27, 2009. 54 Landes, The Environment for Agricultural and Agribusiness Investment in India, July 2008, 34; 

Agmarknet Web site, http://www.agmarknet.nic.in/. 55 Industry representative, interview by Commission staff, Mumbai, India, May 29, 2009. 
7-13

Risk Management 

Economic risk in agriculture comprises many components, including (1) production risk, 

also known as yield risk, related to weather, pests, or disease that limit the volumes 

produced; (2) price risk, related to the uncertainty of the prices for inputs compared to the 

final price of the agricultural outputs; (3) institutional risk, related to changes in the 

government policy environment under which farmers operate; (4) financial risk, relating 

to the source and methods of financing the farming operations; and (5) personal risk, 

related to death or illness of the farmer or other workers. 56 Of these components, 

institutional risk, financial risk, and personal risk are outside the scope of this study.57 

Risk management tools allow agricultural producers to lower price and production risks 

in their operations. These tools include futures markets that mitigate price risk for 

farmers, crop insurance that limits production risk, and contract farming that lessens both 

price risk for farmers and production risk for purchasers.58 

India’s risk management system is inefficient, in part, because government regulations 

restrict the tools that can be used. For example, in May 2008, the Indian government 

banned futures trading in soybean oil, chickpeas, and potatoes, citing speculation on the 

exchange as a factor contributing to rising prices for those commodities.59 India banned 

futures trading in wheat for approximately 30 months, before revoking the ban in May 

2009. Also in May 2009, futures trading in sugar was banned. 60 Bans on trading 

agricultural commodities futures restrict the ability of farmers, traders, and purchasers to 

engage in price discovery. 

Even where risk management tools are permitted, the Indian system is inefficient in 

managing risk. A statistical analysis of four agricultural commodities (castor, cotton, 

pepper, and soybeans) traded on India’s commodities futures exchange indicates the 

exchange is not yet providing enough price discovery to allow farmers to properly hedge 

their prices. This is because of thin market volumes, infrequent trading, ignorance among 

farmers of the futures trading process, underdeveloped spot markets, poor transportion 

infrastructure, and the absence of a well-developed system of grades and standards.61

Another example of India’s inefficient risk tools is government-run crop insurance. Since 

1985, the Indian government has required all farmers that take out farm loans to purchase 

crop insurance, first through the All-Risk Comprehensive Crop Insurance Scheme and 

later by a successor program, the National Agricultural Insurance Scheme (NAIS), which 

began in 1999. The intent of NAIS is to provide stable incomes to farmers in the event of 

poor weather, pests, and diseases. The Indian government admits that the scheme has 

 56 Hardaker, Huirne, and Anderson, Coping with Risk in Agriculture, 1997; Coble and Barnett, An 

Assessment of Risk Exposure in Agriculture: A Literature Review, December 16, 2008. 57 In particular, this study was not asked to provide any analysis on institutional risk as defined—i.e., on 

the likelihood of future changes in current Indian policies. 58 In Indian contract farming, the lower production risk for purchasers consists of access to higher-quality 

agricultural products or products that more closely conform to the specifications required. This occurs 

because the purchasers provide seeds and other inputs to farmers. Contract farming provides price risk 

management for farmers because the contract price is guaranteed, and also because, in practice, farmers 

routinely break the contract with the purchaser when spot prices are higher than the contract price but are 

rarely if ever sued for breach of contract. Industry representative, interview by Commission staff, New Delhi, 

India, May 6, 2009. 59 Egypt News, “India Bans Rubber, Soybean Oil Futures to Cool prices,” May 8, 2008. 60 Commodityonline.com, “India Bans Futures Trading in Sugar,” May 26, 2009. 61 Easwaran and Ramasundaram, “Whether Commodity Futures Market in Agriculture Is Efficient in 

Price Discovery?—An Econometric Analysis,” 2008, 337–344. 
7-14

limited popularity with farmers because payments are based on yield estimates performed 

after the calamity, which delays the processing of claims, and because loss assessments 

are based on wide agricultural areas and not on individual farmer losses. Under the 

scheme, farmers with heavier-than-average losses are insufficiently reimbursed.62

Government Intervention 

A competitive market is efficient because goods are valued according to the costs of 

production and the value to purchasers. Indian government interventions aimed at the 

goals of increased food security and self-sufficiency distort production decisions for 

farmers and act to limit the options available to producers and consumers. In particular, 

government support programs for irrigation, electricity, fuel, and fertilizer distort 

production decisions for crops that require more of these inputs. 

MSPs and other government support for rice and wheat set the market price for these 

commodities that account for one-half the food calories consumed in India.63 The lower 

level of government support for other commodities biases production decisions toward 

rice and wheat. For commodities sold at MSPs, quality differences are uncompensated. 

As noted, this discourages farmers from providing high-quality commodities if this would 

require greater expenses. 

Other than MSPs, most government intervention is at the state level, which adds further 

complexity to decision-making for firms with operations in more than one Indian state. 

Prices can vary considerably from state to state for even basic commodities.64 In addition, 

the Essential Commodities Act (ECA) of 1955 enables the national and state 

governments to impose restrictions on the storage, transport, price, distribution, and 

processing of certain “essential” agricultural products. 65 The ECA was repealed 

administratively in 2005 because of surplus market conditions, but remained on the 

official record.66 In 2008, when food prices rose, the national government reauthorized 

the ECA, allowing states to implement these restrictions again. States implemented the 

law on an ad hoc basis, often through orders requiring firms to maintain strict stock limits 

and follow other regulations that stymied profits and investment.67 The effect of the ECA 

and the corresponding state acts is to inhibit the internal integration of the Indian market 

for the regulated commodities.68 

 62 Government of India, Planning Commission, India’s Eleventh Five Year Plan: 2007–12, vol. 3, 2008, 

21–22. 63 See chapter 3. 

64 Government of India, Agriculture Division Planning Commission, Report of the Working Group on 

Agricultural Marketing Infrastructure, January 2007, 19. 65 Panagariya, India: The Emerging Giant, 2008, 313. Agricultural commodities deemed “essential 

commodities” by the Indian government as of December 15, 2004 (the latest data available), include (1) cattle 

fodder, including oilcakes and other concentrates; (2) foodstuffs, including edible oilseeds and oils; (3) raw 

cotton, either ginned or unginned, and cottonseed; (4) raw jute; and (5) seeds, including seeds of food crops 

and seeds of fruits and vegetables, seeds of cattle fodder, and jute seeds. Government of India, Ministry of 

Consumer Affairs, Food, and Public Distribution, “Essential Commodities Act, 1955.” Edible oils are not 

covered under the ECA; rather, they are regulated under other laws, such as the Food Safety and Standards 

Act of 2006. Industry representative, interview by Commission staff, Jaipur, India, June 3, 2009. 66 Industry representative, interview by Commission staff, New Delhi, India, May 9, 2009. 67 Ibid. 

68 Another consequence of regulation under the ECA is that some potential investments in storage 

infrastructure have been delayed or abandoned because of the restraints imposed by the act, and the 

uncertainties this level of state intervention has generated. Industry representative, interview by Commission 

staff, New Delhi, India, May 6, 2009. 
7-15

Until the 1990s, food processing was legally reserved for small-scale enterprises. 

Although these regulations have been repealed, the sector still largely consists of small, 

nonintegrated firms.69 Larger processors often are unable to obtain a consistent source of 

inputs. Current regulations, plus the legacy of the reservations for small enterprises, can 

keep firms from attaining efficient economies of scale. 

Transaction Costs 

The difference between producer and consumer prices depends on a large number of 

variables, including the amount of processing the raw agricultural product undergoes 

before it is consumed. As noted, most food in India is consumed with only minimal 

processing. Yet, prices for consumers are often many times higher than prices paid to 

farmers. Some of the major components of this price difference between farmers and 

consumers are (1) the sheer number of transactions, (2) the costs and losses of storage, 

(3) high prices for power, and (4) high transportation costs. 

Market Integration 

Agricultural goods in India change hands multiple times, with each transaction adding to 

the cost. The effect of the Indian system is that the delivered price of a typical 

horticultural good in India, for example, may be seven to eight times the farmgate price.70

One reason is the fragmented supply chain. A recent study of typical Indian transactions 

for pulses found that returns to agents, wholesalers, and retailers outweighed the costs of 

processing, transportation, and taxes in all markets studied.71 

Storage 

Storage and cold chain facilities are extremely limited in India. Poor storage 

infrastructure contributes to large seasonal variation in the price of domestic agricultural 

products.72 Storage losses in public warehouses have been estimated at 12 percent. Post 

harvest losses of food grains has been estimated at 10.5 percent.73 

Only 9 percent of the markets to which farmers take their produce have any cold storage 

capacity.74 The lack of cold storage capacity contributes to severe swings in product 

availability for common vegetable crops such as onions, tomatoes, and cauliflowers. 

Prices for onions, for example, are as much as 10 times higher during the off-season than 

during the harvest.75

 69 Dhankhar, India: Food Processing Sector, July 2, 2008, 3; Landes, The Environment for Agricultural 

and Agribusiness Investment in India, 17; industry representative, interview by Commission staff, Mumbai, 

India, May 29, 2009; and industry representative, interview by Commission staff, Mumbai, India, 

June 1, 2009. 70 Mattoo, Mishra, and Narain, From Competition at Home to Competing Abroad, 2007, xvi. 71 Industry representative, interview by Commission staff, Mumbai, India, June 1, 2009. 72 Industry representative, interview by Commission staff, New Delhi, India, May 28, 2009. 73 Government of India, Agriculture Division Planning Commission, Report of the Working Group on 

Agricultural Marketing Infrastructure, January 2007, 81. 74 Ibid., 77. 

75 Maheshwar and Chanakya, Postharvest Losses Due to Gaps in Cold Chain in India, 2006, 778. 
7-16

The lack of infrastructure for electricity, as well as its high cost and poor quality, 

contribute to storage problems for products that are chilled or frozen. 76 Operating 

expenses for cold storage units in India are more than twice the costs in the West, partly 

because of high energy costs.77 The lack of adequate cold storage infrastructure restricts 

sales and raises costs for products that require cold storage. 

 

Electricity 

According to data from the Ministry of Power, India’s energy shortage for FY 2007/08 

was 9 percent, the second-highest level in the last 10 years, behind only FY 2006/07; the 

peak unmet shortage was more than 15 percent, the highest in the past 10 years.78 As a 

result, the electrical power supply is subject to frequent planned outages and unplanned 

interruptions.79 Unreliable electricity provision increases risks and costs for cold storage 

and processing facilities, which must purchase generators and fuel to avoid shutdowns 

that would cost them even more.80

About one-half of India’s rural population lacks access to electricity.81 The government is 

attempting to address this problem, but much remains to be done. India launched the 

Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) program in 2005 as part of the 

Bharat Nirman national rural development program. This program had the goal of 

bringing electricity to 125,000 villages and 23 million households out of the estimated 

78 million total households without access to electricity. Through March 2009, the 

RGGVY program had reached approximately 60,000 villages and provided electricity to 

just over 5 million BPL households.82 

Pumping groundwater for irrigation is a significant drain on the overtaxed power grid and 

has contributed to water shortages in some areas.83 Low electricity rates for agriculture 

have encouraged drilling and pumping groundwater for irrigation. Subsidized electricity 

for agricultural use and flat-rate metering in many rural areas have led to overuse on the 

part of farmers and have deprived power companies of resources needed to maintain and 

expand the power grid.84 

Transportation 

Transportation in India is slow and expensive. The World Economic Forum ranks Indian 

transport and communications infrastructure 52nd out of 118 countries in its Enabling 

 76 For example, pizza is gaining in popularity in India. One exporter approached an Indian importer with 

intentions to sell frozen pizza that could be heated in a microwave at a fraction of the cost of quick-serve 

pizza. The importer explained that most Indians do not have freezer space or microwaves, and most retail 

outlets either do not have freezers to store the product or turn the freezers off at night. Industry representative, 

interview by Commission staff, New Delhi, India, June 2, 2009. 77 Maheshwar and Chanakya, Postharvest Losses Due to Gaps in Cold Chain in India, 2006, 779. 78 Government of India, Ministry of Power, Annual Report: 2007–08, 11. 79 Industry representative, interview by Commission staff, Mumbai, India, May 30, 2009; industry 

representative, interview by Commission staff, New Delhi, India, June 5, 2009. 80 In the affluent city of Gurgaon, electricity service reportedly stops three or four times per day, and the 

cost of electricity produced by the company-owned generator was twice that charged by the utility company. 

Industry representative, interview by Commission staff, Gurgaon, India, June 5, 2009. 81 World Bank, World Development Report 2008, 322. 82 Government of India, Ministry of Finance, Economic Survey, July 2009, 232. 83 International Water Management Institute, “The Energy-Irrigation Nexus,” November 2003, 2. 84 Ibid.,1; International Water Management Institute, “Improving Performance and Financial Viability of 

Irrigation Systems in India and China,” April 2006, 1. 
7-17

Trade Index 2008. Poor transportation networks in India effectively increase costs for 

both domestic food products and imports and reduce demand by limiting the number of 

consumers that can be reached. 

According to the Ministry of Road Transportation and Highways, 65 percent of freight 

and 85 percent of passenger traffic is carried by road, a share that has been increasing.85

Long-haul road transportation in India is characterized by long and unreliable transit 

times; long-haul delivery times average approximately twice those in the United States.86

A number of characteristics make transportation in India slow and expensive: 

• The mixed traffic on most roads, consisting of bicycles and animal-drawn carts as 

 well as freight trucks and private automobiles, slows movement of freight by truck. 

• The speed limit for trucks is typically 40 kilometers per hour. 

• Congestion and the generally poor condition of many highways further increase 

 transport times, even on the national highway system.87 

• Only a small share of highways are limited access.88 

• Differing state regulations force truck traffic to stop at state borders and incur further 

 delays, accounting for 15–25 percent of transit time.89 

• Entry taxes imposed at state borders plus informal payments at checkpoints add 

 5–10 percent to the cost of goods transported between states.90 

• There is a lack of standardization in Indian transportation regulations in areas ranging 

 from emissions to weight standards and driver and vehicle safety. Academic studies 

 of transportation regulatory standardization in other economies indicate that the long- 

 term cost of the lack of standardization is significant.91 

The absence of highway access for many rural Indians effectively eliminates them from 

being potential customers. Many of India’s poor, particularly in rural areas, are not served 

by year-round roads. This situation reduces the demand for agricultural products from 

outside the immediate area, particularly those that require refrigerated storage. Rural 

roads are maintained by the various states, so the quality of rural roads varies widely. In 

2000, approximately 40 percent of India’s villages, containing 74 percent of its rural 

population, lacked access to an all-weather road; the 2008 World Development Report

 85 Government of India, Ministry of Road Transportation and Highways, Roads & Highways: An 

Overview (accessed April 6, 2009); Landes, The Environment for Agricultural and Agribusiness Investment 

in India, July 2008, 30. 86 Landes, The Environment for Agricultural and Agribusiness Investment in India, July 2008, 30. 87 The national highway system accounts for only 2 percent of the road network but reportedly carries 

40 percent of the all road traffic. Government of India, Ministry of Road Transportation and Highways, 

Roads & Highways: An Overview (accessed April 6, 2009). One industry representative reported that the 

poor state of the highways also means that packaging for products must be more robust, and therefore more 

expensive. Industry representative, interview by Commission staff, New Delhi, India, May 26, 2009. 88 Limited access highways are those roadways with vehicle entrance restricted to a relatively small 

number of points. Even most of the national highway system is not limited access. 89 World Bank, India: Road Transport Service Efficiency Study, November 1, 2005, 17. 90 Industry representative, interview by Commission staff, New Delhi, India, June 4, 2009. 91 World Bank, India: Road Transport Service Efficiency Study, November 1, 2005, 18–19. 
7-18

found that 39 percent of the rural population lacks access to an all-season road. 92

Planning documents for India’s Eleventh Five-Year Plan report that as of March 2007, 

35 percent of villages were not yet connected by all-weather roads. The current plan calls 

for all towns and villages of more than 1,000 to be connected by the end of 2009.93 

The efficiency of Indian ports lags that of other major trading nations in Asia but is not 

reported as a significant barrier to U.S. agricultural exports. When asked about major 

barriers to imports, only two industry representatives mentioned that unloading at Indian 

ports was unusually slow, and neither reported that delays were caused by deficiencies in 

port infrastructure.94 Capacity and volume of traffic have increased significantly in recent 

years, and planned expansions under the Eleventh Five-Year Plan will more than double 

port capacity.95 Between FY 2001/02 and FY 2006/07 average ship berth output (ASBO) 

increased 76 percent, and average ship turnaround time (ASTA) declined 39 percent.96

However, a report for the Confederation of Indian Industry noted that in 2006, ASTA at 

Indian ports was approximately 20 times longer than in Singapore and that ASBO in 

Indian ports lags that of other major shipping nations.97 Since FY 2006/07, ASBO has 

improved but ASTA has worsened, both slightly.98

Effects on U.S. Exports 

Many of the inefficiencies that exist in the Indian system do not disproportionately 

disadvantage imports over domestic products. Transportation infrastructure, for example, 

increases costs for all firms in India. The regulations imposed under the ECA restrict 

domestic production as well as imports. The poor state of the electric power grid and the 

high cost of electricity create problems for all firms with a presence in India. The absence 

of an integrated market for intermediate goods and the lack of consistent water supplies 

may increase costs on all agribusiness firms with production in India.99 

However, some characteristics of the Indian marketing and distribution system do 

adversely impact imports more than domestic products. Price volatility of some products 

due to deficiencies in storage capacity, combined with the long and uncertain delays in 

approving import licenses, can serve as a barrier to imports of agricultural 

commodities. 100 Some imports may require storage and handling that is not readily 

available in India. 

Organized retailers and suppliers, both foreign and domestic, have some costs that are not 

borne by their unorganized competitors. Current food safety regulations are unevenly 

applied within the Indian food distribution system. Organized retailers and suppliers are 

forced to comply with regulations and bear the resultant costs but gain little in return. For 

example, regulations specify that packaging for edible oils should not be reused. 

 92 World Bank, Rural Roads, 2007, 1; World Bank, World Development Report 2008, 322. 93 Government of India, Planning Commission, Eleventh Five Year Plan: 2007–12, vol. 3, 2008, 294. 94 Industry representatives, interviews by Commission staff, New Delhi, India, May 26, 2009, and 

Mumbai, India, May 28, 2009. 95 Government of India, Ministry of Shipping, Road Transport and Highways, Report of the Working 

Group for the Port Sector, March 2007, 19; Government of India, Planning Commission, Eleventh Five Year 

Plan: 2007–12, vol. 3, 2008, 314, 318. 96 Government of India, Planning Commission, Eleventh Five Year Plan: 2007–12, vol. 3, 2008, 315. 97 Cygnus, “Background Note—Logistics,” September 2006, 5. 98 Government of India, Ministry of Finance, Economic Survey 2008–09, 244. 99 Landes, The Environment for Agricultural and Agribusiness Investment in India, July 2008, 17. 100 Industry representative, interview by Commission staff, New Delhi, India, June 4, 2009. 
7-19

Organized suppliers must comply with this requirement, but as most edible oil is sold in 

the unorganized market, the majority of their competitors do not have this expense.101

Uniform application of food safety laws would be expected to favor organized retailers 

over unorganized competitors.102 

An inefficient marketing and distribution system can also confer unintended benefits on 

exports from all countries, including the United States. For example, India’s poor storage 

and transportation infrastructure leads to product losses, deterioration in quality, and 

increased costs for domestically produced agricultural goods. These problems may 

actually provide opportunities for U.S. exports in the Indian market. The situation with 

apples, which are a popular fruit in India, offers a good illustration of this dynamic. India 

produces large quantities of fresh apples in the northern part of the country, but few can 

be efficiently transported over land in a timely manner to India’s southern regions.103

Instead, U.S. fresh apples are often shipped through southern Indian ports to satisfy 

Indian demand. 

 101 Industry representatives, interviewed by Commission staff, New Delhi, India, May 6 and June 1, 2009. 

Organized suppliers do receive a small premium for a branded product. 102 The U.S. Food Law of 1908, for instance, helped foster the growth of organized retail in the United 

States. Joseph et al., Impact of Organized Retailing on the Unorganized Sector, May 2008, 33. 103 Deodhar, Landes, and Krissoff, “Prospects for India’s Emerging Apple Market,” January 2006, 17, 21, 

25. 
7-20

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Department of Agriculture, Foreign Agricultural Service, July 2, 2008. 

Easwaran, R. Salvadi, and P. Ramasundaram. “Whether Commodity Futures Market in Agriculture Is 

Efficient in Price Discovery?—An Econometric Analysis.” Agricultural Economics Research 

Review 21 (2008), 337–344. 

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Eleventh Five Year Plan 2007–12, January 2007. 

———. Ministry of Consumer Affairs, Food and Public Distribution. Department of Food 

and Public Distribution. Annual Report 2007–2008, 2008. 

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8-1

CHAPTER 8 

Foreign Direct Investment in Indian 

Agricultural and Food-Related Industries 

Overview 

U.S. firms have become active participants in India’s food and agriculture sector. 

Normally, they do not engage directly in agricultural production: under Indian 

government regulations, foreign firms and individuals are not permitted to own 

agricultural land in India directly, with a few exceptions as detailed below. However, 

they have found many other opportunities through investing in the broader food sector. 

The majority of U.S. foreign direct investment (FDI) is in food and beverage processing, 

alcoholic beverages, and quick-service restaurants. U.S. companies focus on those 

segments of the market because those industries offer the most lucrative opportunities, 

not because they face particular regulatory or non-regulatory obstacles to FDI in other 

parts of India’s food and agriculture sector. Other than the alcoholic beverages 

distribution and retail sectors, industry representatives did not report significant 

regulatory barriers to U.S. investment. 

Because foreign firms do not engage for the most part in direct agricultural production, 

they obtain their agricultural inputs through imports, local commodity markets, or 

contract farming operations. U.S. firms report that, in areas open to foreign investment, 

the Indian government encourages them to establish operations, and they generally have 

not experienced market access or national treatment barriers. Many U.S. firms prefer to 

operate in India through joint ventures rather than wholly owned affiliates, since local 

partners can be particularly important in helping U.S. firms navigate their way through 

central and state government bureaucracies and the intricacies of local business customs. 

U.S. food industry firms must weigh a number of business environment factors when 

deciding whether or not to invest in the sector. Investment incentives include (1) U.S. 

companies’ keen interest in accessing India’s large and growing consumer market; (2) the 

need for a local presence to understand how best to adapt products to local needs and 

requirements; (3) high tariffs and nontariff measures (NTMs) in India that encourage 

entry into the market through investment rather than U.S. exports; and (4) policy 

incentives, such as tax rebates linked to Special Economic Zones (SEZs). Disincentives 

include regulations that ban FDI in most farming activities; occasionally difficult 

relations with joint venture partners; complex licensing and regulatory systems; a 

disjointed national market in which it is difficult to achieve economies of scale because 

of logistical constraints and differing state regulations; and changing agricultural 

marketing regulations for many commodities, primarily related to the Agricultural 

Produce Market Committee (APMC) Act and the Essential Commodities Act (ECA). 

 
8-2

FDI Regulations and Trends 

Beginning in 1991, as part of India’s policy of opening to the global economy, the Indian 

government authorized FDI with foreign equity stakes of up to 51 percent in most 

industries, including food processing. The equity limit for FDI in food processing was 

later raised to 100 percent. Foreign investors generally are not permitted to own 

agricultural land in India and are prohibited from investing in most direct agricultural 

(farming) activities. Exceptions exist for tea plantations and for investment in agriculture 

under “controlled conditions,” such as farming in climate-controlled facilities such as 

greenhouses (table 8.1).1

TABLE 8.1 India: Specific FDI regulations in certain food-related industries

Industry 

Equity 

cap (%) Entry route Other conditions 

Primary agricultural production 

 Floriculture, horticulture, development 

of seeds, animal husbandry, 

pisciculture, aquaculture, cultivation of 

vegetables and mushrooms under 

controlled conditions, and services 

related to agro and allied sectors.a

 

100 Automatic None reported. 

 Tea sector, including tea plantations.b 100 Approval from 

the Foreign 

Investment 

Promotion 

Board required 

Subject to divestment of 26 percent of 

equity in favor of an Indian partner or 

the Indian public within 5 years, and 

prior approval of the state government 

concerned in case of any change in 

future land use. 

Food processing 

Alcohol distillation and brewing 100 Automatic Subject to license by appropriate 

authority. 

Manufacture of cigars and cigarettes 100 Approval from 

the Foreign 

Investment 

Promotion 

Board required 

Subject to industrial license under the 

Industries (Development and 

Regulation) Act of 1951. 

Source: Government of India, Ministry of Commerce and Industry, Department of Industrial Policy and Promotion, 

“Consolidated Policy on Foreign Direct Investment,” March 31, 2008. 

a

FDI is not allowed in any other agricultural sector/activity.

b

FDI is not allowed in any other plantation sector or activity. 

India also prohibits FDI in multibrand retail establishments, which may inhibit 

investment in the agriculture sector. The ban on FDI in multibrand retail is meant to 

protect the interests of India’s many small “kirana” retail shop owners.2

 For instance, 

foreign food companies with established brands may find it difficult to break into the 

Indian market through the kiranas because the shops are small and shelf space is at a 

 1

 Beyond the agricultural industries noted in the table, FDI is not allowed in any other agricultural sector 

or activity. Government of India, Ministry of Commerce, Department of Industrial Policy and Promotion, 

“Consolidated Policy on Foreign Direct Investment,” 2008; government official, interview by Commission 

staff, New Delhi, India, May 5, 2009. 2

 India permits FDI in single-brand retail establishments, defined as shops that only sell products by a 

single producer, such as a footwear manufacturer. FDI is prohibited in multibrand retail establishments, 

which are shops that sell products from more than one manufacturer, as do most U.S. supermarkets and 

department stores. 
8-3

premium. However, in the larger stores owned by organized retail chains, there is more 

space for branded foods. Additionally, the more sophisticated supply and distribution 

systems used by organized retail chains create greater access for high-volume brandname food items.3

 For more detail on the growth of India’s organized retail sector, see 

chapter 7. 

India began to liberalize its FDI regulations for the distribution industry in 2006. 

Although foreign investors are still prohibited from investing in multibrand retail 

establishments, a wholesaler can now be 100 percent foreign owned, and foreign 

companies can hold up to 51 percent equity of a single-brand joint venture.4

 Wal-Mart, 

for example, has initiated a wholesale distribution joint venture with Indian conglomerate 

Bharti that commenced operations in 2009. The firm has announced plans to source more 

than 80 percent of its goods locally, partly to cater to small businesses.5

 In addition, the 

Indian parliament has debated lifting the ban on FDI in multibrand retail organizations. 

Many observers expect the law to be changed, but as of November 2009, there has been 

no action.6

From 2004 through 2008, FDI inflows into agriculture-related industries grew rapidly but 

continued to account for less than 3 percent of total FDI inflows into India (table 8.2).7

Fermentation industries (alcoholic beverages) accounted for the largest share (51 percent) 

of agriculture-related FDI in 2008, followed by food processing industries (20 percent).8

The sharp upsurge in FDI in fermentation industries in 2008 reflects new investment in 

breweries, distilleries, and wineries by several multinational companies. The largest 

contributor was a change in ownership of a 37.5 percent equity stake in United Breweries, 

India’s largest beer company, a result of the acquisition of Scottish & Newcastle plc 

(United Kingdom), which owned a stake in United Breweries, by a consortium consisting 

of Carlsberg (Denmark) and Heineken (Netherlands). Several other multinational 

breweries invested in India during 2007 and 2008. Carlsberg built its fourth Indian 

brewery in West Bengal in 2008 at a cost of $16.1 million, and InBev (Belgium) invested 

$25.3 million in a brewery in Andhra Pradesh. In late 2006, SABMiller (United Kingdom) 

announced plans to invest $125 million in India over the following two to three years, 

both to expand existing facilities and to construct two new breweries (begun in 2007 at an 

expected cost of $49.0 million).9

 

 3

 Industry representative, interview by Commission staff, Gurgaon, India, May 6, 2009. 4

 Government of India, Ministry of Commerce and Industry, Department of Industrial Policy and 

Promotion, Press Note 3 (2006); Government of India, Ministry of Commerce and Industry, Department of 

Industrial Policy and Promotion, Investing in India, n.d., 68. 5

 fDi Markets database (accessed March 13, 2009). 6

 Industry representatives, interview by Commission staff, New Delhi, India, June 4, 2009. 

7

 Detailed Government of India FDI data by industry is not available for 2003. 8

 Government of India, Reserve Bank of India, CEIC database, September 25, 2009. 

9

 A significant share of the construction costs were likely recorded as FDI in 2008, as construction 

continued. Data regarding new FDI by breweries from fDi Markets database, June 22, 2009, Financial Times 

Ltd. 
8-4

TABLE 8.2 India: Agriculture-related FDI inflows, by industry (million $)

Industry 2004 2005 2006 2007 2008 

Share of

total, 2008 (%)

Sugar 2.9 3.0 15.7 10.9 5.0 0.7

Vegetable oils and vanaspati 5.9 13.7 4.4 14.3 44.1 5.8

Tea and coffee (a

) (a) (a) 3.7 52.4 6.9

Agriculture services (

a

) (a) (a) 120.0 10.7 1.4

 Hybrid seeds and plantation (

a

) (a) (a) 65.7 1.2 0.2

 Horticulture (

a

) (a) (a) 0.5 4.1 0.5

Food processing industries 80.2 40.8 54.0 65.6 150.0 19.7

Fermentation industries 7.4 8.3 4.3 49.1 388.7 51.1

Total agriculture-related FDI 96.4 65.8 78.5 329.7 656.2 100.0

Total FDI (all industries) 3,753.6 4,354.0 11,119.5 15,921.3 33,028.8 

Agriculture-related as share of total 

FDI 2.6% 1.5% 0.7% 2.1% 2.0% 

Source: Government of India, Reserve Bank of India, CEIC database, September 25, 2009. 

Note: FDI by industry data not available for 2003. 

a

Government of India statistics did not provide separate data for this industry before 2007.

The large inflows of FDI that have been reported in the hybrid seed and plantation area in 

2007 were likely the result of Devgen SA’s (Belgium) acquisition of a significant share 

of Monsanto’s India business, although the financial details of the transaction were not 

disclosed. Monsanto is focusing on its core Indian businesses of cotton, oilseeds, corn, 

and herbicides and sold its other seed businesses, including rice, sorghum, millet, and 

sunflower.10

The Indian government does not provide a further breakdown of the FDI data by country, 

but U.S. and other foreign firms are active participants in several segments of the food 

industry. A database of greenfield (new) FDI projects in India lists 151 projects covering 

the food, beverage, and warehousing/distribution industries between 2003 and 2008 

(table 8.3).11

TABLE 8.3 India: Identified greenfield FDI projects in food-related industries, 2003–08 

Sector 2003 2004 2005 2006 2007 2008 Total

Food and tobacco 11 10 9 13 11 24 78

Beverages 3 6 2 7 6 7 31

Warehousing and storage 5 2 3 16 3 13 42

Overall total 19 18 14 36 20 44 151

Source: Financial Times Ltd., fDi Markets database, 2009. 

Note: Data for warehousing and storage projects are not specific to the agriculture and food sectors. 

Of the total number of food-related greenfield FDI projects, 74 projects (49 percent) 

involved manufacturing (fig. 8.1), with U.S.-based investors responsible for 18 of those. 

The United States has been the leading source of greenfield FDI in India’s food-related 

sector during the past six years (fig. 8.2).

 10 Bureau van Dijk, Zephyr M&A database (accessed June 25, 2009). 

11 Greenfield projects are those newly established by the investing company, as opposed to acquisitions 

of existing companies. The Indian government’s official FDI data presented in table 8.1 includes FDI through 

both greenfield projects and acquisitions. 
8-5

0

10

20

30

40

50

2003 2004 2005 2006 2007 2008

Number of projects

Manufacturing Logistics, Distribution & Transportation 

Retail Sales, Marketing & Support 

Other

FIGURE 8.1 India: Food-related FDI projects in India by business activity, 2003–08

Source: Financial Times Ltd., fDi Markets database (accessed June 22, 2009). 

Sw itzerland

5%

Denmark

6% Austria

7% Netherlands

7%

United Kingdom

11%

Germany

11%

All other

28% United States

25%

FIGURE 8.2 India: Food-related greenfield FDI projects by source country, 2003–08

Source: Financial Times Ltd., fDi Markets database (accessed June 22, 2009). 

In addition to greenfield FDI, there were 47 foreign majority acquisitions of Indian 

agriculture-related companies between 2003 and 2008, in diverse industry segments, 

including breweries and distilleries, confectionery, seeds, and vegetable oil processing. 

U.S.-based firms were identified as the acquirer in eight of these transactions 

(table 8.4).12

 12 For the purposes of this study, a majority acquisition is defined as an acquisition of a final equity stake 

of at least 51 percent in an Indian company. Additional mergers and acquisitions (M&A) activity occurred 

during the time period, but those transactions involved foreign firms acquiring only a minority stake or an 

unreported equity stake in an Indian company. 
8-6

Food Processing and Nonalcoholic Beverages 

India’s government has a strong interest in reducing wasted food through increased 

development of the food processing industry. Toward this goal, Indian government 

regulations permit FDI in food processing with no industrial license required, except for 

alcoholic beverages and products reserved for small-scale industries (SSI).13 Observers 

expect processed food to grow rapidly as a share of all perishable food, moving from 

TABLE 8.4 India: U.S. majority acquisitions of Indian food companies, 2003–08 

Acquirer Target 

Final equity 

stake 

(percent) 

Deal value 

(million $) Date announced Industry 

Bunge Ltd. Hindustan Lever 

Ltd.’s edible oils 

and fats 

business 

100 0.2 June 20, 2003 Refining and 

blending of fats 

and oils 

 

Gabriel Management 

Group 

Bonsai Garden 

(India) Pvt. Ltd. 

100 NA December 17, 2003 Soil preparation, 

planting, and 

cultivating 

 

Wm. Wrigley Jr. 

Company 

Joyco India Pvt. 

Ltd. 

100 264.5 January 8, 2004 Confectionery 

 

Schreiber Foods Inc. Dynamix Dairy 

Industries Ltd. 

51 37.5 February 24, 2004 Dairy products 

 

Mr. and Mrs. 

Epparala 

KICM (Madras) 

Ltd. 

100 NA June 19, 2004 Mushroom 

processing 

 

Delta and Pine Land 

Company 

Vikki’s Agrotech 

Pvt. Ltd. 

100 NA January 22, 2006 Cotton seeds 

 

The Hershey 

Company 

Godrej 

Beverages and 

Foods Ltd. 

51 55.0 April 3, 2007 Confectionery 

 

Anheuser-Busch 

International 

Crown Beers 

India Ltd. 

100 NA June 20, 2008 Breweries 

Source: Bureau van Dijk, Zephyr M&A database, June 25, 2009. 

approximately 3 percent in 2006 to 6 percent in 2009 and continuing to grow at a 

compound annual growth rate of 12 percent in coming years.14 Further FDI in food 

processing will be essential to increasing India’s food processing capacity. Factors 

contributing to the increased demand for processed and packaged foods include the 

gradual expansion of organized retail outlets, more double-income families, and the 

decreasing cost of processed foods.15 U.S. companies have noted this trend and have 

begun to take an active role in India’s processed food industry (box 8.1). 

 13 As of 2008, the remaining foods reserved for SSI were pickles and chutneys; bread; pastry; hard-boiled 

sugar candy; rapeseed, mustard, sesame, and groundnut oil; and ground and processed spices. Landes, The 

Environment for Agricultural and Agribusiness Investment in India, July 2008, 16–17. 14 Industry representative, interview by Commission staff, Mumbai, India, May 29, 2009; Investment 

Commission of India Web site, “Food & Agro Products.” 15 Investment Commission of India Web site, “Food & Agro Products.” 
8-7

BOX 8.1 FDI in India’s Poultry Market 

Godrej Tyson Foods is a joint venture between Tyson Foods, Inc., a major U.S. poultry processor, and Godrej 

Agrovet. The venture, established in 2008, was aimed at convincing Indian consumers to purchase chicken as 

most Americans do—in chilled bags of whole chickens or tray packs of chicken parts readily available in a retail 

shop. This is a significant change for Indian consumers, who typically purchase live chickens that are 

slaughtered to order. The company emphasizes the convenience and food safety advantages of refrigerated 

chicken for India’s growing population of consumers with disposable income. Nonetheless, Godrej Tyson’s 

market is limited because many rural areas do not have sufficient access to the electric power required for 

refrigeration and because retailers are required to store vegetarian and nonvegetarian food separately, 

creating competition for retailers’ limited refrigerated storage space. 

For retail customers, Godrej Tyson sells processed chicken under the Real Good brand and ready-to-eat 

frozen foods, such as chicken sausages and vegetarian patties, under the Yummiez brand. The joint venture 

also sells frozen food to the restaurant and hotel trade. These large customers generally require a health 

certification from their meat suppliers, which gives large companies such as Godrej Tyson an advantage. 

Godrej Tyson maintains complete control of its cold chain distribution system from slaughterhouse to retail, 

including generating much of its own electricity, an essential investment for refrigeration capacity. Chickens are 

raised through a contract farming arrangement with local farmers, and Godrej Tyson supplies the feed and all 

other inputs. 

The company sells chicken through a controlled distribution system to 600–700 retail outlets. Godrej Real 

Good Chicken is sold with a three-day shelf life from the date of processing. One roadblock has been that most 

Indian food retailers are not accustomed to the hygiene requirements necessary for selling fresh meats, and 

there have been problems with retailers turning off the electric power to the refrigerators at night to save 

electricity costs, not understanding the bacterial risks. To combat this problem, Godrej Tyson has engaged in 

marketing efforts aimed at both consumers and retailers, and the company now refuses to credit retailers for 

any chicken that shows signs of nonrefrigerated storage. 

Godrej Agrovet introduced chilled tray-pack chicken under the Real Good Chicken brand before partnering with 

Tyson, but Tyson brings several highly useful attributes to the joint venture, including new technology and 

operating procedures that can expand the retail shelf life of chilled chicken to 12 days by keeping bacteria 

counts low. Together, Godrej Agrovet and Tyson will invest millions of dollars to upgrade equipment in the 

venture’s chicken processing plants in Mumbai and Bangalore, establish additional cold chain distribution 

facilities, and increase marketing efforts aimed at consumers and retailers. Godrej Tyson has also invested in 

self-controlled electric power and water and wastewater treatment facilities. 

Godrej Tyson’s inputs come from local Indian production rather than from imports. The company has imported 

equipment for its chicken processing line and some chicken vaccines, but chickens and chicken feed (primarily 

corn) are all sourced locally. Godrej Tyson exports small amounts of chicken from India to neighboring 

countries. Exports to larger markets in the Persian Gulf region, however, are currently prohibited because of 

the presence of avian influenza in India. 

 

Sources: Industry representatives, interviews by Commission staff, Mumbai, India, May 13 and 28, 2009; 

industry representative, telephone interview with Commission staff, April 7, 2009; fDi Markets database; and 

press reports. 
8-8

There is not necessarily a strong link between increased FDI in food processing and 

increased trade in food products. While some inputs must be imported, food producers in 

India, as elsewhere, generally prefer to use local inputs because of lower cost, greater 

availability, and local tastes. U.S. firms that have invested in India’s food sector have 

imported ingredients from the United States or elsewhere, but only until they were able to 

find or develop locally available inputs that met company standards. As far as exports are 

concerned, a number of global food companies see India both as an important local 

market and a hub from which to export processed food products to the entire region. 

Although U.S. companies export a share of their Indian production to neighboring 

countries, there is no evidence to suggest that they have exported significant amounts of 

processed food from India to the United States.16

Examples of U.S.-based multinational companies invested in India’s food processing 

sector include PepsiCo, Coca-Cola, ConAgra, Cargill, Heinz, ADM, and Kellogg’s. 

Through their investments, many of these companies, and others based outside the United 

States, hold significant market shares in many segments of India’s food market. In the 

confectionery market, for example, Cadbury-Schweppes held a 27 percent share by value 

in 2007, Nestlé held a 16 percent share, and Perfetti van Melle a 15 percent share.17 CocaCola and PepsiCo held the two largest shares (33 percent and 27 percent, respectively) of 

a rapidly growing soft drink market valued at $3.2 billion in 2007.18

Incentives for FDI in Food Processing 

U.S. companies are investing in India’s food industry for several reasons. First, they want 

to gain access to the Indian local market. U.S. producers of food and other agricultural 

goods are well aware of India’s growing consumer market, given its total population of 

1.2 billion and its rapidly growing middle class with significantly greater discretionary 

spending power than earlier generations of Indian consumers.19 Second, investing directly 

in the Indian market, rather than serving the market through U.S. exports, allows U.S. 

companies to take advantage of local commodity inputs and cheaper labor for processing 

facilities. Third, investing directly enhances U.S. companies’ ability to understand and 

adapt to local consumer preferences, which is likely a more important concern for 

producers of packaged and processed foods than for exporters of commodities such as 

grains, nuts, and oilseeds (box 8.2). 

Aside from offering easier access to local consumers, direct investment in India serves as 

a way to avoid tariffs or other border measures affecting U.S. exports. U.S. firms report 

that, in most cases, once established in India, they receive the same treatment as local 

firms.20 Local establishment through FDI may actually help U.S. firms smooth the path 

for regulatory acceptance of increased U.S. exports. For example, support for lower 

tariffs on U.S. pistachio exports is one motivation for U.S. pistachio producers to invest 

 16 Industry representatives, interviews by Commission staff, New Delhi and Mumbai, India, May 6, 11, 

and 12, 2009. 17 DATAMONITOR, “Confectionery in India: India Profile,” November 2008. The remainder is 

fragmented between Indian and other foreign countries. 18 DATAMONITOR, “Soft Drinks in India: India Profile,” November 2008. 

19 According to one estimate, India will be the fifth largest consumer market in the world in 2025, 

consisting of approximately 583 million middle class consumers, up from an estimated 50 million middle 

class consumers in 2005. McKinsey Global Institute, “The ‘Bird of Gold’: The Rise of India’s Consumer 

Market,” May 2007, 13. 20 Industry representatives, interviews by Commission staff, New Delhi, India, May 6 and June 4, 2009. 
8-9

in Indian processing facilities.21 India’s central and state governments also offer targeted 

incentives for FDI, some of them specific to the food and agriculture sectors. Foreign 

investors welcome such incentives, but there is little evidence to suggest that investors 

see these incentives as crucial aspects of the FDI decision-making process. 

At the central government level, the Ministry of Food Processing has included FDI as 

part of its vision for promoting the food processing industry, with a focus on plans to 

implement a “single-window” clearance system for new FDI in food processing and to 

undertake sector-specific marketing campaigns to attract foreign investors to India’s food 

processing industry.22 Specific tax and other incentives offered at the national level for 

investment in food processing include the following: 

 21 Industry representative, telephone interview by Commission staff, March 3, 2009. 22 Rabo India Finance Pvt. Ltd, Vision, Strategy and Action Plan for Food Processing Industries in India, 

vol. 1, April 2005, 25. 

BOX 8.2 PepsiCo Operations in India 

PepsiCo has a particularly large presence in India’s food processing sector, directly employing 4,600 and 

indirectly employing 60,000 in 2006. PepsiCo entered the Indian market in 1989 and has invested a total of 

$700 million since then. The company has one syrup concentrate plant, from which it supplies all of India, and 43 

bottling plants. PepsiCo also operates three Frito-Lay snack processing plants and a citrus nursery in India. In 

support of its orange juice business, the company has set up an agro-technology program in association with the 

Punjab government. The program includes a large greenhouse facility focused on orange juice-related R&D, 

orange juice groves, and a processing plant to commercialize the cultivation of citrus for its juice business. 

PepsiCo also recently introduced the Quaker Oats brand into India. 

PepsiCo originally entered the Indian market on the condition that it invest in the food processing sector. This led 

to the company’s pioneering efforts in contract farming of tomatoes, to ensure sufficient product for its tomato 

processing plant, which produced tomato paste primarily destined for Pizza Hut. The tomato business was later 

sold to Unilever. PepsiCo’s Frito-Lay operations in India obtain much of their inputs through contract farming. The 

primary crop now is potatoes, designated for potato chips and other snack foods. Frito-Lay reportedly uses about 

150,000 mt of potatoes annually, of which 50 percent is sourced through contract farming agreements with 

15,000 farmers across seven states. The Tropicana division also uses contract farming. 

In India, PepsiCo focuses on production of food for the local market and does not export food or other agricultural 

products from the United States to India. Over time, PepsiCo has shifted its snack food strategy to develop more 

indigenous Indian products, including new chatpate crackers with wheat and daal, offered in such typically Indian 

flavors as “special pindi masala” and “tomato and roasted spices.” Some snack foods are even more localized, 

with regional flavors rather than flavors designed to appeal to consumers across India.

In June 2009, PepsiCo announced plans to double its overall India investment, with approximately $350 million to 

be invested over the next three years, in addition to the capacity additions that the company made in 2008. 

These new investments will support increased facilities across the manufacturing, market infrastructure, supply 

chain, fruit processing, agriculture, and R&D business areas. The company has begun searching for suitable 

locations for new greenfield manufacturing plants and plans to focus on states that offer the best investment 

environment. 

Sources: PepsiCo, “PepsiCo Doubles Investment in India in 2009,” June 1, 2009; interviews with industry 

representatives; International Brand Equity Foundation (IBEF), “PepsiCo Holdings India Pvt. Ltd.,” Fortune 500 

Companies in India: Success Stories; Food Biz Daily, “PepsiCo's Frito-Lay India Launched Aliva—New Baked 

Savory Cracker,” June 4, 2009; Animesh Banerjee, “Role of Private Sector in Contract Farming & Direct 

Procurement,” January 29, 2008; and press reports. 
8-10

 For processing of fruits and vegetables, an income tax rebate for 100 percent of profits 

for the first five years, and 25 percent of profits for the next five years. 

 Zero excise duty on most processed food products, compared to an 8 percent excise 

duty on most other products. 

 Permission for futures commodity trading for agricultural produce. 

 Financial assistance to investors from various ministries and government agencies for 

building infrastructure, establishing or modernizing food processing facilities, 

conducting research and development (R&D), and other efforts.23

India has established a network of SEZs—specified geographical areas in which domestic 

and foreign investors receive tax incentives and other benefits. In many cases, the central 

or state government has given investors preferential access to ports or has developed 

special infrastructure within SEZs, such as dedicated electric power, minor ports and 

jetties, or inland container depots and container freight stations. However, since SEZs 

have been created to promote Indian exports, only 50 percent of production from the 

zones may be sold in the local market, and the remainder must be exported. Thus, SEZs 

are unlikely to meet the needs of investors primarily interested in accessing Indian 

consumers.24 

Separate from the existing SEZ program, the Ministry of Food Processing has developed 

a new Mega Food Parks scheme. Under the program, the ministry will provide financial 

assistance for private-sector firms to develop up to 30 large food industry parks, aimed at 

developing strong forward and backward linkages among farmers, food processors, and 

retailers. The parks are envisioned as “agri/horticultural-processing zone[s] containing 

state of the art processing facilities with support infrastructure and well established 

supply chain.”25 Unlike the SEZ program, the Mega Food Parks program is focused 

primarily on domestic investment and establishing linkages between the different 

segments of India’s food industry, rather than on exports or foreign investment. However, 

the program may well offer opportunities for foreign as well as domestic food industry 

investors. The Mega Food Parks scheme has only recently been implemented, with 

construction beginning on one of the first parks, the Western Agri Food Park in Pune, 

Maharashtra, in March 2009.26 

A number of state governments also offer incentives to investors that establish 

manufacturing facilities in the state, although these regulations are subject to change. For 

example, as of 2008, Jammu and Kashmir offered land at concessional rates and 

investment subsidies on fixed capital investment. The Himachal Pradesh government 

offered concessions on sales tax and electricity rates and other incentives for setting up a 

plant in its tax-free zones.27

 23 Ibid., 7, 108; Goyal, Big's Easy Reference Customs Tariff 2009–2010, July 7, 2009, 76–78. 24 Industry representative, interview by Commission staff, Washington, DC, April 30, 2009; Rabo India 

Finance Pvt. Ltd, Vision, Strategy and Action Plan for Food Processing Industries in India, vol. 1, 

April 2005, 6–7; and industry representative, interview by Commission staff, Mumbai, India, May 30, 2009. 25 Government of India, India.gov.in Web site, March 23, 2009. 26 India PR Wire, “Western Agri Food Park (P) Ltd Under Govt. of India’s Mega Food Scheme to be 

Launched at Shirwal,” March 3, 2009. 27 India Brand Equity Foundation (IBEF), “Fast Moving Consumer Goods,” n.d., 11; IBEF, “Himachal 

Pradesh,” December 2008. 
8-11

Disincentives for FDI in Food Processing 

India can be a difficult food market for foreign investors faced with unfamiliar market 

conditions, difficult supply and distribution systems, and confusing or burdensome 

central and state government policies and regulations. Indian government regulations that 

may inhibit FDI in the food processing sector include the ban on FDI in multibrand retail 

(discussed below), prohibitions on contract farming in some states, barriers to interstate 

commerce based on tax revenue and food security concerns, and some of the world’s 

highest taxes on processed foods. Other characteristics of the Indian market that inhibit 

FDI, but do not result from government regulations, include India’s system of small 

agricultural holdings, its inefficient infrastructure and marketing networks, poor 

distribution networks, the lack of cold chain and cold storage facilities, and Indian 

consumer preferences that remain focused on traditional foods.28 

Even though 100 percent foreign equity ownership is permitted in food processing, 

foreign investors often face challenges in dealing with local licensing requirements and 

other regulations necessary for establishing a new business. The lack of transparency and 

the difficulty of overcoming bureaucratic hurdles in establishing a locally traded 

company have led many foreign investors to choose to establish affiliates in India 

through a joint venture, despite a preference for sole ownership. 29 However, Indian 

regulations on joint venture agreements have also led to difficulties between some U.S. 

investors and their joint venture partners. These regulations have changed for new 

investors, but difficult situations from past joint venture relationships remain (box 8.3). 

 28 Govindan, India: Exporter Guide, October 1, 2008, 12. See chapter 7 for more information on these 

topics. 29 USTR, 2007 National Trade Estimate Report on Foreign Trade Barriers, 2007, 246. 
8-12

The entire food processing industry was once reserved for small-scale industry. Although 

this is true for only a few foods now, the legacy of the system is an industry that is not 

vertically integrated and is composed almost entirely of small firms, making FDI difficult 

for agribusiness investors looking for efficient, competitive suppliers of intermediate 

goods and services. Particular attributes of the small-scale sector that inhibit efficiency 

include lack of access to credit, lack of management expertise, poor equipment, and little 

knowledge of marketing techniques.30 Foreign investors might be able to remedy these 

deficiencies, but the existing situation increases the required scale of any initial 

investment, acting as a disincentive to new investors. The SSI legacy also shapes the 

relationships between foreign investors and contract farmers. Because most Indian farms 

are so small, farmers often do not have the ability to do business directly with large food 

processing companies, and the companies find it difficult to conclude contracts with 

enough small farmers to guarantee sufficient product to operate their factories. For these 

reasons, foreign firms often work through middlemen who serve as bundlers by 

negotiating directly with many small farmers, allowing the firms to ensure sufficient 

supplies to profitably operate food processing facilities.31 

India’s agricultural markets are closely regulated, primarily to protect local farmers. 

Regulations are not directed at foreign investors, and domestic firms are subject to the 

same rules, but market distortions such as price controls and local government 

 30 Rabo India Finance Pvt. Ltd, Vision, Strategy and Action Plan for Food Processing Industries in India,

vol. 1, April 2005, 6. 31 Industry representatives, interviews by Commission staff, New Delhi and Mumbai, India, 

May 4–12, 2009. 

BOX 8.3 Restrictions on Foreign Joint Venture Partners 

In 1974, India required that all wholly owned foreign companies operating in India sell off a share of their equity 

to a local Indian partner (become a joint venture). Under Press Note 18 of 1998,a

 foreign investors were also 

forbidden to establish a competing business in the same industry as an existing joint venture or to increase their 

equity share in the existing business without the permission of the Indian government. The Indian government 

gave such permission only with a notice of approval from the Indian joint venture partner. This regulation applied 

regardless of the terms of the original joint venture contract and was meant to protect the Indian joint venture 

partner. The regulation gives Indian joint venture participants tremendous leverage over their foreign business 

partners, and some U.S. companies have stated that they are essentially held hostage in the Indian market by 

their joint venture partners. 

The regulation was updated through Press Note 1 of 2005, issued by the Department of Industrial Policy and 

Promotion. The new regulation liberalized the rules for new joint venture investments in India. Under the new 

rules, all joint venture partners are bound by the terms of the contract between them, which may specify 

provisions for dissolving the partnership. However, approval by the Indian government, conditioned on joint 

venture partner approval, is still required for most new investments involving companies that entered into joint 

ventures and agreements concluded before January 12, 2005. 

Even though the regulation does not apply to new investments in India, a number of U.S. companies remain 

directly affected, and others may consider the regulation as a disincentive to investment when evaluating their 

investment options. 

 a India’s Ministry of Commerce and Industry, Department of Industrial Policy and Promotion, introduces 

policy changes related to FDI through announcements called Press Notes, which are numbered in a series that 

begins with No. 1 each calendar year. 

Sources: Government of India, Ministry of Commerce and Industry, Department of Industrial Policy and 

Promotion, Press Note 18 (1998) and Press Note 1 (2005); industry representatives, telephone interviews and email communication with Commission staff, March 17, April 7, and May 8, 2009; USTR, 2009 National Trade 

Estimate Report on Foreign Trade Barriers, 2009, 247; and press reports. 
8-13

implementation of particular regulations may deter foreign investment in India’s 

agricultural sector. The two primary agricultural market regulations at the central 

government level are the APMC and the ECA.32 Under the 2005 APMC revisions, a few 

foreign and domestic firms have begun to invest in local agricultural markets (mandis) to 

purchase agricultural goods directly from farmers.33 The ECA gives state governments 

the right to intervene in food markets to ensure food supplies and protect consumers. 

Even though the ECA is not often used, the ongoing possibility of government 

intervention in agricultural markets inhibits investment, particularly in warehousing, 

which might be seen as a hoarding mechanism if the ECA were implemented.34

Alcoholic Beverages 

Under India’s central government regulations, FDI with up to 100 percent foreign equity 

is permitted for the distillation and brewing of alcohol, subject to licensing by the 

appropriate authority.35 However, FDI in the rapidly growing Indian market for alcoholic 

beverages is complicated by the fact that each Indian state government has its own laws 

regulating the production, distribution, and sale of alcohol, including several states that 

prohibit all sales of alcoholic beverages.36 The Indian market for alcoholic beverages 

comprises beer, wine, and spirits. Foreign investors face many of the same issues in all 

three segments of the market, and a number of companies are engaged in two or all three 

market segments, although some issues are specific to only one segment. For instance, 

wine producers often prefer to have direct control over their vineyards, whereas 

producers of beer and spirits are more likely to purchase their ingredients in local markets 

or import them. 

Foreign companies have a strong presence in the Indian beer market, as FDI is relatively 

easy, and they have a keen interest in the rapidly growing market. SABMiller (United 

Kingdom) was the leading foreign brewery in 2008, with a 36 percent share of India’s 

beer sales, second to India-based United Breweries (maker of Kingfisher beer) with 

48 percent.37 SABMiller’s share of the overall alcoholic drinks market, including beer, 

was 19 percent. SABMiller has been actively acquiring regional Indian breweries, 

increasing its market share.38 Other foreign companies with brewery investments in India 

in 2007 and 2008 include Heineken (Netherlands), Carlsberg (Denmark), and AB InBev 

(Belgium).39 U.S. firms have not been among the leading investors, primarily because 

most large players in the global beer market are European companies. 

 32 For more information on these regulations, see chapter 7. 33 Industry representatives, interviews by Commission staff, New Delhi and Gurgaon, India, May 5–6, 

2009; Landes, The Environment for Agricultural and Agribusiness Investment in India, July 2008, 2. 34 Industry representative, interviews by Commission staff, Gurgaon, India, May 6 and 8, 2009; Landes, 

The Environment for Agricultural and Agribusiness Investment in India, July 2008, 2. 35 Government of India, Ministry of Commerce and Industry, Department of Industrial Policy and 

Promotion, “Subject: Rationalisation of the FDI Policy,” 2006; Ministry of Food Processing Web site, 

“Policies and Regulations,” n.d. 36 Industry representatives, interview by Commission staff, Washington, DC, June 19, 2009; 

DATAMONITOR, “Beer in India: India Profile,” December 2008. 37 United Breweries owns the very popular Kingfisher brand of beer. Heineken (Netherlands) owns 

37.5 percent of United Breweries. Vijay Mallya, “Chairman’s Statement, 2008,” Kingfisher World Web site, 

2008. 38 DATAMONITOR, “Beer in India: India Profile,” December 2008; “Alcoholic Drinks in India: 

Industry Profile,” December 2008. 39 Financial Times Ltd, fDi Markets database (accessed June 22, 2009). 
8-14

Under certain circumstances, FDI can be a driver of trade, but as noted above, that has 

not necessarily been the case with regard to investment in India’s food and agriculture 

sector. One exception may be the case of the barley used for brewing beer. Barley is a 

significant input for breweries, and high-quality barley is difficult to find in India, where 

barley is produced and used mostly for animal feed. Several beer industry representatives 

and importers have noted that they would be interested in importing barley from the 

United States, but U.S. exports cannot be certified to meet India’s requirement for ergotfree barley, so brewers in India import from other, more expensive sources, primarily 

Canada.40

Foreign and domestic investment in India’s wine industry is in the very early stages, but 

it is growing rapidly, and is encouraged in part by projected future increases in 

consumption and a supportive FDI environment. According to one estimate, India’s 

production and consumption of wine are expected to increase by 25–30 percent between 

2008 and 2013, driven by increasing incomes, rapid urbanization, and the growth of 

organized retail outlets in India.41 

Foreign firms can wholly own a production facility such as a winery but are not permitted 

to purchase and farm most types of agricultural land, including vineyards. Pernod Ricard, 

a global company in the alcoholic beverage market, has built a winery named “Nine 

Hills” in Nasik and is producing wines for the domestic market. Because of the ban on 

agricultural land ownership, Pernod Ricard has established contract farming 

arrangements to purchase wine grapes from local farmers. The contracts require farmers 

to follow specific production methods, dictated by a Nine Hills viticulturalist who 

educates local farmers on wine grape production. Many of these farmers have long 

experience growing table grapes but have switched because wine grapes sell at 

significantly higher prices.42

The central government offers some support for foreign investors in the wine industry, 

including: 

 direct subsidies for winery development, approximately 25–33 percent of start-up 

costs for capital investments in wineries, up to $160,000; 

 capacity-building initiatives, including technical training of workers; 

 research assistance and assistance in establishing a laboratory; and 

 approval of the formation of a National Wine Board, intended to be a public-private 

partnership that will advocate for growth initiatives for the Indian wine industry.43

Although the distilled spirits industry in India is open to FDI, global spirits companies 

tend to export to India even though existing tariffs are high, rather than establish 

operations within India and produce locally because certain spirits are distinctive 

products of particular countries or regions. For instance, genuine Scotch whiskey must be 

produced in Scotland, and genuine bourbon must be produced in the United States. 

 40 Industry representatives, interview by Commission staff, Gurgaon, India, June 5, 2009; industry 

representatives, interview by Commission staff, Washington, DC, June 19, 2009. See chapter 6 for additional 

discussion of NTM restrictions that apply to barley. 41 Rabobank, “Executive Summary,” February 2008. 

42 According to an industry representative, table grapes sell for Rs. 10–12 per kilogram and wine grapes 

for Rs. 28–38 per kilogram, although production costs for wine grapes may also be higher than for table 

grapes. Industry representatives, correspondence with Commission staff, March 12, 2009. 43 Industry representative, correspondence with Commission staff, March 12, 2009. 
8-15

Alcoholic beverage production and sales are closely regulated by state governments, and 

industry representatives have identified (1) specific state regulations, (2) the general 

system of state regulation, and (3) the practice of export taxes payable for shipments from 

one Indian state to another as deterrents to FDI or domestic investment in particular 

states.44 Specific state regulations cited as impediments to FDI include those related to 

labeling requirements, licensing for breweries and distilleries, prohibitions on sales of 

alcoholic beverages produced in other states, product standards, and price caps, all of 

which tend to vary widely among states.45

Under India’s 2008 Food Safety Law, states are able to require separate labeling 

standards for alcoholic beverages. The law entered into force in May 2009, so state 

regulations have not yet been issued, but industry representatives cite this development as 

a potentially significant barrier to sales. Specific labeling issues noted include 

requirements to list ingredients, dates of packaging and manufacture, and nutritional 

information on labels (see chapter 6). This practice is not standard for alcoholic 

beverages worldwide. 46 If states with smaller markets imposed distinct labeling 

requirements, major distributors would likely exit those markets and concentrate on 

major market areas such as Maharashtra, New Delhi, and Goa.47 

The case of SABMiller in Tamil Nadu exemplifies problems with licensing procedures in 

India. The company applied for a brewery license in 2007 and was still waiting for 

approval as of September 2009. Because Tamil Nadu does not permit alcoholic beverages 

to be transshipped from other Indian states, SABMiller has been supplying its products to 

Tamil Nadu through a contract brewing arrangement with Mohan Breweries & 

Distilleries (MBDL), an Indian company with brewing facilities in the state. MBDL 

suspended its agreement with SABMiller in April 2009, leaving SABMiller with no 

production or distribution facilities in Tamil Nadu. SABMiller reportedly had been 

selling 3 million cases of beer annually in Tamil Nadu, India’s second-largest beer 

market, and the company hopes to resume operations in the state before the end of 

2009.48

By carving up the large Indian market into separate jurisdictions, state regulations may 

dissuade large investors from investing in India at all, because the barriers to interstate 

movement of goods make it very difficult for investors to benefit from the economies of 

scale that such a large market would generally offer. In the wine industry, for example, 

the Bureau of Indian Standards has developed the standards for Indian winemaking, but 

these standards are only suggestions to the State Excise Departments. Each state 

establishes and enforces its own standards, which are usually, but not necessarily, the 

same from state to state.49

State regulations have also been used to impose price caps on specific products, often 

with little or no warning of the change in regulations and after production has 

 44 The central government imposes high tariffs on alcoholic beverages, but other taxes and restrictions on 

the industry are the purview of the individual states. 45 Industry representatives, interviews by Commission staff, New Delhi, India, May 8, 2009, and 

Washington, DC, June 19, 2009. 46 DISCUS, submission to the Commission, June 25, 2009. 

47 Industry representatives, interviews by Commission staff, New Delhi, India, May 8, 2009, and 

Washington, DC, June 19, 2009. 48 Industry representative, e-mail message to Commission staff, September 25, 2009; Boby Kurian, 

“Mohan Breweries to Exit SABMiller Pact,” The Economic Times, May 12, 2009. 49 Industry representative, correspondence with Commission staff, March 12, 2009. 
8-16

commenced. States tend to be quick to match price caps imposed in other states, so 

investors can find that their national marketing strategy becomes invalid from one day to 

the next. For example, in five of India’s top 10 state markets for alcoholic beverages, 

local government regulations mandating certain price limits resulted in reduced brewery 

profit margins in 2008. In a number of states, wholesale and/or retail prices for alcoholic 

beverages are set directly by the state.50

The counterfeiting of spirits companies’ valuable brands is of concern to the industry as 

well.51 According to industry estimates, India’s informal sector is thought to produce 

approximately 300 million cases of liquor a year, double the official production.52 Scotch 

whiskey, particularly Johnnie Walker, is reportedly the counterfeit product of choice in 

India, as it is one of the country’s most popular brands.53 Counterfeiting occurs through a 

variety of means, including the collection of used genuine liquor bottles that are filled 

with counterfeit product that tastes similar to the genuine product, but with distribution 

and sale of the counterfeit through bootleg liquor channels.54 The large size of India’s 

domestic market, high price sensitivity, weak and uncoordinated enforcement efforts, and 

a lack of knowledge among customers all contribute to a substantial market for 

counterfeit spirits in India.55

 

Quick-Service Restaurants 

The quick-service restaurant industry is another sector that has attracted significant 

amounts of FDI from U.S. investors. Two U.S.-based companies, Yum! Brands and 

McDonald’s, are leading companies in India’s quick-service restaurant sector.56 Yum! 

Brands operates restaurant chains including KFC, Taco Bell, Pizza Hut, and Long John 

Silver’s. Other chain restaurants such as Domino’s Pizza, Subway, Quiznos, and Papa 

John’s, have also invested in India and are recognized brands in the country. 

Restaurants are significant consumers of agricultural products, and quick-service chain 

restaurants with integrated supply chains represent an important part of the food product 

market in this sector. Because of their U.S. ties, quick-service restaurant chains such as 

Yum! Brands and McDonald’s would appear to be likely exporters of food products from 

the United States to their affiliate companies in India, but that is seldom the case. It is 

true that at the outset, companies will pay the extra costs, such as high tariffs, associated 

with imported ingredients when they are not available locally, to protect their reputations 

for high quality.57 In many cases, however, Indian quick-service restaurants shift to using 

local ingredients as soon as they are able to obtain or develop what they need from local 

sources. 

 50 Industry representative, e-mail message to Commission staff, May 8, 2009. 51 Industry representative, interview by Commission staff, New Delhi, India, May 8, 2009; industry 

representative, interview by Commission staff, Washington, DC, June 19, 2009. 52 International Center for Alcohol Policies (ICAP), Noncommercial Alcohol in Three Regions, 2009, 

24–25. 53 Industry representative, e-mail message to Commission staff, May 8, 2009. 54 Industry representative, e-mail message with Commission staff, June 26, 2009; Keith Nuthall, “Focus: 

Spirits Industry Calls for Tougher Action on Counterfeiting,” April 28, 2009. 55 KPMG, Combating Counterfeiting and Grey Market: A Challenge for Indian Corporates, 

December 22, 2008, 7; industry representative, interview by Commission staff, New Delhi, India, 

May 8, 2009; and industry representative, interview by Commission staff, Washington, DC, June 19, 2009. 56 DATAMONITOR, “Profit Foodservice in India: Industry Profile,” August 2008. 57 Industry representatives, interviews by Commission staff, Mumbai and New Delhi, India, 

May 8–12, 2009. 
8-17

There are a number of reasons why quick-service restaurant companies prefer local over 

imported food ingredients. One is that they try to offer fresh food wherever possible, 

leading to a preference for local supplies. Fresh produce such as lettuce and tomatoes is 

also easier to purchase locally, reducing transport and other logistics costs. Moreover, 

these restaurants tailor many of their products to local tastes, so it is logical for them to 

use local products. For instance, KFC offers a chicken product in India that is much 

spicier than their U.S. chicken choices. Other food products must conform to Indian 

government regulations, such as a ban on the use of artificial colors.58 Also important is 

the fact that global food companies want to be seen as good local citizens and part of the 

local community, supporting local farmers and food producers. 

Today, Yum! Brands and McDonald’s establishments in India import few ingredients 

from the United States. For example, potatoes for McDonald’s french fries are grown to 

exacting standards; globally, they are provided by McCain Foods. For the first eight years 

that McDonald’s was established in India, the company imported its MacFry supplies 

from the United States, while McCain Foods attempted to grow potatoes to McDonald’s 

specifications in India. McDonald’s began using some locally sourced potatoes in 2007 

and expects to be able to source all of its potato needs, estimated to be 12,000 mt, from 

Gujarat by 2010. In fact, McDonald’s hopes to export surplus potatoes from India to 

China in the near future. These Indian exports would replace MacFry exports from the 

United States to China.59 

Some restaurant companies prefer to import certain ingredients, though it is not always 

possible for them to do so. Certain widely available bulk commodities that are easy to 

ship, including wheat and vegetable oil, would seem to be likely candidates for imports. 

For example, low-protein Indian wheat is not well suited to high-rising dough products, 

such as Western-style bread rolls and pizza dough, and restaurants that use Indian wheat 

to make such products must include a costly extra step of adding wheat gluten to their 

bread dough. However, existing Indian barriers to foreign wheat imports make imports of 

high-protein foreign wheat more expensive; as reported elsewhere in this report, U.S. 

wheat, though desirable, is almost impossible to import into India. Thus most companies 

continue to rely on less-suitable Indian wheat.60

Global brand reputation is tremendously important to quick-service restaurants, and they 

have been successful in building brand loyalty with Indian consumers. For example, the 

Economic Times annual brand survey has named Pizza Hut the “Most Trusted Service 

Brand” in India for the last five years.61 Yet it does not appear that brand loyalty is built, 

for the most part, on providing specifically U.S. ingredients in these restaurants’ offerings. 

Rather, U.S. brand owners report that success in the quick-service industry in India is in 

direct proportion to their ability to adapt product offerings to local palates while 

continuing to emphasize those parts of the global brand that Indian customers value most, 

such as high quality, convenience, cleanliness, and good service.62 

 58 Industry representatives, interviews by Commission staff, Mumbai and New Delhi, India, 

May 8–12, 2009. 59 Industry representative, interview by Commission staff, Mumbai, India, May 12, 2009; Hindu Business 

Line, “MacFry Now Made in India,” March 7, 2008. 

60 Industry representative, interview by Commission staff, New Delhi, India, May 8, 2009. 61 StreetInsider.com, “Pizza Hut Named Most Trusted Food Service Brand in India by the Economic 

Times for Fifth Year,” June 25, 2009. 62 Bahn and Nemer, “Brand Magic in India,” May 8, 2006; industry representative, interview by 

Commission staff, Mumbai, India, May 12, 2009; and industry representative, interview by Commission staff, 

New Delhi, India, May 8, 2009.
8-18

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9-1

CHAPTER 9 

Intellectual Property Rights and Related 

Policies in the Indian Seed Sector 

Overview 

U.S. and global seed firms identified intellectual property rights (IPR) as particularly 

important to their operations in India.1

 Firms in other agricultural sectors, by contrast, did 

not identify IPR policies as critical to their trade or investment decisions.2

 U.S. and other 

global firms participate in the market mainly through the local research and development 

(R&D) and commercialization of hybrid and genetically engineered, or biotech, seeds.3

This local presence enables global firms to establish and maintain close connections with 

customers and facilitates the development and regulatory approval of seeds tailored to 

India’s specific agronomic conditions.4

 

U.S. and other global firms have identified three factors as critical to increasing their 

participation in the Indian market: comprehensive and effective IPR laws, market-based 

pricing, and science-based regulatory review of new seed technologies. In the area of IPR, 

India has recently put in place a plant variety protection law, as well as patent provisions 

for seed biotechnology inventions; however, industry sources indicated that broad 

exceptions in the laws, delayed implementation, and uncertainty regarding enforcement 

undermine the effectiveness of these protections. They also noted that state-level 

restrictions on prices and time-consuming and unpredictable regulatory review impede 

the commercialization of new seed technologies. In the absence of effective regulatory 

review and IPR enforcement, industry sources claim that illegal and counterfeit seed 

markets have flourished, to the detriment of legitimate products.5

 

 1

 One IPR issue of substantial concern to producers of agricultural chemicals is India’s lack of protection 

against the unfair commercial use of tests or other data that firms submit to obtain government marketing 

approval for their products. Biotechnology Industry Organization (BIO), written submission to the 

Commission, June 26, 2009, 3. Because chemicals are outside the scope of this investigation, the issue is 

mentioned only briefly here. 2

 Although not reported to be of primary importance, the value of trademarks to successful FDI in the 

processed food and quick service restaurant sectors, and problems with the counterfeiting of spirits, were 

issues raised by industry representatives during Commission interviews and are noted in chapter 8. 3

 Although India’s domestic seed market is one of the largest in the world, imports account for only a 

small portion of the market. The International Seed Federation (ISF) estimates the value of India’s domestic 

seed market at $1.5 billion. See ISF Web site, http://www.worldseed.org/en-us/international_seed/home.html

(accessed June 20, 2009). The United States accounted for $6 million of India’s total planting seed imports of 

$49 million in FY 2007–08. Singh and Kaul, India: Planting Seeds, December 17, 2008, 6. 4

 Industry representative, interview by Commission staff, Mumbai, India, May 12, 2009; Monsanto India 

Ltd., Annual Report 2007–2008, 2009, 16. 5

 Industry representatives, interviews by Commission staff, New Delhi, India, May 4, 5, 6 and 9, 2009; 

industry representatives, interviews by Commission staff, Mumbai, India, May 11 and 12, 2009; and industry 

representatives, telephone interviews by Commission staff, January 21, March 30, and June 10, 2009. See 

also BIO, written submission to the Commission, June 26, 2009, 2–3; USIBC, written submission to the 

Commission, June 26, 2009. 
9-2

Structure of the Indian Seed Market 

The Indian seed market comprises a large public sector and a growing private sector. The 

involvement of the public and private sectors in the market varies according to the three 

major types of seeds: (1) open-pollinated varieties (OPVs), which can be saved and 

reproduced from one year to the next without deteriorating quality; (2) hybrids, which 

must be replaced each year but generally provide substantial yield and quality gains over 

OPVs; and (3) biotech seeds, or seeds that have been engineered to include genes with 

desirable traits, such as insect resistance, that are transferred from other organisms.6

Genetic engineering techniques can be used with hybrids or OPVs; in India, biotech seeds 

are typically hybrids. Generally, Indian public-sector seed companies supply high 

volumes of low-value OPVs—such as grains and pulses. The private sector supplies low 

volumes of high-value hybrids and biotech seeds, such as vegetables and cotton. 7

Demand for hybrid and biotech seeds is growing as Indian farmers become convinced of 

the substantial quality, stability, and yield improvements such seeds can bring to the 

harvest.8

 

With this transition away from OPVs, the private sector’s share of the seed market has 

increased to 60–70 percent, up significantly from 20 years ago.9

 Economic reforms in the 

seed industry in the late 1980s and in the Indian economy in 1991—including the 

removal of industrial licensing requirements, of small-scale industry reservations, and of 

restrictions on foreign direct investment (FDI)—also have opened the industry to broader 

participation by Indian and global firms. Today, there are reportedly no FDI or profit 

repatriation restrictions limiting investment in India’s seed sector.10 

U.S. and other global seed firms with a substantial presence in the Indian hybrid and 

biotech seed markets include Monsanto (United States), Bayer CropScience (Germany), 

DuPont/Pioneer (United States), Syngenta (Switzerland), and Dow AgroScience (United 

States). Leading Indian firms include Rasi Seeds, the Maharashtra Hybrid Seed Company 

(Mahyco), Nuziveedu Seeds, Advanta/United Phosphorus Limited, and JK Seeds. 

Together these foreign and domestic firms reportedly supplied more than 90 percent of 

the Indian hybrid and biotech seed market in 2006.11 

Intellectual Property Rights Protection for Seeds 

IPR protection for seeds is important because the invention, development, and 

commercialization of new products often entails large research expenditures, uncertain 

 6

 Choudhary and Guar, Trust in the Seed, 2008, 15. 7

 Govindan, India: Planting Seeds, December 29, 2003, 3. 8

 Industry representative, telephone interview by Commission staff, June 10, 2009; Choudhary and Guar, 

Trust in the Seed, 2008, 10–14. 9

 Ramaswami, “Understanding the Seed Industry,” August 2002, 4. 10 Industry representative, interview by Commission staff, New Delhi, May 9, 2009; Murugkar, 

Ramaswami, and Shelar, “Competition and Monopoly in the Indian Cotton Seed Market,” May 2007, 2. 11 Girdhar, “Public Private Partnership in Seed Development,” October 19, 2006. Dow AgroScience is a 

more recent entrant to the hybrid and biotech seed market in India and thus was not included in the Bayer 

CropScience market estimates. 
9-3

outcomes, and lengthy and costly regulatory procedures.12 U.S. and other global seed 

firms report that stronger IPR protections are necessary to help recover these substantial 

costs and to provide incentives for continued innovation.13 

IPR protection is considered crucial for all types of seeds, but particularly for new OPVs 

and biotech seeds. The value of these types of seeds can be relatively easily appropriated; 

OPVs can be saved and reused or shared among farmers, and the latest biotechnology 

tools facilitate the reverse engineering of biotech seeds by commercial competitors.14

Hybrids, which are created through the crossing of two or more parental lines, have some 

built-in protection from appropriation by farmers as the seeds lose their superior yield 

potential and other valuable characteristics after the first planting. 15 Moreover, 

competitors cannot copy a hybrid without obtaining access to the parental lines used to 

create it.16 However, these built-in protection mechanisms have their limitations. Seed 

production in India tends to be concentrated in geographic zones with favorable 

agronomic conditions; the presence of many competing firms working in a relatively 

small area creates numerous opportunities for misappropriation.17 U.S. and other global 

firms report that they are cautious about developing and marketing hybrids in India, 

particularly seeds that are produced by only a single cross of parents, preferring multiple 

crosses to make unauthorized access to the parental lines more difficult.18 

Plant Variety Protection 

The WTO Agreement on the Trade-Related Aspects of Intellectual Property Rights 

(TRIPS Agreement) requires that members protect plant varieties with patents, an 

effective alternative system, or both. 19 A limited number of countries, including the 

United States, use both patents and an alternative system to protect plants. Most 

developing countries have chosen not to offer patent protection and instead provide an 

alternative system, relying on the model supplied by the International Union for the 

Protection of New Varieties of Plants (UPOV) (box 9.1). 

 12 According to BIO, “it can take ten to fifteen years and tens of millions of dollars to commercialize an 

agricultural biotechnology product.” BIO, written submission to the Commission, June 26, 2009, 2. See also 

Monsanto India Ltd., Annual Report 2007–2008, 2009, 10; Maskus, “Intellectual Property Rights in 

Agriculture,” December 2004, 721; and Gracen, “How Intellectual Property and Plant Breeding Come 

Together,” 2007, 1820–23. 13 Industry representatives, interviews by Commission staff, New Delhi, India, May 4, 5, 6, and 9, 2009; 

industry representatives, interviews by Commission staff, Mumbai, India, May 11 and 12, 2009; industry 

representatives, telephone interviews by Commission staff, January 21, March 30, and June 10, 2009; and 

BIO, written submission to the Commission, June 26, 2009, 2. 14 Maskus, “Intellectual Property Rights in Agriculture,” December 2004, 721. 15 Industry representative, telephone interview by Commission staff, June 10, 2009. 16 World Bank, Intellectual Property Rights, 2006, 7. 17 Tripp, Louwaars, and Eaton, “Plant Variety Protection,” 2007, 360. 18 Industry representative, telephone interview by Commission staff, June 10, 2009. 19 TRIPS, art. 27.3(b). 
9-4

India enacted its own unique legislation in 2001, the Protection of Plant Varieties and 

Farmers’ Rights Act, 2001 (PPV&FR law). Major differences between the Indian law and 

U.S. law, which follows the 1991 UPOV Convention, are highlighted below (table 9.1). 

The most significant difference stems from India’s attempt to safeguard the interests of 

farmers by broadly permitting them to save, use, sow, exchange, share, and even sell 

protected seed. U.S. and other global seed firms state that this broad farmer’s privilege is 

a significant disincentive to their introduction of new technologies in India.20 The only 

limitation on the farmers’ privilege is a prohibition on the sale of “branded seed.” Even 

branded seed is often protected only in theory: the practice of “brown bagging,” where 

farmers and others sell repackaged branded seed or seed of unknown origin in brown 

bags in village markets, is widespread in India.21 

 20 Industry representative, telephone interview by Commission staff, March 30, 2009; industry 

representatives, interviews by Commission staff, New Delhi, India, May 4, 8, 2009; and industry 

representative, e-mail message to Commission staff, June 19, 2009. 21 As several industry representatives noted, it is virtually impossible to sue farmers in India. Industry 

representative, interview by Commission staff, New Delhi, India, May 5, 2009; industry representative, 

interview by Commission staff, Mumbai, India, May 12, 2009; and industry representative, telephone 

interview by Commission staff, June 10, 2009. For additional information on brown bagging and illegal seed, 

see box 9.3. 

BOX 9.1 The UPOV System for Plant Variety Protection 

UPOV was established by the International Convention for the Protection of new varieties of plants (the UPOV 

Convention). The UPOV Convention was originally adopted in 1961, with the objective of encouraging the 

development of new varieties of plants by granting IPR to plant breeders. UPOV grants plant breeders rights over a 

variety that is “distinct, uniform, and stable” (the DUS criteria) for a defined number of years. Breeders can bring 

suit to enforce their rights and obtain damages for infringement. 

The UPOV Convention was revised in 1972, 1978, and again in 1991, with the 1991 revision providing stronger 

protection to plant breeders than earlier conventions. For example, the 1991 UPOV Convention makes it optional 

rather than mandatory for a member state to recognize a farmer’s privilege to use and exchange saved seeds of a 

protected variety. Moreover, the farmer’s privilege is more narrowly tailored in the 1991 UPOV Convention. 

Although members joining UPOV generally are required to join under the latest version of the UPOV Convention, 

India received a dispensation that would permit it to join under the 1978 UPOV Convention. Although India has 

applied to join UPOV, to date UPOV has not granted India’s application, at least in part because of the broad 

farmer’s privilege in India’s law (discussed below). 

Sources: Dhar, “Sui Generis Systems,” April 2002, 8–16; World Bank, Intellectual Property Rights, 2006, 16; and 

industry representative, telephone interview by Commission staff, June 10, 2009.
9-5

TABLE 9.1 Major differences between Indian and U.S. plant variety protection laws

India United States 

Length of 

protection 

18 years for trees and vines; 15 years for 

other crops and “extant” (existing) varieties. 

25 years for trees and vines, 20 years for other 

crops. 

Scope of 

protection 

Allows protection of extant varieties and 

farmers’ varieties, as well as new varieties. 

Only new varieties must meet the UPOV 

requirement that variety be distinct, uniform 

and stable. 

Allows protection of plant varieties that are novel 

and that meet the UPOV requirement that variety be 

distinct, uniform and stable. 

Farmer seed 

saving and 

exchange 

Seed saving, exchange, and sale by farmers 

are broadly permitted, without reference to 

breeders’ interests. Farmers are prohibited 

only from selling “branded seed.” 

Seed saving and sole use by the farmer to produce 

a crop are permitted, subject to the legitimate 

interests of the breeder. Farmers cannot sell or 

share seed without the permission of the breeder 

and payment of royalties. 

Breeder’s 

exemption 

Activities for purpose of breeding other 

varieties are generally permitted. 

Activities for purpose of breeding other varieties are 

permitted provided that they do not result in the 

production of “essentially derived varieties.” 

Sources: Indian Protection of Plant Varieties and Farmers’ Rights Act (2001); U.S. Plant Variety Protection Act, 7 

U.S.C. §§ 2321–2582 (2007). 

Moreover, India’s delayed implementation of the PPV&FR law makes it difficult to 

assess its effectiveness. Despite enactment of the law in 2001, the regulatory agency 

charged with implementation, the PPV&FR Authority, was not established until October 

2005 and did not begin accepting applications for registration until May 2007. 22

Furthermore, the PPV&FR Authority has been phasing in protection by initially 

accepting applications for only 12 species of crops, and more recently adding 6 more 

species.23 U.S. and other global seed firms are concerned that this phased-in approach 

leaves many important fruit and vegetable crops excluded from any potential coverage 

for the foreseeable future.24 

The PPV&FR Authority has received more than 1,200 applications for registration of 

new and existing varieties of the 18 permitted species.25 Most applications cover varieties 

already existing at the time of the law’s enactment. To date, only registration certificates 

for existing varieties, which do not require extensive testing procedures for registration, 

have been issued; no new varieties have been extended protection under the law.26 

Most applications have been filed by the public sector. Applications filed by the Indian 

Council for Agricultural Research (ICAR), India’s preeminent agricultural research body, 

and by state agricultural universities (SAUs) make up 54 percent of all filings, while 

applications by domestic and global firms comprise 45 percent of filings. Farmer filings 

are minimal (fig. 9.1). The substantial number of filings by ICAR and the SAUs suggest 

 22 PPV&FR Authority Web site, http://www.plantauthority.gov.in (accessed June 20, 2009); government 

official, interview by Commission staff, New Delhi, India, May 4, 2009. 23 The 18 species that may be protected are: black gram, bread wheat, cotton (tetraploid), cotton (diploid), 

chickpea, field pea, green gram, jute, kidney bean, lentil, maize, pearl millet, pigeon pea, rice, sorghum, 

sugarcane, tumeric and ginger. PPV&FR Authority Web site, http://www.plantauthority.gov.in (accessed 

June 20, 2009). 24 Industry representative, e-mail message to Commission staff, June 19, 2009. 25 Government official, e-mail message to Commission staff, July 24, 2009. 26 PPV&FR Authority Web site, http://www.plantauthority.gov.in (accessed June 20, 2009). 
9-6

that the public sector in India has an ongoing role in the seed sector and, like the private 

sector, is focused on protecting its IPR in plant varieties.27 

606

90 11

577

ICAR Private Sector SAUs Farmers

Source: Indian PPV&FR Authority.

FIGURE 9.1 Plant variety protection applications filed in India, 

2007–present 

The process for approval of new plant varieties reportedly requires the deposit of the 

parental lines used for making hybrid seeds, as well as a gene bank deposit of the genetic 

material for biotech seeds. These deposits can be used for resolving legal disputes and for 

“compulsory licensing” in cases of famine or other emergency.28 U.S. and other global 

seed firms have expressed substantial concern with the deposit requirements, particularly 

with whether the confidentiality of the deposits will be maintained during testing by 

public-sector scientists or whether instead seed technologies will be shared with publicand private-sector competitors.29 

Patent Protection 

India’s patent law with respect to seed technologies is complex. It excludes plants, seeds, 

varieties, and species from patenting, but for the production of plants, it permits the 

patenting of microorganisms and processes that are not “essentially biological.”30 There 

has been substantial discussion within India of the appropriate scope of coverage for 

microorganisms and biotechnology. Recently, a government-appointed expert group 

concluded that although some protection for microorganisms was required by the TRIPS 

Agreement, strict guidelines should be implemented to limit patents to cases of 

“substantial human intervention and utility.”31 The Indian Patent Office reportedly is 

considering how to address the suggestions of the expert group.32 

 27 Ibid.; Government official, interview by Commission staff, New Delhi, India, May 4, 2009. 28 Government official, interview by Commission staff, New Delhi, May 4, 2009. The PPV&FR permits 

compulsory licensing three years after the registration of the protected seed where the reasonable 

requirements of the public are not met or the seed is not available at a reasonable price. Protection of Plant 

Varieties and Farmers’ Rights Act (2001), Chapter VII, Section 47. 29 Industry representative, e-mail message to Commission staff, June 19, 2009; industry representative, 

telephone interview by Commission staff, March 30, 2009; and World Bank, Intellectual Property Rights, 

2006, 24. 30 India Patents Act, 1970 (2005), Section 3(j). 

31 While initially issued in December 2006, this expert report was withdrawn in 2007, and then reissued 

in March of 2009. Technical Expert Group on Patent Law Issues, “Report of the Technical Expert Group on 

Patent Law Issues” (revised March 2009), 15. 32 Government official, interview by Commission staff, May 8, 2009. 
9-7

U.S. and other global seed firms state that it remains difficult to obtain patent rights of 

any significant commercial value for biotechnology inventions because the law excludes 

plants from protection.33 They also have expressed concern over the patent law’s broad 

compulsory license provisions and stringent requirements for the identification of the 

source and geographical origin of any biological material contained in an invention.34

Major differences in plant-related patent provisions in India and the United States are set 

forth below (table 9.2). 

Notwithstanding these concerns, global firms have patented seed technologies in India.35

According to online records of the Indian Patent Office, Monsanto has the largest number 

of recently granted patents for seed technologies (table 9.3). For example, Monsanto has 

obtained a patent for “Cotton Event MON15985,” the genetic sequence underlying the 

second generation of its biotech cotton product (Bollgard II). Patents for biotechnology 

methods and products, as well as seed coatings and treatments, also have been issued to 

Bayer and Syngenta. However, neither DuPont/Pioneer nor Dow Agroscience appear to 

have patented any seed technologies in India recently, and the same is true of such large 

Indian seed companies as Rasi Seeds, Mahyco, and Nuziveedu. 

 33 BIO, written submission to the Commission, June 26, 2009, 3; industry representative, telephone 

interview by Commission staff, March 30, 2009; and industry representative, e-mail message to Commission 

staff, June 19, 2009. 34 According to BIO, the “special disclosure requirements impose unreasonable burdens on patent 

applicants, subjecting valuable patent rights to great uncertainty.” BIO, written submission to the 

Commission, June 26, 2009, 3; industry representative, telephone interview by Commission staff, March 30, 

2009; and industry representative, e-mail message to Commission staff, June 19, 2009. 35 The Controller General of Patents, Designs, and Trademarks (Indian Patent Office) has online search 

facilities that permit the searching by applicant name of “new records” of granted patents. See Indian Patent 

Office, Public Search for Patents, http://ipindia.nic.in/patsea.htm (accessed July 12, 2009). Although date 

parameters for new records are not provided, they appear to include patents granted since 2007. Patents 

related to fertilizers, pesticides, and other agricultural chemicals are not included in the totals reported here. 

TABLE 9.2 Major differences between Indian and U.S. plant-related patent provisions

India United States 

Patents available for plants, seeds, and varieties No Yes 

Patents available for microorganisms and certain biotechnology processes Yes Yes 

Compulsory license may be imposed three years after patent grant where invention has 

not been worked on domestically, where reasonable requirements of the public have not 

been satisfied, or where invention is not available at a reasonably affordable price 

Yes No 

Mandatory identification of source and geographical origin of biological material in the 

invention 

Yes No 

Sources: India Patents Act, 1970 (2005), §§ 3, 10, 84; U.S. Plant Patent Act, 35 U.S.C. § 161; Utility Patent 

Statute, 35 U.S.C. § 101 (2007). 

TABLE 9.3 India: Patents granted to U.S. and other global seed firms for biotechnology, 2007–09

Company 

Recent 

seed 

patents Subject matter 

Monsanto 17 Biotechnology methods and processes; genetic sequences that confer valuable 

traits including insect resistance, herbicide tolerance, improved germination rates, 

and increased oil levels; and seed treatments. 

Bayer 13 Biotechnology methods and processes; genetic sequences that confer valuable 

traits such as insect resistance, reduced seed shattering, stress tolerance, and 

increased starch content; and methods for producing transgenic cotton and rice. 

Syngenta 7 Biotechnology methods and processes; seed coatings and treatments. 

Source: Indian Patent Office. 
9-8

Whether this situation will soon change is unclear. While global seed firms, and some 

Indian companies, have patent applications pending for seed technologies, there are 

significant resource constraints and a large backlog in the processing of applications by 

the Indian Patent Office.36 Although the Patent Office has taken steps to reduce the 

backlog in recent years, applications relating to biotech seeds reportedly have not been 

included in the group of applications given priority for resolution.37

U.S. and other global firms also are concerned about how effectively any IPR granted to 

seed technologies will be protected.38 Civil suits often take many years to conclude, and 

the enforcement of judgments ultimately obtained is reported to be difficult.39 Moreover, 

India’s court system is reported to be extremely slow because of a large volume of cases 

and numerous opportunities to challenge adverse rulings.40 

State Pricing Restrictions 

Biotech seeds give rise to a market for both the seeds and the underlying technology. The 

genetic technology is typically licensed by the technology producer to seed companies for 

a “trait fee.” Seed companies insert the genetics into local varieties and then sell the seeds 

to distributors or directly to consumers. Since India has no national laws or regulations 

that restrict the price of either seeds or trait fees, the technology producers and the seed 

companies should have an unrestricted ability to set prices.41 However, this has not been 

the case for Bt cotton, the first biotech seed approved for planting in India. A description 

of the development and adoption of Bt cotton in India is provided below (box 9.2). 

Controversies over the pricing of Bt cottonseed began in 2005. In January 2006, the state 

government of Andhra Pradesh filed a complaint with the Monopolies and Restrictive 

Trade Practices Commission alleging that the trait fees charged by Mahyco-Monsanto 

Biotech (MMB) to seed companies and passed on to farmers in seed prices were too high. 

After an early ruling in its favor, Andhra Pradesh issued a 2006 directive to all biotech 

seed companies that limited the customer price for a packet of MMB’s first-generation 

product, Bollgard I, to Rs. 750 ($17) per package, a substantial reduction from prevailing 

prices that ranged from Rs. 1,600–1,800 ($36–$41).42

Other states, including Maharashtra, Gujarat, Tamil Nadu, Karnataka, Madhya Pradesh, 

and West Bengal, have been quick to adopt directives restricting prices in a “race to the 

 36 WTO, “Trade Policy Review of India,” 2007, 89. The U.S. Patent and Trademark Office also has a 

significant backlog of patent applications for processing. 37 Industry representative, telephone interview by Commission staff, January 21, 2009. 38 India has been on the Priority Watch List of the U.S. Trade Representative because of weak IPR 

protection and enforcement since 1989. Generally, however, U.S. concerns have focused on copyright 

infringement and internet piracy, the counterfeiting of pharmaceuticals, the need for criminal IPR 

enforcement, and the failure to enact a law protecting against the unfair use of test data, rather than seedrelated IPR issues. USTR, “India,” Special 301 Report, 2009. 39 Industry representative, interview by Commission staff, Washington, DC, June 19, 2009. 40 USTR, 2009 National Trade Estimate Report on Foreign Trade Barriers, 2009, 242; industry 

representative, interview by Commission staff, Washington, DC, June 19, 2009. The backlog is so substantial 

that the chief judge of the High Court in New Delhi, which hears criminal and civil cases, recently stated that 

it would take 466 years just to adjudicate all of the pending criminal cases at the present rate of resolution. 

International Business Times, “Indian Court Is 466 Years Behind Schedule,” February 7, 2009. 41 Singh, India: Agricultural Biotechnology, July 24, 2009, 8. 42 Sourav, “Monsanto at the Receiving End of Bt Cotton Pricing Policy,” July 14, 2006; industry official, 

e-mail message to Commission staff, August 25, 2009. 
9-9

bottom” for the pricing of Bt cottonseeds.43 Today, Bt cottonseed price are limited to Rs. 

650–750 ($13–$15) per package for Bollgard I, and Rs. 750–925 ($15–$19) for Bollgard 

II.44 These restrictions on customer prices necessarily limit the amount that MMB can 

charge its licensees for the technology. Various legal challenges mounted by MMB to the 

state government price restrictions have been unsuccessful. 

.

 43 Singh, India: Agricultural Biotechnology, August 25, 2008, 8; industry representative, telephone 

interview by Commission staff, January 21, 2009. 44 Industry official, interview by Commission staff, Mumbai, India, May 11, 2009; industry official, email message to Commission staff, August 25, 2009. 

BOX 9.2 Bt Cotton in India 

Bt cotton is an insect-resistant transgenic crop that contains genetics from the bacterium Bacillus thuringiensis 

(Bt). These genetics confer resistance to certain pests, particularly the bollworm. 

In 1996, Monsanto, the original developer of the Bt cotton technology, obtained approval in the United States 

for the commercial release of its product, marketed under the brand name Bollgard. At about this same time, 

the Indian firm Mahyco obtained permission to import Monsanto Bt cotton genetics under a license agreement. 

Mahyco began to backcross its hybrid cotton lines with the Monsanto genetics. In 1998, Monsanto acquired a 

26 percent share in Mahyco and created MMB to develop and commercialize biotech products in India. Field 

tests of three Mahyco backcrossed lines began in 1998. In 2002, India’s Genetic Engineering Approval 

Committee (GEAC) approved the three hybrids for cultivation in central and southern India. 

 

Patent protection was not available for biotech products in India at the time of Bollgard’s initial release, so the 

technology underlying the first generation product, Bollgard I, is not patented in India. In 2009, however, 

Monsanto was granted a patent for the technology underlying its second-generation product, Bollgard II. 

Since the initial approval in 2002, the Monsanto genetics have been broadly licensed to other private- and 

public-sector firms and incorporated into their cotton hybrids. As of 2008, 274 cotton hybrids had been 

approved for marketing by 30 different seed companies. These hybrids incorporate genetics developed by 

Monsanto (Bollgard I and II); the Indian firm JK seeds, in collaboration with the Indian Institute of Technology; 

and genetics developed by the Chinese Academy of Agricultural Science and licensed to the Indian firm Nath 

Seeds. In May 2008, the GEAC approved the release of genetics developed by an Indian public-sector institute 

and incorporated in an OPV such that farmers will be able to effectively save and reuse the biotech seed. 

 

In 2008, approximately 5 million (82 percent) of India’s small farmers were reported to be planting Bt cotton. 

The adoption of Bt cotton has been credited with substantial yield increases, decreases in pesticide use, and 

increases in farmers’ profitability per hectare. Farmers have been willing to purchase Bt cottonseeds despite 

higher prices than conventional cottonseeds (before price restrictions were implemented) because of these 

substantial benefits. 

Sources: Scoones, Regulatory Manoeuvres, August 2003, 6–7; James, Global Status, 2008, 57; industry 

representatives, telephone interviews by Commission staff, January 21 and June 10, 2009; and industry 

representatives, interview by Commission staff, Mumbai, May 11, 2009. 
9-10

The U.S.-India Business Council states that non-market-based pricing of seeds and 

intellectual property infringement threaten the continued availability of new and 

improved seed technologies and thus the ability of Indian farmers to compete with U.S. 

and other global agricultural interests.45 U.S. and other global firms report that they are 

reconsidering investment decisions, product offerings, and business models in light of the 

state government pricing restrictions.46 Price restrictions undermine the willingness of 

global firms to introduce their most valuable technologies to the Indian market. Domestic 

firms’ innovative efforts also have been impaired by state government interference in 

pricing.47 

Biosafety Regulation 

A transparent and science-based biosafety regulatory system is essential for global and 

domestic firms seeking to introduce new seed technologies on the Indian market, as well 

as for farmers and the consuming public. The stated goals of the Indian biosafety system 

are to ensure that biotech crops pose no major risk to food safety, environmental safety, 

or agricultural production, and that farmers are not economically harmed by biotech 

crops. 48 The latter goal of protecting farmers is unique to India’s regulatory system. 

Based on this wide-ranging mandate, regulatory review in India has been reported to take 

into account not just health and safety factors but also the manner in which a product will 

be commercialized, including whether a single company would have market exclusivity 

and/or the ability to charge relatively high prices in the event of an approval. Regulatory 

approval may be delayed or denied to avoid such a result.49 

U.S. and other global firms report that biosafety regulatory proceedings in India can be 

lengthy and unpredictable.50 Lengthy regulatory proceedings can have the unintended 

effect of encouraging the growth of illegal seed markets to fill unmet demand during 

protracted review periods (box 9.3). 

 45 USIBC, written submission to the Commission, June 26, 2009, 6. 46 Industry representatives, interviews by Commission staff, Mumbai, India, May 11–12, 2009; industry 

representatives, telephone interviews by Commission staff, January 21 and June 10, 2009. 47 Suresh and Rao, “Profiles of Four Top Biotech Companies,” 2009, 299. 

48 Pray et al., “Costs and Enforcement,” 2006, 142. 49 Industry representative, telephone interview by Commission staff, June 10, 2009. 50According to the NCGA, “[W]hile there is a policy for biotechnology registrations, overall Indian 

policy regarding genetically modified organisms is not well-defined.” NCGA, written submission to the 

USITC, June 19, 2009, 1. Industry representative, telephone interview by Commission staff, June 10, 2009; 

industry representatives, interview by Commission staff, Mumbai, India, May 12, 2009; and USTR, 2009 

National Trade Estimate Report on Foreign Trade Barriers, 2009, 240. 
9-11

High regulatory costs and lengthy procedures also can result in products being withdrawn 

from consideration if the costs of compliance outweigh the benefits the firm can obtain in 

a particular market. 51Bayer CropScience, for example, reportedly pulled its biotech 

mustard seed from regulatory consideration in India in 2003 after approximately nine 

years of review and testing and millions of dollars in costs. Bayer reported that the 

continued costs, uncertainty about whether the product would ever be approved, and 

potentially small market size all contributed to its decision not to continue with 

commercialization of the product in India.52

 

Regulatory review that is not timely and science-based does not serve either farmers or 

the consuming public. Biotech seeds are being developed to incorporate traits such as 

pest resistance, drought tolerance, and yield and nutritional enhancement that could 

substantially assist India in meeting its goals of self-sufficiency, food security, and 

supporting farmer incomes.53 A large number of such products are currently undergoing 

regulatory review in India.54 The product closest to completing review appears to be Bt 

 51 Researchers have compared the costs of biosafety review in India and China and found that the cost of 

initial approval of Bt cotton in India exceeded the cost in China by a ratio of 20:1, and that approval took 

substantially more time in India. Pray, et al., “Costs and Enforcement,” 2006, 146–50. 52 Pray, Bengali, and Ramaswami, “The Cost of Biosafety Regulations,” 2005, 273. 53 These goals are discussed in chapter 1. 

54 Singh, India: Agricultural Biotechnology, July 24, 2009, 3. 

BOX 9.3 Illegal and Counterfeit Cottonseeds in India 

Enforcement of biosafety and IPR laws remains an ongoing challenge in India. Biotech seeds must be 

approved by the Indian biosafety system; seeds that do not obtain regulatory approval are illegal. In 2001, 

unapproved biotech cottonseed was found in farmers’ fields in Gujarat, while the MMB product was still being 

reviewed by regulators for release. The illegal seed was identified as NB 151, a variety registered as a 

conventional hybrid by NavBharat Seeds but containing the Bt genetics developed by MMB. 

NavBharat Seeds was banned from the cottonseed business and prosecuted for violating biosafety laws, but 

the production, distribution, and widespread use of NB 151 reportedly continues today. The seed is produced 

through a network of seed companies, producers, and agents, many of whom are former contract growers for 

NavBharat Seeds. Illegal Bt cottonseed production and sales reportedly are concentrated in Gujarat and, to a 

lesser extent, in Punjab, Maharashtra, and Andhra Pradesh. According to press reports, 5 million packets of 

illegal seeds were produced in Gujarat in 2007. Government raids have had limited effect in stopping the 

activity. 

Counterfeit cottonseeds also are a substantial problem. Dealers label counterfeits with names similar to wellknown Bt cotton sources—for example, “Mahaco” rather than “Mahyco.” The counterfeits do not carry the 

insect-resistant trait of legitimate products. As mentioned elsewhere, “brown bagging,” where farmers and other 

parties sell repackaged branded seed and seed of unknown origin in brown bags in village markets, is also a 

common practice. 

 

Drawn-out regulatory proceedings, by keeping potentially high-demand legitimate products out of the market, 

create a void that may be filled by illicit goods. In recognition of the importance of more timely regulatory 

review, India recently announced that it would adopt a new approval mechanism for cotton hybrids—one that 

will be based on genetic events (i.e., particular genetically engineered organisms) rather than on the particular 

hybrid. Under this new mechanism, any cotton hybrid incorporating one of the four already approved genetic 

events will go through a streamlined review process. This change is intended to ease market access for 

legitimate and safe products. 

Sources: Lalitha, Pray, and Ramaswami, “The Limits of Intellectual Property Rights,” March, 2008, 10–11; 

Business Standard, “Guj Worst-Hit by Illegal Bt Cotton Production,” April 22, 2008; Government of India, 

Ministry of Environment and Forests, “New Procedure for Commercial Release of Bt Cotton Hybrids,” 

February 20, 2009; and Herring, “Persistent Narratives,” 2009, 16–17. 
9-12

eggplant, which began field trials in 2002 and was expected to reach final approval in 

2009.55 That time frame now appears less likely in light of the recent announcement by 

India’s environment Minister that approval by GEAC was not sufficient and that a series 

of additional consultations with interested groups would be necessary.56 Wide-ranging 

inquiries into matters other than biosafety can make regulatory review processes unduly 

time-consuming and unpredictable. 

 55 Choudhary and Guar, Development and Regulation, 2009, 54. 56 The Times of India, “Bt Brinjal Debate Goes to People,” October 16, 2009.
9-13

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7_08.pdf. 

Murugkar, Milind, Bharat Ramaswami, and Mahesh Shelar. “Competition and Monopoly in the Indian 

Cotton Seed Market.” Economic and Political Weekly 62, no. 37 (2007): 3781–3789. 

National Corn Growers Association (NCGA). Written submission to the U.S. International Trade 

Commission in connection with inv. no. 332-504, India: Effects of Tariffs and Nontariff 

Measures on U.S. Agricultural Exports, June 19, 2009. 

Pray, Carl E., Bharat Ramaswami, Jikun Huang, Ruifa Hu, Prajakta Bengali, and Huazhu Zhang. “Costs 

and Enforcement of Biosafety Regulations in India and China.” Int. J. Technology and 

Globalisation 2, nos. 1/2 (2006): 137–157. 

Pray, Carl E., Prajakta Bengali, and Bharat Ramaswami. “The Cost of Biosafety Regulations: The Indian 

Experience.” Quarterly Journal of International Agriculture 44, no. 3 (2005): 267–289. 

Ramaswami, Bharat. “Understanding the Seed Industry: Contemporary Trends and Analytical Issues.” 

Keynote paper, 62nd Annual Conference of the Indian Society of Agricultural Economics, New 

Delhi, August 2002. 

Scoones, Ian. “Regulatory Manoeuvres: The Bt Cotton Controversy in India.” Working Paper No. 197, 

Institute of Development Studies, August 2003. 

Singh, Santosh. India: Agricultural Biotechnology; Annual, 2009. GAIN Report No. IN9098. U.S. 

Department of Agriculture, Foreign Agricultural Service, July 24, 2009. 

Singh, Santosh, and Nalini Kaul. India: Planting Seeds; Seed Report, 2008. GAIN Report No. IN8151. 

U.S. Department of Agriculture, Foreign Agricultural Service, December 17, 2008. 

Suresh, Narayanan, and Ch. Srinivas Rao. “Profiles of Four Top Biotech Companies in India.” 

Biotechnology Journal 4 (2009): 295–300. 

Technical Expert Group on Patent Law Issues. “Report of the Technical Expert Group on Patent Law 

Issues.” Revised, March 2009. http://www.patentoffice.nic.in/RevisedReport_March2009.doc. 

The Times of India, “Bt Brinjal Debate Goes to People,” October 16, 2009. http://timesofindia.com. 

Tripp, Robert, Niels Louwaars, and Derek Eaton. “Plant Variety Protection in Developing Countries.” 

Food Policy 32 (2007): 354–371. 
9-15

U.S.-India Business Council (USIBC). Written submission to the U.S. International Trade Commission in 

connection with inv. no. 332-504, India: Effects of Tariffs and Nontariff Measures on U.S. 

Agricultural Exports, June 26, 2009. 

United States Trade Representative (USTR). “India.” 2009 National Trade Estimate Report on Foreign 

Trade Barriers. Washington, DC: USTR, 2009. 

———. “India.” 2009 Special 301 Report. Washington, DC: USTR, 2009. 

APPENDIX A 

REQUEST LETTER

MAX SAUCUS, MONTANA. CHAIRMAN 

JOllN D. l3OCKtFtLLtR IU, WEST V!I?tiINIA 

ktNICONRAD. NORTH DAKOTA 

CHUCKGHASSLCY, lOV/A 

URRlN G IIATCH. UTAH 

' JEFF UISGAL~AH, NEW MEXICO OLYA!PIAJ.ShO;YE, MA.NE 

JOHN F. K€KRY, MASSACHUSETR? 

BLANCHE L. LISCOLN. ARKANSAS 

JON KYL, ARIZONA 

GORDON SWTH. OREGON 

RON VWDFN, OREGON CHARLES E SCHUMER, NEWYORK 

OEBDIE 8TADENOVJ, MICHIGAN PATROBEKTS, KANSAS 

JIM RUNNING. KENTUCKY 

MIKE CRAPO, IDAICO 

hlARIA CANTWELL. WASHINGTON 

KEN SALAZAR, COLOAAOO 

JOHN ENSIGN. NEVAUA 

JOHN E. SUNUNU, NEW HAMPSHlfiE 

RUSSELL SULLIVAN. STAFF DIRSCTOR 

KOLAN DAVIS, REPUBLICAN STAFF UIRECTOR AND CHIEF COUNSEL 

COMMITTEE ON FfNANCE 

WASHINGTON, DC 20510-6200 

January 12,2009 

The Honorable Shara L. Aranoff 

Chairman 

US. International Trade Coinmission 

500 E Street, S.W. 

Washington, DC 20436 

Dear Chairman Aranoff, 

U.S. agricdhire depends on reliable access to globa1 markets. Strong economic growth in 

developing countries like India presents oppoiWnities for US. agricultural exports. Although the 

United States is globally competitive in a wide vasiety of agricultural products - ranging f2om 

wheat, corn, soybeans, peas, lentils, and edible oils -US. farmers only provide about 5 percent 

of India's current food imports. While US. exporters can provide individual examples of trade 

measures that prevent their sales to India, the extent to which trade and investment measures 

account for the disproportionately low U.S. share of India's agricultural imports remains largely 

undocumented. 

We are writing to request that the U.S. International Trade Commission (ITC) conduct an 

investigation under section 332(g) of the Taxiff Act of 1930 (1 9 U.S.C. 1332(g)) regarding the 

effects of tariff and non-tariff measures on U.S. agricultural exports to India. The report should 

cover the period 2003-2008, or the period 2003 to the Iatest year for which data are available. 

To the extent possible, the report should include the following: 

an overview of the Indian agricultural market, including recent trends in consumption, 

imports, and domestic supply; 

a description of the principal measures affecting Indian agricultural imports, including 

tariffs, sanitary and phytosanitary measures, food regulations, packaging and labeling 

requkements, pricing policies, intellectual property policies, and customs procedures; 

information on Indian government regulations, including state regulations, covering 

agricultural markets and foreign direct investment affecting US. agricultural products in 

India; 

A-3
The Honorable Sham L. Aranoff 

Page 2 

an evaluation of the impact of India’s food marketing and distribution system, including 

market structure, transportation infrastructure, and cold-storage capacity, on US, 

agricultural products in the Indian market; and, 

a quantitative analysis of the economic effects of Indian tariffs, and to the extent possible, 

non-tarif€nieasures on U.S. agriculturai exports to India, 

The Commission should provide its completed report no later than ten months fiom the receipt of 

this request, As we intend to make the report availabie to the public, we request that it not 

contain confidential business information. 

Sincere1 y, 

Chairman 

Charles E. Grassley 

Ranking Member 

A-4
APPENDIX B 

FEDERAL REGISTER NOTICE

7262 Federal Register / Vol. 74, No. 29 / Friday, February 13, 2009 / Notices 

your entire comment—including your 

personal identifying information—may 

be made publicly available at any time. 

While you can ask us in your comment 

to withhold your personal identifying 

information from public review, we 

cannot guarantee that we will be able to 

do so. 

Dated: January 15, 2009. 

Ann Gold, 

Acting Regional Director—UC Region. 

[FR Doc. E9–2727 Filed 2–12–09; 8:45 am] 

BILLING CODE 4310–MN–P 

INTERNATIONAL TRADE 

COMMISSION 

[Investigation No. 332–504] 

India: Effects of Tariffs and Nontariff 

Measures on U.S. Agricultural Exports 

AGENCY: United States International 

Trade Commission. 

ACTION: Institution of investigation and 

scheduling of hearing. 

SUMMARY: Following receipt on January 

13, 2009, of a request from the United 

States Senate Committee on Finance 

(Committee) under section 332(g) of the 

Tariff Act of 1930 (19 U.S.C. 1332(g)), 

the U.S. International Trade 

Commission (Commission) instituted 

investigation No. 332–504, India: Effects 

of Tariffs and Nontariff Measures on 

U.S. Agricultural Exports. 

DATES: March 24, 2009: Deadline for 

filing requests to appear at the public 

hearing. 

April 2, 2009: Deadline for filing 

prehearing briefs and statements. 

April 21, 2009: Public hearing. 

April 28, 2009: Deadline for filing 

posthearing briefs and statements. 

June 26, 2009: Deadline for filing all 

other written submissions. 

November 12, 2009: Transmittal of 

Commission report to the Committee. 

ADDRESSES: All Commission offices, 

including the Commission’s hearing 

rooms, are located in the United States 

International Trade Commission 

Building, 500 E Street, SW., 

Washington, DC. All written 

submissions should be addressed to the 

Secretary, United States International 

Trade Commission, 500 E Street, SW., 

Washington, DC 20436. The public 

record for this investigation may be 

viewed on the Commission’s electronic 

docket (EDIS) at http://www.usitc.gov/ 

secretary/edis.htm. 

FOR FURTHER INFORMATION CONTACT: 

Project leader George Serletis (202–205– 

3315 or george.serletis@usitc.gov) or 

deputy project leader Brian Allen (202– 

205–3034 or brian.allen@usitc.gov) for 

information specific to this 

investigation. For information on the 

legal aspects of this investigation, 

contact William Gearhart of the 

Commission’s Office of the General 

Counsel (202–205–3091 or 

william.gearhart@usitc.gov). The media 

should contact Margaret O’Laughlin, 

Office of External Relations (202–205– 

1819 or margaret.olaughlin@usitc.gov). 

Hearing-impaired individuals may 

obtain information on this matter by 

contacting the Commission’s TDD 

terminal at 202–205–1810. General 

information concerning the Commission 

may also be obtained by accessing its 

Internet server (http://www.usitc.gov). 

Persons with mobility impairments who 

will need special assistance in gaining 

access to the Commission should 

contact the Office of the Secretary at 

202–205–2000. 

Background: As requested by the 

Committee, the Commission will 

conduct an investigation and prepare a 

report on the effects of tariffs and 

nontariff measures on U.S. agricultural 

exports to India. As requested, to the 

extent possible, the report will 

include— 

(1) An overview of the Indian 

agricultural market, including recent 

trends in consumption, imports, and 

domestic supply; 

(2) a description of the principal 

measures affecting Indian agricultural 

imports, including tariffs, sanitary and 

phytosanitary measures, food 

regulations, packaging and labeling 

requirements, pricing policies, 

intellectual property policies, and 

customs procedures; 

(3) information on Indian government 

regulations, including state regulations, 

covering agricultural markets and 

foreign direct investment affecting U.S. 

agricultural products in India; 

(4) an evaluation of the impact of 

India’s food marketing and distribution 

system, including market structure, 

transportation infrastructure, and coldstorage capacity, on U.S. agricultural 

products in the Indian market; and 

(5) a quantitative analysis of the 

economic effects of Indian tariffs, and to 

the extent possible, nontariff measures 

on U.S. agricultural exports to India. 

The Committee requested that the 

Commission deliver its report 10 

months after receipt of the request letter, 

or by November 12, 2009. 

Public Hearing: A public hearing in 

connection with this investigation will 

be held at the U.S. International Trade 

Commission Building, 500 E Street, 

SW., Washington, DC, beginning at 9:30 

a.m. on Tuesday, April 21, 2009. 

Requests to appear at the public hearing 

should be filed with the Secretary no 

later than 5:15 p.m., March 24, 2009, in 

accordance with the requirements in the 

‘‘Submissions’’ section below. All 

prehearing briefs and statements should 

be filed not later than 5:15 p.m., April 

2, 2009; and all posthearing briefs and 

statements responding to matters raised 

at the hearing should be filed not later 

than 5:15 p.m., April 28, 2009. In the 

event that, as of the close of business on 

March 24, 2009, no witnesses are 

scheduled to appear at the hearing, the 

hearing will be canceled. Any person 

interested in attending the hearing as an 

observer or nonparticipant may call the 

Office of the Secretary (202–205–2000) 

after March 24, 2009, for information 

concerning whether the hearing will be 

held. 

Written Submissions: In lieu of or in 

addition to participating in the hearing, 

interested parties are invited to file 

written submissions concerning this 

investigation. All written submissions 

should be addressed to the Secretary, 

and all such submissions (other than 

pre- and post-hearing briefs and 

statements) should be received not later 

than 5:15 p.m., June 26, 2009. All 

written submissions must conform with 

the provisions of section 201.8 of the 

Commission’s Rules of Practice and 

Procedure (19 CFR 201.8). Section 201.8 

requires that a signed original (or a copy 

so designated) and fourteen (14) copies 

of each document be filed. In the event 

that confidential treatment of a 

document is requested, at least four (4) 

additional copies must be filed, in 

which the confidential information 

must be deleted (see the following 

paragraph for further information 

regarding confidential business 

information). The Commission’s rules 

authorize filing submissions with the 

Secretary by facsimile or electronic 

means only to the extent permitted by 

section 201.8 of the rules (see Handbook 

for Electronic Filing Procedures, http:// 

www.usitc.gov/secretary/fed_reg_

notices/rules/documents/handbook_on_

electronic_filing.pdf). Persons with 

questions regarding electronic filing 

should contact the Office of the 

Secretary (202–205–2000). 

Any submissions that contain 

confidential business information must 

also conform with the requirements of 

section 201.6 of the Commission’s Rules 

of Practice and Procedure (19 CFR 

201.6). Section 201.6 of the rules 

requires that the cover of the document 

and the individual pages be clearly 

marked as to whether they are the 

‘‘confidential’’ or ‘‘nonconfidential’’ 

version, and that the confidential 

business information be clearly 

identified by means of brackets. All 


cprice-sewell on PRODPC61 with NOTICES

B-3
Federal Register / Vol. 74, No. 29 / Friday, February 13, 2009 / Notices 7263 

written submissions, except for 

confidential business information, will 

be made available for inspection by 

interested parties. 

In its request letter, the Committee 

stated that it intends to make the 

Commission’s report available to the 

public in its entirety, and asked that the 

Commission not include any 

confidential business information in the 

report it sends to the Committee. Any 

confidential business information 

received by the Commission in this 

investigation and used in preparing this 

report will not be published in a manner 

that would reveal the operations of the 

firm supplying the information. 

Issued: February 9, 2009. 

By order of the Commission. 

Marilyn R. Abbott, 

Secretary to the Commission. 

[FR Doc. E9–3079 Filed 2–12–09; 8:45 am] 

BILLING CODE 7020–02–P 

INTERNATIONAL TRADE 

COMMISSION 

[Investigation No. 337–TA–625] 

In the Matter of Certain Self-Cleaning 

Litter Boxes and Components Thereof; 

Notice of Commission Determination 

To Review a Final Initial Determination 

In Part; Grant a Motion To Strike; and 

Set a Schedule for Filing Written 

Submissions on the Issues Under 

Review and on Remedy, the Public 

Interest, and Bonding 

AGENCY: U.S. International Trade 

Commission. 

ACTION: Notice. 

SUMMARY: Notice is hereby given that 

the U.S. International Trade 

Commission has determined to review 

in part the final initial determination 

(‘‘ID’’) issued by the presiding 

administrative law judge (‘‘ALJ’’) on 

December 1, 2008, in the abovecaptioned investigation, and has granted 

Complainants’ motion to strike. 

FOR FURTHER INFORMATION CONTACT: 

Mark B. Rees, Office of the General 

Counsel, U.S. International Trade 

Commission, 500 E Street, SW., 

Washington, DC 20436, telephone (202) 

205–3116. Copies of non-confidential 

documents filed in connection with this 

investigation are or will be available for 

inspection during official business 

hours (8:45 a.m. to 5:15 p.m.) in the 

Office of the Secretary, U.S. 

International Trade Commission, 500 E 

Street, SW., Washington, DC 20436, 

telephone (202) 205–2000. General 

information concerning the Commission 

may also be obtained by accessing its 

Internet server at http://www.usitc.gov. 

The public record for this investigation 

may be viewed on the Commission’s 

electronic docket (EDIS) at http:// 

edis.usitc.gov. Hearing-impaired 

persons are advised that information on 

this matter can be obtained by 

contacting the Commission’s TDD 

terminal on (202) 205–1810. 

SUPPLEMENTARY INFORMATION: The 

Commission instituted this investigation 

on December 28, 2007, based on the 

complaint of Applica Consumer 

Products, Inc. of Miramar, Florida 

(‘‘Applica’’) and Waters Research 

Company of West Dundee, Illinois 

(‘‘Waters’’). 72 FR 73884 (Dec. 28, 2007); 

73 FR 13566 (Mar. 13, 2008). The 

complaint alleges violations of section 

337 of the Tariff Act of 1930 (19 U.S.C. 

1337) in the importation into the United 

States, the sale for importation, and the 

sale within the United States after 

importation of certain self-cleaning litter 

boxes and components thereof by reason 

of infringement of U.S. Patent No. 

RE36,847 (‘‘the ‘847 patent’’). The 

respondents are Lucky Litter, LLC of 

Chicago, Illinois (‘‘Lucky Litter’’) and 

OurPet’s Company of Fairport Harbor, 

Ohio (‘‘OurPet’s’’). 

On December 1, 2008, the ALJ issued 

his final ID, finding that a violation of 

section 337 has occurred in the 

importation, sale for importation, or sale 

after importation of certain self-cleaning 

litter boxes and components thereof by 

reason of infringement of claim 33 of the 

‘847 patent. His final ID also included 

his recommendation on remedy and 

bonding. Respondents Lucky Litter and 

OurPet’s, complainants Applica and 

Waters, and the Commission 

investigative attorney (‘‘IA’’) filed 

petitions (or contingent petitions) for 

review on December 16, 2008. All 

parties filed responses to the petitions 

on December 24, 2008. Complainants 

also filed a motion to strike on 

December 23, 2008, to which Lucky 

Litter and the IA filed oppositions on 

January 5, 2009. 

Having examined the record in this 

investigation, including the ALJ’s final 

ID, the petitions for review, and the 

responses thereto, the Commission has 

determined to review the following 

issues: the construction of ‘‘comb drive’’ 

(asserted claims 8, 13, 31–33), ‘‘comb 

drive means’’ (asserted claims 27, 41– 

42), ‘‘drive means’’ (asserted claims 24– 

25), ‘‘discharge position adjacent the 

discharge end wall’’ (asserted claims 8, 

13), ‘‘comb * * * coupled to the comb 

drive’’ (asserted claims 31–33), and 

‘‘mode selector switch * * * moveable 

between a manual operation position 

* * * and an automatic operation 

position’’ (asserted claim 33); invalidity 

due to anticipation; invalidity due to 

obviousness; and direct and 

contributory infringement. 

On review, the Commission requests 

briefing on the above-listed issues based 

on the evidentiary record. The 

Commission is particularly interested in 

responses to the following questions: 

(1) Did the ALJ err in finding that the 

specification of the ‘847 patent contains 

no disavowal that limits the claimed 

comb drive? If the patentee disavowed 

certain drives, what is the correct scope 

of the disavowal? Does it include, for 

example, worm drives of any 

configuration, or only the drive 

disclosed in the Carlisi prior art 

reference, which has a ‘‘worm’’ along 

the side of the litter box that turns and 

thereby drives the rake or comb on its 

path in the litter box? 

(2) What are the differences or 

similarities in the patent’s use of ‘‘comb 

drive’’ in asserted claim 8, ‘‘comb drive 

means’’ in asserted claim 27, and ‘‘comb 

drive’’ in asserted claim 33? 

(3) Is there a difference in function 

between the ‘‘guide’’ wheels and 

‘‘guide’’ pins referenced in the 

specification in connection with figures 

1–3 of the ‘847 patent and the ‘‘drive’’ 

wheels and ‘‘drive’’ pins referenced in 

claim 10? 

(4) What result should the 

Commission reach on infringement if it 

were to find that the ‘847 patent 

disavows all worm drives or that it 

disavows only the Carlisi drive? 

(5) What result should the 

Commission reach on infringement if it 

were to find that the synonyms for 

‘‘adjacent’’ cited in the ID at 143–44 

incorrectly narrow the limitation 

‘‘discharge position adjacent the 

discharge end wall’’ in asserted claim 8? 

(6) Is the limitation ‘‘comb * * * 

coupled to the comb drive’’ in asserted 

claims 31–33 met in OurPet’s 

SmartScoop under a broader 

construction that includes, as 

Complainants argue, an ‘‘indirect’’ 

connection? Should the infringement 

analysis that follows from the correct 

construction of this limitation be 

different in claim 31 than it is in claim 

33? Did the ID err in finding claim 33 

infringed on the one hand and, on the 

other, that the same limitation is not 

met for purposes of claim 31? 

(7) How does a finding of disavowal 

of all worm drives, or the Carlisi drive, 

impact the consideration of obviousness 

under section 103 and anticipation 

under section 102? Do the broader 

constructions of ‘‘discharge position 

adjacent the discharge end wall’’ and 

‘‘comb * * * coupled to the comb 


cprice-sewell on PRODPC61 with NOTICES

B-4
APPENDIX C 

HEARING WITNESSES

C-3

CALENDAR OF PUBLIC HEARING

Those listed below appear as witnesses at the United States International Trade Commission=s 

hearing: 

Subject: India: Effects of Tariffs and Nontariff Measures on U.S. 

Agricultural Exports 

Inv. No.: 332-504 

Date and Time: April 21, 2009 - 9:30 a.m. 

Sessions were held in connection with this investigation in the Main Hearing Room (room 101), 

500 E Street, S.W., Washington, D.C. 

ORGANIZATION AND WITNESS: 

National Cotton Council 

Cordova, TN 

Gary Adams, Vice President, Economic and Policy Analysis 

JBClawson International 

Washington, D.C. 

on behalf of

The Wine Institute 

WineAmerica 

The California Association of Winegrape Growers 

The Winegrape Growers of America 

James Gore, Director, JBClawson International 
C-4

ORGANIZATION AND WITNESS:

Tuttle Taylor & Heron 

Washington, D.C. 

on behalf of

Blue Diamond Growers 

Julian B. Heron ) B OF COUNSEL 

Almond Board of California 

Modesto, CA 

Brian Tormey, Director of Sales and Marketing, Premier Almonds 

Cal-Pure Pistachios, Inc. 

Los Angeles, CA 

Mark Masten, Senior Vice President, Sales 

The California Pistachio Export Council (ACPEC@) 

Jim Zion, President, CPEC 

Will E. Leonard, Counsel, Adduci, Mastriani & Schaumberg, LLP 

The Western Pistachio Association (AWPA@) 

Brian Blackwell, Chairman, Government Relations Committee, WPA 

Will E. Leonard, Counsel, Adduci, Mastriani & Schaumberg, LLP 

-END-
 

APPENDIX D 

SUMMARY OF VIEWS OF INTERESTED 

PARTIES

D-3

Summary of Views of Interested Parties1

Almond Board of California2

The Almond Board of California (ABC) runs programs on behalf of U.S. almond growers 

in the areas of industry information and statistics, nutrition research, global marketing, 

food safety, environmental stewardship, and production research. ABC programs are 

funded through a mandatory assessment on almond growers pursuant to a U.S. 

Department of Agriculture (USDA) federal marketing order. 

In its written submission and its direct hearing testimony, the ABC highlighted the 

history of its trade relationship with India, the factors in India that contribute to the 

growing market there, and the positive effect that India’s current specific tariff on 

almonds has on transparent and predictable trade for U.S. almonds. The ABC noted 

several statistics to illustrate the importance of U.S. almond trade with India: (1) Export 

markets currently constitute 70 percent of the U.S. almond industry’s total shipments. 

(2) In 2008, almonds were the largest U.S. agricultural export to India, valued at 

$177 million. (3) Given the last three years (marketing years 2006/07–2008/09) of record 

almond shipments to India, the U.S. industry estimates that India could triple its import 

volume in the next 10 years. 

The ABC indicated that several factors have contributed to the expansion of U.S. almond 

exports to India over the last several decades. The ABC attributed the U.S. almond 

industry’s success thus far to its ability to take advantage of the growing Indian middle 

class and its rising disposable income as well as the general greater interest in health and 

wellness in India. The ABC noted that almonds, unlike other food imports, hold a unique 

place in Indian food culture and heritage, a situation on which the U.S. industry has been 

able to capitalize. In addition, the ABC noted that the stable duty on almond imports has 

allowed U.S. exporters and Indian importers to better implement longer-term planning. 

Although duties would frequently change in the past, resulting in extreme market 

volatility, the current specific duty rate has eliminated a degree of financial risk for U.S. 

almond exporters, according to the ABC. The organization noted in its statement that 

“[t]he California almond industry’s experiences with tariff and nontariff issues have 

largely been addressed in consultation with U.S. government and Indian authorities over 

the years, and are no longer viewed as a significant impediment to future growth.” In his 

direct hearing testimony, Mr. Tormey similarly noted that the Indian duty on almond 

imports is one economic factor that U.S. exporters weigh in establishing market prices for 

almonds in India, but that U.S. exporters consider the duty to be transparent and 

predictable and no longer a market distorting barrier. 

 1

 This chapter of the report summarizes the testimony presented at the Commission’s hearing and written 

submissions filed with the Commission during this investigation. In many instances, the chapter reflects only 

the principal points made by the particular party. The views expressed in the summarized materials should be 

considered to be those of the submitting parties and not necessarily the Commission. In preparing this 

summary, Commission staff did not attempt to confirm the accuracy of or otherwise correct information 

summarized. For the full text of hearing testimony and written submissions, see entries associated with 

Investigation No. 332-504 at the Commission’s Electronic Docket Information System 

(http://searchapp.usitc/edis3/app). 2

 USITC, Hearing transcript, April 21, 2009, 24–29 (testimony of Brian Tormey, Premier Almonds on 

behalf of the Almond Board of California); Almond Board of California, written submission to the 

Commission, June 26, 2009. 
D-4

The ABC further noted that the success of current and future marketing efforts in India 

will be influenced by factors that are not uncommon in any developing market, such as 

mature infrastructure, distribution systems, and importers’ access to capital (for 

financing). Finally, in its written statement, the ABC cited several concerns that it views 

will impact future sales to India: (1) India’s bureaucratic system and nontransparent 

nature of regulatory development; (2) India’s development of standards (for pesticide 

residues, commodity standards, and food safety regulations) independent of globally 

recognized standards; and (3) a potential free trade agreement between India and 

Australia, India’s second-largest import supplier of almonds. 

Biotechnology Industry Organization3

In its written submission, the Biotechnology Industry Organization (BIO) stated that it 

represents more than 1,200 biotechnology companies, academic institutions, state 

biotechnology centers, and related organizations in the United States and 31 other nations. 

BIO asserted that India’s lack of tolerance for the low-level presence of genetically 

engineered commodities that might be inadvertently present in shipments of grain from 

the United States acted as a significant trade barrier. BIO requested that the United States 

prioritize the issue in bilateral discussions with India. BIO stated that it is opposed to a 

policy under consideration in India that would require the labeling of all products derived 

from agricultural biotechnology. Instead, BIO expressed its support for science-based 

regulations that would require labeling only when the product has been significantly 

changed nutritionally or in health-related characteristics. 

Finally, BIO identified several intellectual property issues of concern in India, including 

the alleged use of compulsory licenses that go beyond the letter and spirit of the Doha 

Declaration, exceptions for transgenic plants and animals in the patent laws, the 

requirement that the source and geographical origins of biological material used in an 

invention be disclosed in patent applications, and the lack of meaningful protection for 

test data submitted to support the regulatory approval of pharmaceuticals and agricultural 

chemicals. 

Blue Diamond Growers4

In its written statement and its direct hearing testimony, Blue Diamond Growers 

described itself as a nonprofit, farmer-owned grower cooperative and the largest 

processor and marketer of almonds in the world. In its written statement, the cooperative 

detailed the history of cooperation among Blue Diamond Growers, the U.S. government, 

and the Indian government in successfully opening and maintaining market access for 

U.S. almonds in India, dating back to the early 1980s. According to Blue Diamond 

Growers, through its efforts the Indian government first allowed U.S. almond imports 

into the country in 1981 at tariff rates of 120–190 percent. Over time, that rate fluctuated, 

and today U.S. almonds are subject to 18–20 percent ad valorem equivalent tariffs. As the 

pioneer in bringing U.S. almonds to India, Blue Diamond Growers stated that it has been 

active in product promotion in India and created a mass market for almonds through 

 3

 Biotechnology Industry Association, written submission to the USITC, June 26, 2009. 4

 USITC, Hearing transcript, April 21, 2009, 20–24 (testimony of Julian Heron, Blue Diamond Growers); 

Blue Diamond Growers, written submission to the USITC, March 24, 2009. 
D-5

advertising and promotional programs held throughout India. Accordingly, demand in 

India for U.S. almonds has grown, as demonstrated by the growth in U.S. exports there, 

rising from approximately 3,000 mt in 1989 to just more than 38,000 mt in 2008. 

California Cling Peach Board5

In its written submission, the California Cling Peach Board, a nonprofit, quasigovernmental association representing approximately 600 cling peach growers in 

California, stated that the U.S. cling peach industry is interested in exporting canned 

peaches and canned fruit mixtures, the industry’s principle products, to India but the high 

tariffs, additional import fees, and the lack of a developed market for canned fruit have 

prevented U.S. exports. In addition, another industry concern noted in the submission is 

the large disparity between lower Indian applied and high bound rates, which allows 

India to adjust their tariff rates legally but by large amounts. As a result, high Indian 

bound rates may limit the impact of future World Trade Organization (WTO) Doha 

negotiations on Indian applied rates. 

California Pistachio Export Council6

In his direct testimony, Mr. Zion stated that the California Pistachio Export Council 

(CPEC) handles 40 percent of U.S. pistachio exports and represents six of the seven 

major processors in California. He noted the strong and growing demand for pistachios in 

India because of their historical presence in India due to pistachios imported from 

Afghanistan and Iran. Demand for pistachios has also grown along with the increase in 

India’s middle class population, education levels, and increased desire to enjoy healthier 

snack foods. Mr. Zion noted that the CPEC does not consider that Indian laws and 

regulations for imports and domestic procedures constitute nontariff measures but that the 

30 percent tariff on pistachio imports in India is a large burden for U.S. exporters. Until 

the tariff is lowered, Mr. Zion asserted, U.S. pistachio exports to India will never reach 

their full potential. He further added that the reduction of the tariff would benefit Indians 

by increasing government revenues, employment in pistachio processing facilities 

through increases in foreign direct investment, and availability of the nuts at lower prices. 

In response to questions from Commissioner Williamson, in his posthearing brief Mr. 

Zion provided estimates of the domestic economic benefits for expanded pistachio trade 

to India. He cited a research finding that, for every $1 billion in agricultural exports from 

California, 27,000 jobs are created. He cited additional estimates that, for every dollar of 

exports, about $1.70 in economic activity is generated. Using these statistics, Mr. Zion 

indicated that, with a 50 percent increase in U.S. pistachio exports to the Indian market 

over the next three years, 90 new jobs would be created and an additional $5.6 million in 

economic activity would be generated. Mr. Zion stated that his organization believes that 

India has the potential to be a $100 million market for U.S. pistachios, which would 

equate to 2,500 new jobs and an additional $160 million in economic activity. 

 5

 California Cling Peach Board, written submission to the USITC, May 26, 2009. 

6

 USITC, Hearing transcript, April 21, 2009, 34–38 (testimony of Jim Zion, California Pistachio Export 

Council); Zion, Posthearing brief to the USITC, April 28, 2009. 
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Cargill Incorporated7

In a written submission, Cargill Incorporated, a privately held company, stated that it is 

an international producer and marketer of food, agricultural, financial, and industrial 

products and services. Cargill’s operations in India include several businesses, employing 

several hundred people.8

 Cargill stated that the importation of U.S. agricultural products 

into India by its Indian operations is limited relative to its agricultural imports from other 

origins (e.g., crude edible oils from South America and Southeast Asia and sugar from 

Asia). 

Cargill listed several recommendations that could reduce policy distortions in the food 

system to advance economic relationships in agriculture between India and the United 

States. Cargill recommended the elimination of production subsidies in both countries 

and the reassessment of agricultural input subsidies, such as fertilizer, in India. Cargill 

explained that Indian input subsidies, which are currently based on specific fertilizer 

products, should be non–product specific and nutrient based. A second recommendation 

was the reduction and capping of tariffs at applied rates rather than bound rates. Cargill 

noted that high tariffs on processed foods limited Indian consumers’ access to U.S. 

processed foods. In addition, Cargill noted that India should maintain the zero duty on 

vegetable oils and harmonize the tariff rates for all vegetable oils to allow Indian 

consumers access to their preferred choice of oils. 

Cargill also recommended that India consistently apply sound science to its decisions. In 

particular, Cargill stated that India should implement a system that expeditiously reviews 

and approves genetically modified organisms and that Indian food laws, regulations, and 

specifications should conform to global standards (e.g, Codex Alimentarius (Codex), OIE, 

and IPPC). Among other recommendations listed by Cargill in its written submission is 

the adoption of the nationwide goods and service tax to reduce regional trade barriers and 

the consistent operation of the futures market so that it may operate effectively as a risk 

management and price discovery tool for farmers. 

Cargill also stated that there needs to be “increased opportunities for increased 

investment in agricultural and food production infrastructure” and “promotion of 

innovations and technological advancements in agriculture and food production, 

distribution, marketing, and retail to link the farmer to the consumer.”9

Distilled Spirits Council of the United States10

The Distilled Spirits Council of the United States (DISCUS) is a national trade 

association representing U.S. producers, marketers, and exporters of distilled spirits 

products. DISCUS noted that India represents the fifth-largest global market for distilled 

spirits, which presents “enormous opportunities” for U.S. spirits exporters, particularly 

exporters of U.S. whiskey. DISCUS noted that Indian demand for spirits is among the 

 7

 Cargill Inc., written submission to the USITC, June 30, 2009. 8

 Cargill is invested in the handling and processing of various products, including refined oils, grain and 

oilseeds, sugar, cotton, and animal feeds. Cargill also develops flavor systems and operates a value investing 

business in India. 9

 Cargill Inc., written submission to the USITC, June 30, 2009, 7–9. 10 Distilled Spirits Council of the United States, written submission to the USITC, June 25, 2009. 
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highest in the Asia-Pacific region. Growth rates of consumption have exceeded 

80 percent during 2003–08. 

DISCUS argued that exceptionally high Indian tariffs on spirits (150 percent) have 

“severely impeded” the sale of U.S. spirits in the Indian market. DISCUS asserted that 

the Indian spirits tariff is dramatically higher than those of the “vast majority” of 

developing countries (e.g., China’s spirits tariff is 10 percent). The association noted that 

the Indian government has modified its spirits duties a number of times since 2001 to 

bring them in line with its WTO commitments. DISCUS stated that it is seeking 

assurances that the central government will not reimpose additional duties that would 

exceed India’s WTO bound-level commitment. DISCUS noted that certain states apply 

discriminatory measures to imported spirits, including taxes and fees that are not imposed 

on domestically produced spirits. DISCUS reported that certain Indian labeling 

requirements are inconsistent with the Codex standards regarding such issues as 

ingredients, packaging dates, and nutritional information. 

Florida Citrus Mutual11

In its written submission, Florida Citrus Mutual (FCM) stated that it represents more than 

90 percent of Florida’s citrus growers and is a voluntary cooperative association with an 

active membership of more than 9,000 Florida citrus growers who produce for the fresh 

and processed markets. 

The FCM stated that India represents a large and potentially important market for U.S. 

fresh citrus and citrus juices but that tariffs and nontariff measures (NTMs) are impeding 

U.S. exports. The association stated that India has a large population, including a growing 

and health-conscious middle class, and has experienced steady transformation of its retail 

food sector, including the entrance of large Indian conglomerates in food retailing. In 

addition, India has a growing number of quick-service chains and luxury hotels, 

increasing exposure to Western products and lifestyles, increasing urbanization, and a 

growing food processing industry looking for imported food ingredients. The FCM stated 

that the United States has not been able to export more than a trace amount of orange or 

grapefruit juice to India during the past five years and none in 2008. The FCM argued 

that high tariffs, “dated food laws,” unwarranted sanitary and phytosanitary restrictions, 

poor infrastructure, and restrictions on foreign direct investment in food retailing have 

seriously impeded trade. Indian tariffs and duties on citrus juice are equivalent to an 

effective rate of about 53 percent ad valorem. Additional duties include a countervailing 

duty of 16 percent on most consumer food products, an educational cess of 3 percent, and 

a special countervailing duty of 4 percent, which is assessed on most imports. The FCM 

stated that NTMs include complicated Indian food laws, including those pertaining to the 

use of additives and colors, labeling and packaging requirements, weights and measures, 

shelf-life issues, and phytosanitary requirements. 

The FCM supports efforts to reduce measures affecting trade, including the prohibitory 

tariffs and NTMs that India imposes against U.S. citrus juice and other citrus products. It 

also supports efforts to reduce the multiple additional duties that have made it very 

difficult for U.S.-produced citrus juice to have access to and compete in the large Indian 

market. 

 11 Florida Citrus Mutual, written submission to the USITC, June 26, 2009. 
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National Confectioners Association12

The National Confectioners Association (NCA) stated that it represents approximately 

400 U.S. manufacturers of chocolate and confectionery products. The NCA stated that 

U.S. exports of chocolate and confectionery to India are constrained by high tariffs and 

border taxes. The NCA stated that the Indian agricultural and food products sector, as 

well as the growing middle class of consumers, would benefit from the reduction of 

tariffs on chocolate and confectionery inputs and finished products. The NCA also stated 

that the increased competition in the Indian chocolate and confectionery sector that would 

result from tariff reductions would encourage domestic and foreign investment in this 

sector as well as in the sugar, dairy, cereals, and fruit sectors. 

National Corn Growers Association13

In its written submission, the National Corn Growers Association (NCGA) noted that it 

represents the interests of more than 300,000 corn farmers. The NGCA stated that India’s 

large population, rapid growth rate, and developing economy make it an important 

potential market for U.S. corn exports. The NCGA reported that India is projected to 

export 1 million mt of corn this year and import 5,000 mt from sources other than the 

United States. It noted that India’s corn exports are volatile and that India historically 

imports grain as needed. Further, the NCGA reported that although India temporarily 

removed a 15 percent duty on corn imports in 2008, a 5 percent rebate on exports remains 

in place. 

The NCGA asserted that India’s policy regarding registration of genetically modified 

organisms is not well defined. The NCGA noted that, under the 1989 Notification of 

“Rules for the Manufacture, Use, Import, Export and Storage of Hazardous Micro 

Organisms, Genetically Engineered Organisms or Cells,” the Genetic Engineering 

Approval Committee must approve imports. However, the NCGA stated that a 

constituted group of concerned ministers can also serve as a decision-making body. The 

NCGA noted that “(t)he lack of formal procedure for the approval of biotech product 

imports could result in delays in approving any corn import applications.” 

National Cotton Council14

In a written submission, the National Cotton Council of America (NCC) stated that it 

represents all U.S. cotton industry segments (producers, ginners, warehousers, merchants, 

cottonseed processors/dealers, cooperatives, and textile manufacturers) regarding raw 

cotton, oilseed, and U.S.-manufactured product markets at home and abroad. The NCC 

stated that India is not a major export market for U.S. cotton because of the large 

domestic cotton production in India. 

The NCC reported that there are no major or systemic problems with exporting U.S. 

cotton to India. However, letters of credit were noted as being more complicated and 

lengthy than in other markets. The NCC also stated that Indian applied tariff rates of 

10 percent (effectively 15 percent when including other duties and fees) are not a barrier 

 12 National Confectioners Association, written submission to the USITC, May 14, 2009. 13 National Corn Growers Association, written submission to the USITC, June 19, 2009. 14 National Cotton Council, written submission to the USITC, April 21, 2009. 
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to U.S. exports to India but that Indian WTO bound rates of 100 percent remain an area 

of possible future concern. 

The NCC also expressed concern with ongoing and expanded subsidies received by 

Indian cotton farmers, primarily through a minimum support price (MSP) and export 

subsidies, and their effect on world cotton prices. The Indian government raised the MSP 

for most cotton by 26–48 percent, resulting in a large buildup in government stocks. The 

NCC stated that the Indian government reportedly is beginning to sell cotton from these 

stocks at a discounted rate both domestically and abroad. Discounts to domestic textile 

mills are provided under a bulk discount scheme with discounts of $23–29 per mt, while 

exporters are provided with a “scrip” equal to 5 percent of the value of exports that can 

be used to pay duties on imported products or be sold on a secondary market to other 

entities purchasing imports. 

National Milk Producers Federation and U.S. Dairy Export 

Council15

The National Milk Producers Federation (NMPF) is a national farm commodity 

organization that represents dairy farmers and the dairy cooperative marketing 

associations they own and operate throughout the United States. The U.S. Dairy Export 

Council (USDEC) is a nonprofit, independent membership organization that represents 

the export trade interests of U.S. milk producers, dairy cooperatives, proprietary 

processors, and export traders. The NMPF and USDEC submitted a joint written 

submission. 

The submission noted the extent to which the U.S. dairy industry depends on export 

markets for continued growth and survival. The NMPF and USDEC highlighted steady 

export gains since 2002 but noted that U.S. exports are largely blocked to India, the 

world’s second-largest country by population and largest consumer of milk. They 

attribute the low volume of U.S. dairy exports to India to nontariff measures imposed by 

the Indian government, including revised import permit requirements that went into effect 

at the end of 2003. The new import permit requirements direct the U.S. government to 

provide what the U.S. industry considers to be arbitrary and unfeasible new attestation 

statements.16 The statements require the U.S. government to provide endorsement on 

India’s export certificates that the milk from which the products were derived was not 

subjected to certain hormones, such as recombinant Bovine Somatotropin Hormone 

(rBST), and did not contain drugs, pesticides, and heavy metal residues above limits 

prescribed by the Codex Commission. The NMPF and USDEC state that the U.S. Food 

and Drug Administration has determined that proper use of rBST is safe for human 

consumption. With respect to residue levels, U.S. standards differ in certain respects from 

Codex Commission levels, as do standards in most countries, including India, but the 

tested residue levels in U.S. dairy exports are well within Codex Commission limits. 

After more than five years of negotiating with the Indian government through U.S. 

diplomatic channels, the NMPF and USDEC stated that U.S. dairy exporters have been 

unable to resolve this issue. The U.S. dairy industry stated that it is frustrated by the 

 15 Milk Producers Federation and U.S. Dairy Export Council, written submission to the USITC, 

April 17, 2009. 16 All dairy exporting countries, including Australia and New Zealand, appear to be equally affected by 

the revised attestation statements. 
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negotiating process, claiming that the Indian government is engaging in deliberate stall 

tactics. According to the written submission, the NMPF and USDEC, working with the 

U.S. government, develop proposals and submit them to the Indian government for 

resolution, but the Indian government provides no response, an ineffective response, or a 

response not based on sound science and WTO principles. 

National Oilseed Processors Association17

The National Oilseed Processors Association (NOPA) represents the U.S. soybean, 

sunflower, canola, flaxseed, and safflower seed crushing industries. NOPA represents 15 

member companies that account for approximately 95 percent of all soybean processing 

in the United States and essentially all U.S. soybean oil exports to India. NOPA’s 

submission noted that the country imports about one-half of the vegetable oil it consumes 

and Indian demand for vegetable oil has increased because of rising per capita income 

and an increase in population. India’s applied tariffs for oilseeds and oilseed products, 

high by global standards, are intended to protect small-scale domestic farmers. India is 

not a significant importer of oilseeds for processing because of its 30 percent applied 

tariff and nontariff measures, such as a restriction on imports of genetically modified 

oilseeds. In April 2008, India reduced its applied tariffs on vegetable oils to zero or very 

low levels because of concerns regarding domestic food price inflation. India is the 

world’s fifth-largest exporter of both soybean meal and total oil meals, although growth 

in exports of these products has been dampened by expanding domestic feed use and 

slow growth in domestic soybean production. 

NOPA stated that even when India’s high tariff protection is in place, domestic oilseed 

producers have been unable to meet the rapid increase in consumer demand. This is 

because of industry fragmentation, barriers created by the Indian government to foster 

small-scale activity, past policies favoring wheat and rice over oilseeds, inefficiencies in 

marketing and processing, and erratic rainfall. The United States is a very minor 

participant in the Indian market because South American (primarily Argentine) soybean 

oil and Asian palm oil are less costly than U.S. soybean oil. According to NOPA, the 

primary competitive advantage that Argentina has over the United States is Argentina’s 

use of differential export taxes (DETs) on oilseeds and oilseed products, including 

soybean oil and sunflower oil. NOPA believes that as long as Argentina’s DETs exist, 

U.S. oilseed processors will find it difficult to compete for India’s very large and 

expanding edible vegetable oil market. NOPA believes that all DETs, including those 

used by Argentina (soybean), Malaysia (palm oil), Indonesia (palm oil), Russia 

(sunflower seed), and Ukraine (sunflower seed), as well as other export subsidies, must 

be eliminated in the Doha Round of global trade negotiations. 

National Pork Producers Council18

The National Pork Producers Council (NPPC) is an association of 43 state-level pork 

producer organizations. In its submission, the NPPC asserted that India maintains both 

significant unscientific sanitary and technical barriers and high tariffs on pork that 

effectively ban imports of pork from the United States. The NPPC urged that India adopt 

 17 National Oilseed Processors Association, written submission to the USITC, April 1, 2009. 18 National Pork Producers Council, written submission to the USITC, June 25, 2009. 
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transparent sanitary regulations that are based on a sound scientific basis and lower its 

bound and applied tariff rates on pork. 

The NPPC indicated that numerous requirements of India’s import permit system for 

pork are not supported by science. These requirements include that the originating 

country be free of diseases and parasites such as porcine reproductive and respiratory 

syndrome (PRRS), anthrax, and trichinae. Another requirement is that the originating 

country be free of high pathogenic avian influenza, although influenza is not spread 

through the handling or consumption of pork. The NPPC noted that the permit system 

requires plant-by-plant inspection of U.S. pork processors, rather than adhering to the 

principle of equivalence required by the WTO SPS Agreement and, further, that the 

import permit specifies feeding requirements, slaughter plant requirements, and 

packaging material requirements that are not based on food safety. 

Other requirements of India’s import permit system were reported to be vague and 

nontransparent. Among these are the requirement that imported pork “not have any 

residues of pesticides, drugs, mycotoxins, or chemicals above the maximum residue 

limits (MRLs) prescribed internationally” 19 without specifying either the substances 

subject to these requirements or the respective MRLs. The NPPC urged that these 

requirements be replaced with MRLs based on a scientific assessment of risk. 

The NPPC further noted that India’s bound tariff on pork is 100 percent, and its applied 

tariff is 30 percent. A tariff rate of 30 percent is a significant barrier to imports. The 

NPPC argues that one goal of the current WTO Doha Round negotiations should be the 

lowering of India’s tariff on pork to below its current applied rate. 

Northwest Fruit Exporters20

In its written submission, the Northwest Fruit Exporters (NFE), a nonprofit organization 

that coordinates activities of growers, packers, and exporters of fresh apples and sweet 

cherries in the Pacific Northwest, stated that the highly restrictive tariff on apples has 

prevented the full development of the Indian market for U.S. exporters. In addition to the 

high tariff, the NFE noted that a number of additional national, state, and local taxes are 

assessed on imports that may or may not be imposed on domestic products, further 

restricting Pacific Northwest apple exports. The NFE explained that if the high tariff and 

additional taxes were reduced, annual U.S. exports of apples to the Indian market would 

grow to approximately $50 million. 

Northwest Horticulture Council21

In its written submission, the Northwest Horticulture Council, which represents growers, 

packers, and shippers in the Pacific Northwest on national and international policy issues, 

stated that U.S. apple and pear exports to India are restricted by high tariffs that do little 

to protect domestic producers. The council indicated that U.S. exports do not compete 

directly with Indian domestic production because U.S. apples and pears are differentiated 

by their higher quality and a disparity in the season of fruit availability. The council 

 19 National Pork Producers Council, written submission to the USITC, June 25, 2009, 2. 

20 Northwest Fruit Exporters, written submission to the USITC, June 22, 2009. 21 Northwest Horticulture Council, written submission to the USITC, June 24, 2009. 
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stated that U.S. exports of apples and pears would likely double if the tariffs are reduced. 

In addition to high tariffs, the council stated that U.S. cherry exports are restricted by the 

lack of a reliable cold chain and a restrictive phytosanitary protocol. Indian phytosanitary 

protocols require cherries to be fumigated with methyl bromide, which reduces quality 

and limits shelf life. 

Paramount Farms22

In his direct testimony, Mark Masten, senior vice president of sales for Paramount Farms, 

a California company involved in pistachio growing, processing, and export, described 

his organization as the single-largest producer of pistachios in the world. Mr. Masten 

noted that India is a burgeoning market for pistachios because India does not grow them, 

yet it has a growing middle class and lifestyle changes that are driving a rise in the 

incidences of Type 2 diabetes and the need for healthy snacks. Paramount Farms is 

committed to exporting to the Indian market and has invested in a pistachio processing 

plant in Gujarat, India, which was to be inaugurated in June 2009. Paramount Farms is 

working to reduce the current 30 percent tariff on pistachios, which it has found makes it 

difficult for California pistachios to achieve the price point that could reach the majority 

of the Indian middle class. Mr. Masten used U.S. almond exports to India as an example 

to describe what might happen if the pistachio tariff were lowered. After the almond 

import tariff was cut in half, almond consumption doubled and Indian government tax 

revenue increased by 71 percent during 2001–06. Mr. Masten noted that Paramount 

Farms also produces and exports almonds and benefited from that change. 

Sunkist Growers23 

In a written submission, Sunkist Growers stated that it is a nonprofit membership 

cooperative and marketing association owned by and operated on behalf of its member 

farmers, who produce about 65 percent of California and Arizona citrus. Sunkist Growers 

stated that it markets its members’ produce, develops and maintains reliable domestic and 

export markets in order to get the highest returns for its member growers, and provides 

consumers with premium quality fresh and processed citrus products. Sunkist’s principal 

products are fresh oranges, lemons, grapefruit, tangerines, citrus juices, and other 

processed citrus products. They are marketed under the SUNKIST trademark. Sunkist 

currently exports some 33 percent of its fresh citrus production, accounting for 45 percent 

of its farmers’ fresh fruit revenue. 

Sunkist stated that it would like to export its products to India, which it views as a 

potentially important market for citrus products, but high tariff and NTMs prevent 

exports in consequential amounts. Although India is not currently a meaningful export 

market for fresh oranges, lemons, and grapefruit, or frozen concentrated orange juice 

(FCOJ) from the United States, Sunkist views India as a potentially large market for these 

products, provided that its high tariffs are removed or reduced. 

Although India produces citrus, its production is limited to loose-skin tangerines, 

mandarins, lemons, and limes. Fresh citrus is an important part of the Indian diet. India 

currently imports limited quantities of fresh citrus, mainly oranges, which are used in the 

 22 USITC, Hearing transcript, April 21, 2009, 29–34 (testimony of Mark Masten, Paramount Farms). 23 Sunkist Growers, written submission to the USITC, May 1, 2009. 
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hotel and catering sectors. U.S. exports to India of fresh citrus have been inconsequential, 

except in 2008 when India imported $1.3 million of fresh U.S. citrus, up from $220,000 

in 2007. India mainly imports citrus from Australia during India’s off-season of June 

through October. India imports almost no fresh grapefruit or lemons. India also imports 

$2–3 million annually of FCOJ mainly from Brazil and none from the United States. 

High applied and bound tariffs are the principal barrier to U.S. exports of citrus products 

to India. India’s bound rates range from 25 percent for fresh grapefruit to 100 percent for 

fresh mandarins, and the rate is 85 percent for FCOJ. Applied rates are 25 percent for 

fresh grapefruit, and 30 percent for most other fresh citrus products. However, the applied 

rates could be legally raised to the higher bound rates. In addition, taxes of 2–4 percent 

are routinely assessed on top of the tariff. Sunkist has limited information about Indian 

NTMs because the high tariffs already prevent most U.S. exports of fresh citrus to India. 

Sunkist reported that it is concerned that in the WTO Doha Round, India will be 

permitted to designate itself as a developing country, allowing India to reduce its tariffs 

from the higher bound rates, rather than the lower applied rates. This would result in 

minimal market access gains below India’s current applied tariff rates because under the 

draft agricultural modalities, developing countries make smaller-tiered formula tariff 

reductions than developed countries and these can be phased-in over a longer period of 

10 years. As a developing country, India could also claim exemptions from tariff 

reductions for designated “special” products and could temporarily impose special 

safeguard mechanisms to reinstate higher tariffs on products it deemed sensitive. 

U.S.-India Business Council24

The U.S.-India Business Council (USIBC) is a business advocacy organization 

representing U.S. and Indian companies. The mission of the USIBC is to serve as a direct 

link between business and government leaders focusing on increased trade and 

investment between the two countries. The USIBC noted that Indian domestic and 

international agricultural policies, in response to severe food shortages, are focused on 

food self-sufficiency, price stability for consumers, and adequate returns for farmers. 

The USIBC stated that since the Green Revolution in the early 1960s, the India 

agricultural sector has experienced dramatic output growth, making India one of the 

world’s leading producers of agricultural products. However, the USIBC indicated that 

recent performance in the sector has lagged, despite substantial economic growth in the 

Indian economy since the economic reforms of 1991. According to the USIBC, the 

agricultural sector, which employs 70 percent of the country’s 1.1 billion people, has 

suffered from structural deficiencies, including underinvestment, which has led to 

poverty in the rural sector. The USIBC noted that the Indian government has taken a 

number of steps to improve the performance of the agricultural sector, including market 

and regulatory reforms. 

The USIBC indicated that Indian agricultural tariffs and other border taxes remain at 

levels that are not commercially viable for many foreign products. The association argued 

that reducing tariffs would benefit Indian consumers, producers, and the Indian 

government. The organization stated that reduced tariffs would allow foreign companies 

to test the interest of their products to the Indian market, which could lead to investment 

in domestic production of those products. The USIBC also stated that India’s efforts to 

 24 U.S.-India Business Council, written submission to the USITC, June 26, 2009. 
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streamline regulation are commendable and represent important steps toward 

harmonizing domestic standards with international standards, but that certain sanitary and 

phytosanitary standards are not consistent with internationally recognized best practices. 

The organization argued that private sector partnerships would spur innovation and 

increase agricultural yields. These policies should be done in conjunction with reducing 

tariff barriers, incentivizing investment, and applying best practices to safety standards 

that will lead to benefits for Indian farmers. 

Welch Foods Inc.25

In a written submission, Welch Foods Inc., a cooperative, stated that it is the processing 

and marketing affiliated cooperative of the National Grape Co-operative Association, Inc. 

It represents some 1,300 grower-owners of Concord and Niagara grapes, which are 

grown on 50,000 acres of vineyards in New York, Pennsylvania, Ohio, Michigan, and 

Washington. Welch Foods’ principal products are Concord and Niagara grape juice. 

Welch Foods also produces a variety of other fruit juices, juice cocktails, jellies, jams, 

preserves, juice bars, and fruit-flavored carbonated drinks. Welch Foods’ total production 

value was $685 million for the 12 months ended August 31, 2008. Welch Foods markets 

its products in the United States and 30 other countries and exports more than $80 million 

of Concord and Niagara grape juice products, mainly to Japan, the United Kingdom, 

Hong Kong, Korea, and China. 

Welch Foods would like to expand into India because the creation of new export outlets 

has become increasingly essential to the financial health of its farmer-owners and the 

rural economies that they help to support, but global trade distortions in the grape juice 

and grape juice products markets in the form of tariffs and subsidies are preventing them 

from expanding into countries such as India. Welch Foods stated that it has begun to 

explore opportunities in the Indian market. The principal barriers to Welch Foods in India 

include high bound tariffs on grape juice of 85 percent and applied tariffs of 30 percent. 

Welch Foods believes that it could establish annual sales of $30 million in India for its 

grape juice and grape juice concentrate products if the tariffs were removed or 

significantly reduced. 

Welch Foods has requested that the U.S. government aggressively pursue meaningful 

tariff reductions with India in the WTO Doha Round negotiations. Specifically, Welch 

Foods would like to see meaningful reductions in India’s high bound rates for U.S. grape 

juice and grape juice products to levels below current applied rates. In addition, because 

there is limited information about India’s grape juice market and NTMs and government 

regulations affecting U.S. grape juice exports to India, Welch Foods also asked that the 

USITC include as much information as possible in its report about India’s grape juice 

market.

 25 Welch’s Foods Inc., written submission to the USITC, June 23, 2009. 
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Western Pistachio Association26

In his direct testimony, Brian Blackwell, vice chairman of Western Pistachio Association 

(WPA), described it as a trade association representing pistachio growers in the western 

United States and the sole pistachio grower-member organization whose directors are 

elected by pistachio growers. The WPA runs programs in the areas of trade barrier 

removal, nutritional research and promotion, governmental affairs, and defense of 

existing U.S. unfair trade orders. Mr. Blackwell stated that the WPA has worked closely 

with U.S. government trade officials to remove tariff and nontariff measures in various 

countries. Mr. Blackwell noted that Indians have consumed pistachios for generations, 

mainly from the large Iranian production and trade with Afghanistan. The WPA views 

the high Indian tariff as the major impediment to U.S. exports there. Mr. Blackwell stated 

that besides the tariff, WPA members have not experienced any trade impediments in 

India. 

U.S. Wheat Associates27

U.S. Wheat Associates is a trade association that focuses on promoting export market 

development on behalf of U.S. wheat producers. The association stated that U.S. wheat 

growers export approximately 50 percent of the U.S. wheat crop every year, which makes 

the industry trade dependent. U.S. Wheat Associates argued that the Indian agricultural 

market is one of the most protected in the world. The association claimed that Indian 

import policies, including tariffs and NTMs, are not transparent and create significant 

obstacles to U.S. exports of wheat. 

U.S. Wheat Associates reported that Indian phytosanitary requirements are “impossible to 

meet,” specifically, prohibitive weed seed requirements. The association stated that the 

USDA Animal and Plant Health Inspection Service cannot certify that U.S. wheat 

shipments are free of these quarantined seeds because they cannot be reliably removed by 

cleaning. U.S. Wheat Associates argued that these same weeds are likely common to 

most wheat exporting countries, including countries that supply India. 

The association also commented on the restrictiveness of high and variable Indian wheat 

tariffs and export subsidies, which affect U.S. wheat exports. Specifically the 

organization stated that Indian tariffs on wheat are high except when there is a shortfall in 

Indian domestic production. The association argued that when Indian buffer stocks 

increase, India raises its wheat tariff, which imposes “exorbitant” risk for private 

importers. U.S. Wheat Associates also stated that India provides export subsidies when 

domestic buffer stocks rise above necessary levels, by selling wheat to governmentowned and private sector exporters at discounted prices, as much as 50 percent below the 

acquisition cost. The association also stated that India has been “obstructionist” in WTO 

Doha Round talks because of domestic political pressures. The organization also claimed 

that U.S. exporters are disadvantaged because of widespread corruption in India, 

specifically mentioning that “it has been suggested that certification problems can be 

resolved with cash payments.” 

 26 USITC, Hearing transcript, April 21, 2009, 38–43 (testimony of Brian Blackwell, Western Pistachio 

Association). 27 U.S. Wheat Associates, written submission to the USITC, April 16, 2009. 
D-16

Wine Institute et al.28 

In his direct testimony, Jim Gore, of JBC International (JBC) representing the U.S. wine 

industry, stated that the Indian wine market, currently valued at $60 million, represents an 

opportunity for U.S. wine exporters. He argued that duties, taxes, special fees, and 

restrictive regulations and other restrictions make selling U.S. wine in India a “complex, 

costly, and oftentimes frustrating endeavor.” Mr. Gore stated that tariffs and NTMs are 

designed to prohibit imported wine in the Indian market. He stated that comprehensive 

information on these challenges is detailed in a report by JBC, “A Comprehensive Study 

of the Indian Wine Market.” 

According to Mr. Gore, India charges customs duties at the federal level, in excess of its 

bound levels through additional duties, extra additional duties, and other taxes. Mr. Gore 

argued that certain state-level practices violate WTO national treatment provisions. He 

cited the example of Maharashtra state, which charges a 200 percent special fee on 

imported wine but exempts local producers from this tax. Mr. Gore stated that the Indian 

base tariff rate of 150 percent plus additional fees and taxes, plus state taxes, can reach a 

total of 400 percent, making a bottle of California wine which would sell for $10 in a U.S. 

wine shop, retail for $80 in India. 

Mr. Gore also cited a number of NTMs affecting U.S. wine exports, including a lack of 

an integrated cold chain and other supply chain, infrastructure, and distribution 

limitations. In addition, he cited issues related to labeling, requirements for bank holdings 

with regard to bonded warehousing, minimum retail pricing, and monopoly wholesaling 

and retailing, which all serve to limit U.S. exports of wine. 

 28 USITC, Hearing transcript, April 21, 2009, 13–20.
APPENDIX E 

POTENTIAL FOR U.S. AGRICULTURAL

PRODUCTS IN THE INDIAN MARKET 

E-3

Many factors make India an appealing market for U.S. agricultural products, chief among 

them being a rising per capita income and an increasing Indian middle class, which is 

already approximately the size of the total U.S. population.1

 Greater expenditures on food, 

more exposure to Western cuisine, aspirations to higher food quality and wider food 

diversity, and growing health consciousness are leading to increased consumption of 

Western-style foods in general and U.S. agricultural exports to India in particular.2

 

Certain regions of India are more likely to provide future demand for U.S. agricultural 

exports than others. As discussed in chapter 3, these areas include large cities with 

higher-income density, such as Mumbai and New Delhi. The growth of urban areas, 

where middle- and upper-class consumers are more likely to live, provides a 

concentration of potential customers for U.S. agricultural exports. 3 This concentration 

makes reaching customers easier, especially with the expansion of organized retail stores 

and restaurants in cities. 

U.S. food products are generally well regarded by Indian consumers because of global 

brand recognition and consistently high quality. For example, U.S. apples and almonds 

are perceived as healthy and high quality, compared to alternative domestic and imported 

sources.4

 Providing and marketing healthy, high-quality, and safe foods is likely to help 

U.S. exporters make future sales to India.5

 

Table E.1 lists U.S. agricultural products that have export potential to the Indian market, 

according to academic research, U.S. Department of Agriculture reports, or industry and 

foreign government documents. The table excludes products identified as having export 

potential without corroborating information. The table also excludes products such as 

almonds and apples, which already have gained significant market share in the Indian 

market. 

 1

 See chapter 3 for further information. 

2

 USDA, FAS, India: Exporter Guide; Annual, 2008, October 1, 2008, 4. 3

 See chapter 3 for further information on Indian incomes and urbanization. 4

 Government officials, interview by Commission staff, New Delhi, India, May 26, 2009. 5

 Industry official, interview by Commission staff, Washington, DC, October 1, 2008. 
TABLE E.1 India: U.S. agricultural products with sales potential 

Tariff rate(s) (%) 

Product(s) 

Projected 

annual 

import 

growth in 

value (%) 

Growth 

period 

Market attractiveness 

for United States Constraints Bound Applied 

Sp

NTM

Alcoholic beverages 

General 15–20 2008–12 Growing consumption but 

poor quality of some domestic products. Consumer willingness to try U.S. wines and spirits. Kerala and Punjab are large potential markets. 

Competition from the EU and other foreign suppliers. 

150 150 TX

Distilled sprits (b) (b) Fifth-largest market for 

distilled spirits in the world. Large potential market for U.S. whiskey exports. 

Large volume of domestic production. Special constraints on alcohol sales. 

150 150 TX

Wine (b) (b) Developing wine culture 

especially in the top income brackets. Wine market has high growth rates. 

Special constraints on alcohol sales. Competition from Australia, EU, and other exporting countries. Increased domestic production. 

150 150 TX

Confectionery 

Chocolate, chocolate syrups, and other cocoa products 

5–10 2008–12 Increasing demand for 

imported products/brands and a shortage of quality domestic products. Low per capita consumption compared to the United States and Western Europe as well as other developing countries, holds potential for increased consumption. 

Competition from domestic suppliers, South Asian countries, and the EU. 

150 30 

See footnotes at end of table. 

E-4 
TABLE E.1 India: U.S. agricultural products with sales potential—Continued

Tariff rate(s) (%) 

Product(s) 

Projected 

annual 

import 

growth in 

value (%) 

Growth 

period 

Market attractiveness 

for United States Constraints Bound Applied 

Specific 

NTM/issu

Dairy 

General (b) (b) India is one of the largest 

milk consumers in world, and dairy is substantial in the Indian diet. Increasing consumption of processed milk products. 

Currently, the market is effectively closed. Industry identifies the biggest barrier as the nonresponsiveness of the Indian government in discussions of NTMs. 

40–100 30–40 SPS 

Dried fruit/nuts 

Figs (fresh and dried) (b) (b) Consumption of figs is 

approximately double domestic Indian production. 

Pakistan is a major supplier; Iran is a distant second. The United States is not a major fig supplier, but has the opportunity to increase market share. 

100 30 NR 

Pistachios 8 Annually No domestic production. 

Indians like pistachios, especially for special occasions and holidays. Trend towards healthier foods helps as pistachios are presented as a healthy snack. Some exporters believe it will be easy to place pistachios into the almond distribution chain. California suppliers are competitive. "California" branding may enable U.S pistachios to compete with Iranian pistachios. 

Competition from Iran, Afghanistan, and Pakistan. 

100 30 NR 

See footnotes at end of table. 

E-5 
TABLE E.1 India: U.S. agricultural products with sales potential—Continued

Tariff rate(s) (%) 

Product(s) 

Projected 

annual 

import 

growth in 

value (%) 

Growth 

period 

Market attractiveness 

for United States Constraints Bound Applied 

Specifi

NTM/iss

Dried fruit/nuts—Continued

Raisins (b) (b) Small U.S. market share 

has been growing. 

Competition from Pakistan and Afghanistan. 

100 100 NR 

Edible oils 

Soybean oil (b) (b) India imports about 

50 percent of its edible oil. 

Competition from Argentina and Brazil. 

45 

(refined) 

7.5 

(refined) 

NR 

Olive oil 10–15 2008–12 Growing Western-style, 

quick-service restaurant sector and a shortage of quality domestic products. 

Competition from the EU. 46 

(refined) 

7.5 

(refined) 

NR 

Fruit and vegetables 

General 5–8 2008–12 Growing demand for fruits 

in off-season. Increased interest in high-quality fruit and exotic vegetables among middle class. Wide acceptance of a variety of imported fruits. Demonstrated willingness to pay for premium products by those with higher disposable income. 

Growing competition from Australia, China, New Zealand, etc. 

Various Various SPS 

Canned peaches and canned fruit mixes 

12–15 2008–12 India does not have a 

developed canned fruit industry. 

Low imports. Competition from EU and Chile. 

150 30 NR 

Frozen french fries and vegetables 

(b) (b) Growing Western-style, 

quick-service restaurant sector and lack of domestic availability. 

Competition from the EU, Australia, New Zealand, and domestic suppliers. 

55 30–35 NR 

Preserved dried vegetables 

10–15 2008–12 Growing Western-style, 

quick-service restaurant sector and shortage of quality domestic products 

Competition from domestic suppliers, South Asian countries, and the EU. 

35, 100, 

or 150 

30 NR 

See footnotes at end of table. 

E-6 
TABLE E.1 India: U.S. agricultural products with sales potential—Continued

Tariff rate(s) (%) 

Product(s) 

Projected 

annual 

import 

growth in 

value (%) 

Growth 

period 

Market attractiveness 

for United States Constraints Bound Applied 

Specifi

NTM/issu

Fresh fruit and vegetables—Continued

Citrus fruit 5–10 2008–12 Indians prefer fresh citrus. 

Market share for some items, such as oranges, increasing. 

Competition from a strong domestic industry and other suppliers such as Australia, which has an off-season advantage. Some U.S. products (e.g., California oranges) do not have an offseason advantage. 

25–100 25–40 TBT 

Temperate fruit (b) (b) Off-season advantage for 

some items. The United States is currently a supplier of certain fruits (e.g., largest supplier of peaches and plums). 

Competition from other suppliers (e.g., pears from China, peaches and plums from Australia) and domestic production. Need to build demand for cherries. 

25–100 25–50 SPS 

Fruit juices 

General (b) (b) Increasing health 

awareness among middle class and shortage of quality products locally. 

Competition from domestic suppliers and nearby suppliers. 

85 30 TBT 

Grains 

Wheat (b) (b) U.S. wheat could capture 

10–15 percent of the import market. 

Large volume of domestic production and competition from other suppliers. 

100 50 SPS 

Malt barley 10 Annually Needed by brewers 

because Indian malt barley does not meet brewers’ standards. 

100 0 SPS 

See footnotes at end of table. 

E-7 
TABLE E.1 India: U.S. agricultural products with sales potential—Continued

Tariff rate(s) (%) 

Product(s) 

Projected 

annual 

import 

growth in 

value (%) 

Growth 

period 

Market attractiveness 

for United States Constraints Bound Applied 

Specifi

NTM/issu

Skins and hides 

General (b) (b) India is beginning to 

expand its leather industries, which will increase demand for hides and skins. For example, the Council of Leather Exporters has requested that India establish “leather parks,” which would increase tanning capacity. Certain Indian firms have invested in machinery that is better able to handle U.S. product. 

Competition from EU suppliers. Indians are used to working with hides smaller than U.S. ones. Water shortages and stricter environmental standards on tanners. View of Indians that long transit times causes damage to U.S. product. Certain Indian processors prefer unbranded hides. Most U.S. hides are from branded cattle. 

25 0–25 TBT 

Pork 

Premium pork products (b) (b) Increased Westernization 

and the expanding hospitality industry may increase demand for premium processed pork products in food service and retail. Poor availability of pork products in India. 

Muslims do not consume pork. Some Hindus view pork as an inferior product. Pork is the least developed major livestock sector in India. 

55–100 30 SPS 

Processed food 

Jams and jellies (b) (b) Increasing popularity of 

imported brands and a shortage of quality domestic products. 

Competition from domestic suppliers, South Asian countries, and the EU. 

150 30 TBT 

Pasta 5–10 2008–12 Growing Western-style, 

quick-service restaurant sector and shortage of quality domestic products. 

Competition from domestic suppliers, South Asian countries and the EU. 

150 30 NR 

See footnotes at end of table. 

E-8 
TABLE E.1 India: U.S. agricultural products with sales potential—Continued

Tariff rate(s) (%) 

Product(s) 

Projected 

annual 

import 

growth in 

value (%) 

Growth 

period 

Market attractiveness 

for United States Constraints Bound Applied 

Specific 

NTM/issue

Processed food—Continued

Potato products and other snack products 

10–15 2008–12 Growing Western-style, 

quick-service restaurant sector. 

Competition from domestic suppliers. 

Varies 

by 

product 

Varies by 

product 

TBT 

Sauces, spreads, salad dressing, condiments, soups/broths, etc. 

20 Annually Growing Western-style, 

quick-service restaurant and food processing sectors and increasing popularity of imported brands. 

Competition from domestic, South Asian, and EU suppliers. 

55–150 30 TBT 

Source: Compiled by Commission staff. 

aNontariff measures (NTM) Codes: NR = Nothing reported; SPS = Sanitary and phytosanitary barriers; SR = State regulations; TBT = Technical barriers 

barriers and taxes (including, among others, labeling and packaging requirements, customs administration, and weights and measurements); and TX = Taxe

bNot applicable. 

E-9 

APPENDIX F 

INDIAN AGRICULTURAL PRODUCTION 

AND CONSUMPTION BY SECTOR 

F-3

Indian Agricultural Production and Consumption by Sector1 

Grains 

Production 

India is generally self-sufficient in grains, only importing in bad crop years. 2

 Grain 

production is dominated by rice and wheat, of which India is a leading global producer.3

Rice production totaled 96.7 million metric tons (mmt) and wheat production totaled 

78.6 mmt in marketing year (MY) 2007/08 (table F.1). Rice covered 43.8 million 

hectares (ha), and wheat covered 28.2 million ha in MY 2007/08, representing an 

expansion of 2–5 percent over their MY 2003/04 levels. 

Both grains are distributed to the poor through the government food distribution system. 4

Public procurement is usually equivalent to about one-fourth of the production of these 

two food grains, except in 2008–09, when procurement increased to nearly one-third of 

production (table F.2). 

Production of food grains is heavily influenced by government procurement prices, which 

increased over the period, with faster rates of growth after MY 2006/07 following poor 

harvests because of unfavorable weather. Wheat, rice, and coarse grains benefited from 

favorable weather in MY 2007/08 and reportedly from greater distribution of improved 

seeds to farmers resulting in higher yields.5

 Area planted to wheat increased slightly after 

MY 2005/06, mostly at the expense of rapeseed/mustard, because of the lower relative 

support price for rapeseed vis-à-vis wheat.6

Most of the increase in coarse grains production is accounted for by corn (maize), which 

rose 22 percent in MY 2007/08 to 19 mmt.7

 Increased demand for corn comes from the 

growing Indian poultry industry for use as feed and from the cornstarch industry for use 

in paper, pharmacy, food, and textiles.8

 Of total annual corn production, almost twothirds is used for animal feed, about one-quarter is consumed as food, and the remainder 

is used to produce starch.9

 Other coarse grains produced in India include pearl millet 

(bajra), sorghum (jowar), and barley. 

 1

 The following discussion is limited by the gaps in Indian production and consumption data for certain 

sectors. 2

 Multinational pizza chains operating in India import high-protein wheat for making pizza crusts because 

Indian wheat is reportedly low in protein and unsuitable for making pizza crusts. Industry representative, 

interview by Commission staff, New Delhi, India, May 8, 2009. 3

 Regional patterns of crop production are shown in figure F.1. 

4 The Targeted Public Distribution System is the largest of India’s food distribution programs. 5

 Govindan, India: Grain and Feed; Quarterly Lock-Up Report, May 6, 2008, 3. 6

 Govindan, India: Grain and Feed; Monthly Lock-Up Report, January 10, 2007, 3. 7

 Govindan, India: Grain and Feed; Quarterly Lock-Up Report, May 6, 2008, 6. 8

 Govindan, India: Grain and Feed; Quarterly Lock-Up Report, August 31, 2007, 9. 9

 Indian industry representative, interview by Commission staff, Mumbai, India, May 28, 2009. 
F-4

TABLE F.2 India: Government procurement and distribution of rice and wheat, MYs 2004/05–2008/09 (million mt) 

Item 2004/05 2005/06 2006/07 2007/08 2008/09

Rice production 83.13 91.79 93.35 96.69 99.37

Wheat production 68.64 69.35 75.81 78.57 77.63

 Sum of rice and wheat production 151.77 161.14 169.16 175.26 177.0

Procurement under Central Pool 

Rice 24.0 26.7 26.3 26.3 32.8

Wheat 16.8 14.8 9.2 11.1 22.7

 Sum of rice and wheat 40.8 41.5 35.5 37.4 55.5

Procurement under Central Pool as share of production (%) 

Rice 28.9 29.1 28.2 27.2 33.0

Wheat 24.5 21.3 12.1 14.1 29.2

 Sum of rice and wheat 26.9 25.8 21.0 21.3 31.4

Distribution (offtake) 

Rice for targeted public distribution system 16.6 19.2 21.2 22.6 22.3

Wheat for targeted public distribution system 13.1 12.2 10.4 10.9 12.5

 Sum for targeted public distribution system 29.7 31.4 31.6 33.5 34.8

Total other (welfare) 10.6 9.7 5.1 3.9 3.3

Sales and exports 1.2 1.1 0.0 (

a

) 0.1

 Total rice and wheat distributed 41.5 42.1 36.7 37.4 38.1

Distribution as share of production (%) 

Rice for targeted public distribution system 20.0 20.9 22.7 23.4 22.4

Wheat for targeted public distribution system 19.1 17.6 13.7 13.9 16.1

 Sum for targeted public distribution system 19.6 19.5 18.7 19.1 19.7

Total other (welfare) 7.0 6.0 3.0 1.9 1.8

Sales and exports 0.8 0.7 0.0 (

b

) (b)

 Total distribution 27.3 26.1 21.7 21.3 21.6

Source: Government of India, Ministry of Finance, Economic Survey, 2008–09, Tables 7.4 and 7.21; Government of India, Ministry of 

Agriculture. 

Note: Distribution data for MY 2008/09 were extrapolated from data for April–February. 

 aLess than 500 mt. 

b

Less than 0.05 percent.

TABLE F.1 India: Agricultural production by commodity, MYs 2003/04–2007/08 (million mt) 

 Product 2003/04 2004/05 2005/06 2006/07 2007/08 

% increase 

2007/08 

over 

2003/04

Grains 

 Rice 88.5 83.1 91.8 93.4 96.7 9.2

 Wheat 72.2 68.6 69.4 75.8 78.6 8.9

 Coarse grains 37.6 33.5 34.1 33.9 40.8 8.4

Pulses 14.9 13.1 13.4 14.2 14.8 –1.0

Major oilseeds 25.2 24.4 28.0 24.3 29.8 18.1

 Groundnut 8.1 6.8 8.0 4.9 9.2 12.9

 Rapeseed/mustard 6.3 7.6 8.1 7.4 5.8 –7.3

 Soybean 7.8 6.9 8.3 8.9 11.0 40.3

Sugarcane 233.9 237.1 281.2 355.5 348.2 48.9

Sugar 15.2 14.2 21.1 30.8 28.6 89.0

Tea 0.878 0.893 0.946 0.956 0.944 13.3

Coffee 0.271 0.276 0.274 0.280 0.262 –3.3

Cotton (million bales) 13.7 16.4 18.5 22.6 25.9 88.5

Fruit (

a

) (a) 55.4 58.9 62.9 b13.6

Vegetables (

a

) (a) 111.4 116.0 122.3 b 9.8

Milk, all 88.1 92.6 97.1 100.9 104.8 19.0

 Buffalo milk 48.0 50.2 52.1 55.2 57.0 18.7

 Cow milk 35.0 37.3 39.8 41.0 42.1 20.5

Meat, bovine 2.13 2.25 2.38 2.4 2.5 16.0

Goat meat 0.4 0.5 0.5 0.5 0.5 32.4

Pig meat 0.490 0.497 0.497 0.497 0.497 1.4

Sheep meat 0.216 0.225 0.241 0.240 0.243 12.5

Poultry 1.7 1.9 2.0 2.2 2.5 50.9

Source: Government of India, Ministry of Agriculture; FAOSTAT; USDA, FAS, PSD database. 

 aNot available. bPercentage change represents MY 2005/06 to MY 2007/08. 
F-5

The Indian milling sector is dominated by wheat, mainly milled for wheat flour and to a 

lesser degree rice and pulses. Wheat milling is mainly done by the unorganized sector, 

but a few large firms produce and market branded wheat flour. Bakery products are the 

largest segment of grain-based processed foods, and this production is also performed by 

mainly small and medium-sized unorganized local players and a limited number of 

organized firms. Bread production was 2.7 mmt in 2004; 50–55 percent of it took place in 

the organized sector.10 Higher value-added processed grain products include Westernstyle breakfast cereals, which is a small but growing segment. 

 

Consumption 

Grains, predominantly wheat and rice, are the largest component of the Indian diet and 

are consumed in many forms. Although wheat is most popular in the north, its 

consumption is growing nationally partly because of migration but also because of its 

wider availability, its versatility, and the public’s increasing awareness of its health 

benefits.11 Other, less commonly consumed grains include sorghum (jowar), pearl millet 

(bajra), and maize (corn). Sorghum and millet are consumed in substantial quantities in 

only approximately one-half of all states and have very low per capita consumption 

(about 0.6 kilograms or less per month) in most of the remaining states. 12 Food 

consumption of corn is also low in most states. 

Pulses 

Production 

India is a leading global producer of pulses of many types, including desi (small) 

chickpeas, pigeon peas, black matpe, and mung beans. Total pulse production was 

14.8 mmt in MY 2007/08 with a planted area of 23.9 million ha; this represents a steady 

decline in area and relatively stagnant production since the 1970s. There have been few 

varietal improvements for domestic pulse production over the years, and only a small 

share of production is under irrigation.13 As a result, yields have not risen compared to 

other crops, eroding profitability relative to crops such as wheat and rice.14 Production 

takes place mainly in Madhya Pradesh, Maharastra, and Uttar Pradesh (fig. F.1). Some 

pulse-producing states provide indirect support for pulse production. For example, in 

Tamil Nadu a 4 percent tax is levied on yellow/green peas and chickpeas that are shipped 

across state lines. This tax is intended to limit the amount of pulses that are imported or 

transported through the state.15

 10 IBEF, Food Processing: Market and Opportunities, 5. 11 Wheat has higher levels of calcium and protein relative to rice. Government of India, Ministry of 

Agriculture Directorate of Marketing and Inspection, “Post Harvest Profile of Wheat,” n.d. 12 Government of India, NSSO, Household Consumer Expenditure in India, 2006–07, October 2008, 

app. A, table 7R. 13 Indian industry representatives, interviews by Commission staff, New Delhi and Mumbai, India, 

May 26 and 28, 2009. 14 USDA, ERS, India’s Pulse Sector, May 2003, 3. 15 Ibid., 5. 
F-6

Consumption 

Pulses are an important protein source for low-income households in India, and 

consumption was 35–37 percent of total world pulse consumption from 2000 to 2003.16

Essentially, all Indians consume pulses, mostly in shelled and split form, called daal,17 or 

as flour.18 The four most popular pulses in India are desi chickpeas, pigeon peas, mung 

beans, and lentils.19 Desi chickpeas are eaten throughout India, while the other popular 

pulses are preferred in certain regions.20 Pulses with lower consumption include green, 

yellow, and den peas. To help meet demand, India imports pulses, including yellow peas, 

green peas, chick peas, and lentils from the United States, Australia, and Canada.21

 16 FAOSTAT, downloaded May 27, 2009. 

17 “Daal” also refers to dishes Indians make out of pulses which can be in the form of soup or a thick 

paste. 18 USDA, ERS, India’s Pulse Sector, May 2003, 6; Govindan, India: Exporter Guide, October 1, 2007, 5. 19 USDA, ERS, India’s Pulse Sector, May 2003, 7 (table 1). 20 To see regional preferences for different pulses, see USDA, ERS, India’s Pulse Sector, May 2003, 7 

(table 1). 21 Industry official, interview by Commission staff, Mumbai, India, May 28, 2009; industry official, 

interview by Commission staff, Mumbai, India, May 29, 2009. 

FIGURE F.1 India: Leading state agricultural production for select commodities (mmt)

Punjab Volume

Wheat 14.60

Milk 9.17

Cotton 2.68

Haryana Volume

Wheat 10.06

Orissa Million

Hectares

Fruit and Veg. 0.98

Rajasthan Volume

Milk 9.38

Coarse Cereals 5.50

Soybeans 0.77

MadhyaPradesh Volume

Soybeans 4.78

Pulses 3.20

Maharashtra Volume

Sugarcane 78.57

Coarse Cereals 6.14

Cotton 4.62

Soybeans 2.89

Pulses 2.30

UttarPradesh Volume

Sugarcane 133.95

Wheat 25.03

Milk 18.10

Rice 11.12

Pulses 1.98

Fruit and Veg.

(million hectares) 0.99

Karnataka Volume

Coarse Cereals 5.06

Gujarat Volume

Cotton 8.79

TamilNadu Volume

Sugarcane 41.12

AndhraPradesh Volume

Rice 11.87

West Bengal Volume

Rice 14.75

Fruit and Veg.

(million hectares) 1.46

Source: Government of India, Ministry of Agriculture.

FIGURE F.1 India: Leading state agricultural production for select commodities (mmt)

Punjab Volume

Wheat 14.60

Milk 9.17

Cotton 2.68

Haryana Volume

Wheat 10.06

Orissa Million

Hectares

Fruit and Veg. 0.98

Rajasthan Volume

Milk 9.38

Coarse Cereals 5.50

Soybeans 0.77

MadhyaPradesh Volume

Soybeans 4.78

Pulses 3.20

Maharashtra Volume

Sugarcane 78.57

Coarse Cereals 6.14

Cotton 4.62

Soybeans 2.89

Pulses 2.30

UttarPradesh Volume

Sugarcane 133.95

Wheat 25.03

Milk 18.10

Rice 11.12

Pulses 1.98

Fruit and Veg.

(million hectares) 0.99

Karnataka Volume

Coarse Cereals 5.06

Gujarat Volume

Cotton 8.79

TamilNadu Volume

Sugarcane 41.12

AndhraPradesh Volume

Rice 11.87

West Bengal Volume

Rice 14.75

Fruit and Veg.

(million hectares) 1.46

Punjab Volume

Wheat 14.60

Milk 9.17

Cotton 2.68

Haryana Volume

Wheat 10.06

Orissa Million

Hectares

Fruit and Veg. 0.98

Rajasthan Volume

Milk 9.38

Coarse Cereals 5.50

Soybeans 0.77

MadhyaPradesh Volume

Soybeans 4.78

Pulses 3.20

Maharashtra Volume

Sugarcane 78.57

Coarse Cereals 6.14

Cotton 4.62

Soybeans 2.89

Pulses 2.30

UttarPradesh Volume

Sugarcane 133.95

Wheat 25.03

Milk 18.10

Rice 11.12

Pulses 1.98

Fruit and Veg.

(million hectares) 0.99

Karnataka Volume

Coarse Cereals 5.06

Gujarat Volume

Cotton 8.79

TamilNadu Volume

Sugarcane 41.12

AndhraPradesh Volume

Rice 11.87

West Bengal Volume

Rice 14.75

Fruit and Veg.

(million hectares) 1.46

Source: Government of India, Ministry of Agriculture.
F-7

Yellow peas can serve as a low-cost substitute for desi chickpeas and other pulses.22

Green peas, which normally cost more than yellow peas, are used in daal and for snack 

foods.23

Although income and pulse demand are generally positively correlated, per capita pulse 

consumption fell over the period 1970–2001 despite rising incomes. 24 This decline 

occurred because of reduced production and import levels and price increases that may 

have outpaced income growth.25 This dynamic reflects the high level of Indian food price 

sensitivity.26 In response to rising pulse prices, it appears that middle- and low-income 

Indians have replaced pulses with lower-priced grains and vegetables, not with other 

proteins.27 The shift from pulses by higher-income Indians, however, is possibly because 

of preference changes in favor of previously less-consumed items, such as meat, 

vegetables, fruit, or dairy.28

Oilseeds 

Production 

India is a major global producer of oilseeds. The most important oilseed crops in India in 

terms of production are soybeans, peanuts, and rapeseed/mustard. Approximately 

80 percent of total oilseed production is processed into oil. With only 24 percent of 

oilseed production in India irrigated, the majority of oilseed farmers are dependent on 

monsoon rainfall. As a result, oilseed yields are well below world averages. Major 

oilseed production—28.1 mmt on 26.5 million ha in MY 2007/08—increased by nearly 

20 percent between MY 2003/04 and MY 2007/08. The increase in oilseed area was 

driven by increases for soybeans, which alone during the same period increased by 

35 percent. High domestic market prices for soybean, peanut, and rapeseed toward the 

end of the period encouraged production and increased plantings.29 Rising feed demand, 

mainly for poultry production, in the Indian domestic and international markets kept 

soybean meal prices high.30 Other oil meals, including peanut and rapeseed meals, are 

also used in feed formulations, although to a lesser extent, and experienced similar 

increased demand and firm prices in MY 2007/08. 

For soybeans, meal is the most important processed product, and it is used for poultry 

feed. Of total soybean production, approximately 85 percent is converted into meal. The 

Indian poultry industry consumes about one-third of domestic soy meal production while 

most of the rest is exported.31 Approximately 70 percent of domestic soybean production 

 22 USDA, ERS, India’s Pulse Sector, May 2003, 7 (table 1); industry official, interview by Commission 

staff, New Delhi, India, May 26, 2009. 23 USDA, ERS, India’s Pulse Sector, May 2003, 7 (table 1); industry official, interview by Commission 

staff, Mumbai, India, May 28, 2009; and industry official, interview by Commission staff, New Delhi, India, 

May 26, 2009. 24 USDA, ERS, India’s Pulse Sector, May 2003, 6, 22. 25 Ibid., 22. 

26 Industry official, interview by Commission staff, New Delhi, India, May 26, 2009; industry official, 

interview by Commission staff, Mumbai, India, May 28, 2009. 27 USDA, ERS, India’s Pulse Sector, May 2003, 6, 8. 28 Ibid., 8. 

29 Indian government minimum support prices for oilseeds are typically set too low to influence market 

prices. Aradhey, India: Oilseeds; Annual, April 16, 2009, 3. 30 Aradhey, India: Oilseeds; Annual, May 19, 2008, 6. 31 Industry representative, interview by Commission staff, Mumbai, India, May 28, 2009. 
F-8

is in nonirrigated areas with yields of 1,000 kg/ha, compared to 2,000–3,000 kg/ha in the 

United States.32 

The oilseed processing sector consists of firms involved in crushing for oil and meal, as 

well as oil refining and marketing. In 2008, a significant portion (1 mmt) of Indian edible 

oils, including imported palm oil, was hydrogenated to make margarine.33 Because India 

imports a considerable amount of unrefined oil, refineries are generally situated on the 

coasts near ports of import. The Indian preference for importing unrefined oil reportedly 

reflects a desire to generate the added value of refining, generate domestic tax revenue on 

the processing, and create employment opportunities at refineries. 34 Because 

transportation logistics are poor and local taxes vary, large refiners generally set up 

multiple locations in different states to serve local markets.35 

Oilseed processing is performed by a large number of small-scale, low-technology, highcost plants. Indian government regulations regarding small-scale industry have 

traditionally limited plant sizes in this sector, keeping operations from benefiting from 

economies of scale or vertically integrating. 36 In addition, government policies have 

provided tax incentives to build new capacity in depressed areas, often areas where 

processing is not economically viable. Oil refining capacity utilization in India is low, as 

plants generally run only during the domestic oilseed harvest and government policies 

discourage imports of oilseeds for processing.37

Edible Oil Consumption 

Traditionally, edible oil preferences have been notably regional. For example, the 

southern states have a preference for coconut and sunflower oils and the northern states 

for rapeseed (canola) oil. 38 Oils are highly substitutable, however, and price is an 

important determinant of purchases.39 As a result, Indians have recently been switching 

from traditional oils to lower-priced imported edible oils, mainly palm and soybean oils; 

these lower-priced imported oils are estimated to account for 53 percent of edible oil 

consumption in MY 2008/09.40

Palm oil, which is relatively low priced, accounts for the largest share of edible oil 

consumption, and its consumption has risen in recent years.41 It can easily be blended 

with other edible oils and is also used in processed foods.42 Soybean and rapeseed oils 

account for the second and third largest shares of edible oils consumed. In line with the 

 32 Ibid. 

33 Dhankhar, India: Food Processing Sector; Annual, 2008, July 2, 2008, 14. 34 Indian industry representative, interview by Commission staff, New Delhi, India, May 26, 2009. 35 Indian industry representative, interview by Commission staff, Mumbai, India, June 1, 2009. 36 USDA, ERS, The Role of Policy and Industry Structure in India’s Oilseed Markets, April 2006, 14. 

Such policies do not apply to soybean and sunflower seed processing, resulting in relatively larger plants in 

those sectors. 37 Because of high costs of transporting oilseeds and the 5:1 soybean-to-oil ratio, importing oilseeds for 

processing in India may not be practical. Indian industry representative, interview by Commission staff, 

Mumbai, India, May 28, 2009. 38 Aradhey, India: Oilseeds; Annual, April 16, 2009; industry officials, interview by Commission staff, 

Mumbai, India, June 1, 2009. 39 Industry officials, interview by Commission staff, Mumbai, India, June 1, 2009. 40 Aradhey, India: Oilseeds; Annual, April 16, 2009. 41 Ibid. 

42 Industry officials, interview by Commission staff, New Delhi, India, May 26, 2009 and May 28, 2009; 

Aradhey, India: Oilseeds; Annual, April 16, 2009. 
F-9

trend toward healthier eating, Indian demand for healthful oils, such as sunflower, 

safflower, and palmolein, is rising. 

Sugar 

Production 

Sugarcane is an extremely important cash crop in India. The production, pricing, and 

international trade of sugarcane and sugar is highly regulated by the Indian government. 

Production, which stood at 348.2 mmt of sugarcane and 28.6 mmt of sugar in MY 

2007/08, has grown dramatically over the years because of the central government’s 

planned growth in the sector, which included the development of central/state 

government extension services, increased support prices, and increased use of irrigation.43

Favorable government policies, as well as favorable weather, have led to a steady 

increase in planted area, which in MY 2007/08 reached 5.0 million ha. 

Indian sugarcane and sugar production generally follows a six- to eight-year cycle, 

whereby three to four years of high production, with corresponding high stocks and low 

prices, is usually followed by two to three years of lower production. High sugarcane 

production during MY 1999/2000–2002/03 was followed by marked drops in production 

during MY 2003/04–2004/05. 44 The next upswing, aided by increased planted area, 

resulted in record sugar production in MY 2005/06 and converted India into a net sugar 

exporter for the first time. Another year of record production followed in MY 2006/07, 

which led again to cyclical oversupply, low prices, and a distressed situation for farmers. 

Delayed cane price payments by the mills to growers in key growing regions and 

relatively higher prices for food grains shifted growing area out of cane in MY 2007/08. 

Delayed payments also caused farmers to use less fertilizer, pesticides, and irrigation 

water, resulting in lower yields.45 

The Indian sugar milling sector consists of several hundred sugar mills, about one-half of 

which, accounting for 56 percent of processing capacity in 2007, were organized as 

farmer cooperatives. The remainder is processed by private and public sector mills.46 The 

sugar milling industry is concentrated in Maharastra and Uttar Pradesh. 

 

 43 FAO, “Factors Determining Indian Sugar Production,” October, 1997, 29–31. 

44 Singh, India: Sugar, Semi-Annual 2008, October 6, 2008, 4. 45 Ibid. 

46 Government of India, Agriculture Division Planning Commission, Report of the Working Group on 

Agriculture Marketing Infrastructure and Policy Required for Internal and External Trade for the XI Five 

Year Plan 2007–12, January 2007, 27. 
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Consumption 

India is the largest sugar-consuming country in the world in terms of absolute numbers, 

though not in per capita terms.47 Per capita sugar consumption in India was 24 kilograms 

in 2003 versus 8 kilograms in China, 56 kilograms in Brazil, and 70 kilograms in the 

United States. In higher-income urban centers, however, Indian per capita consumption 

of refined sugar is as high as that of many developed countries.48 Sugar is an important 

part of Indian culinary and cultural practices and is mixed into everything from syrupy 

tea to dense sweets. A basic staple of most households, it is consumed in various forms: 

the traditional, unrefined sugar called khandsari, typically used by sweets makers; gur, an 

unrefined lumpy brown sugar, mainly consumed in rural areas; and white, refined sugar. 

As levels of income and urbanization have risen, consumption of refined sugar has 

increased, with a corresponding decrease in consumption of khandsari and gur. 49

Industrial consumption of refined sugar by the food processing sector is rising as well. 

Dairy 

India is the largest milk producer in the world, at approximately 114 mmt in 2008.50 In 

1970 the Indian government and the World Food Program began a campaign to 

encourage the growth of the dairy sector as a rural poverty alleviation program as well as 

a dairy production program.51 Almost 40 years later, the landless, unable to grow crops, 

are still attracted to dairying, as alternative paid employment is not generally available in 

rural areas.52 Even for marginal landholders, dairying provides regular, more immediate 

cash flow than crops, and livestock has become a side business to cropping.53

The industry consists of mainly smallholder farmers with one or two cows or buffaloes 

and some dairy farms—large, by Indian standards—with about 30 cows. Smallholder 

farmers, who mainly milk cows by hand, have advantages over “commercial” or full-time 

farmers because of unpaid labor and low dry fodder costs.54 Part-time dairy farmers in 

rural areas account for the vast majority of production, which is largest in Uttar Pradesh, 

Rajasthan, and Punjab. Productivity rates in India are very low at the farm level: milk 

production per cow is only one-eighth the U.S. average, though it is growing at 5 percent 

annually. 55 The increases in milk production have occurred mainly because of new 

entrants into dairying, rather than yield increases. 

Approximately 85 percent of total milk production is marketed through the informal 

sector, i.e., consumed on the farm by the farmer’s household or sold and possibly 

 47 FAO, Food Outlook, November 2008. 48 India Infoline, Sector Database, “Sugar,” n.d. 49 Ibid. 

50 The second-leading global milk producer, the United States, produced about 86 million metric tons of 

milk in 2008. Pandit, “Amul Ranks Among Top 21 Global Dairy Biz Cos,” June 25, 2009; USDA, NASS, 

2009. 51 U.S. Dairy Export Council, India: Dairy Industry, March 2006. 52 Ibid. 

53 Ibid. 

54 Ibid., 15. 

55 Overgrazing on public lands and the use of crop residues for animal feed, rather than high-quality 

grains, severely restricts milk productivity. U.S. Dairy Export Council, India: Dairy Industry, March 2006, 

25. 
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processed (into other dairy products like cheese) directly by the farmer.56 Milk in the 

informal sector remains unpasteurized and is typically not held to national food safety 

standards. Surplus milk is generally marketed through state-level milk marketing 

federations, district-level milk unions, and village-level cooperatives.57 Processed dairy 

production consists largely of packaged liquid milk, but other products produced in the 

organized sector include ethnic sweets, milk powder, curd, whey, butter, ghee (clarified 

butter), cheese, ice cream, and casein.58 Sweetened milk powders, condensed milk, and 

creamers are also important products for this sector. 

Indian milk cooperatives have few national brand names, with perhaps two exceptions. 

The Amul and Sagar brands were developed by the 2.8 million dairy farmers of the 

Gujarat Cooperative Milk Marketing Federation, India’s largest food products marketing 

organization, with 19 processing plants and $650 million in annual sales.59 The national 

brand Mother Dairy, developed by the National Dairy Development Board and based in 

New Delhi, has successfully organized and marketed the milk production of more than 

117,000 small-scale milk producers.60 

Of the multinational dairy firms that operate in India, Nestlé may have the most 

recognized brand name among consumers and the most aggressive plan for growth. In 

2006 and 2007, Nestlé India created business ties with several regional dairies for 

sourcing, processing, packaging, and supplying milk products, including Andhra 

Pradesh-based Heritage Foods India Ltd. for sales in the south, Bengal Nester in the east, 

and Dynamix Dairy Industries Ltd. in the west. The company already had strong ties 

dating back to 1961 to the Moga Dairy in Punjab, where the company sources 

approximately 1 million liters of milk per day61 and currently has contracts with 100,000 

farmers.62 Nestlé’s consumer focus is liquid milk, infant formula, and yogurt.63

 

Consumption 

Liquid milk and ghee are the most widely consumed dairy products in India, accounting 

for an estimated 80 percent of total milk production.64 For liquid consumption, Indian 

consumers prefer high-fat milk, particularly buffalo milk. 65 Milk consumption has 

increased with the growth of Indian urban areas,66 as wealthier urban Indians consume 

substantially more milk than poorer, rural Indians.67 Ghee, typically produced without the 

benefit of pasteurization, is a popular dairy food because it can be stored without 

 56 Dairy processing plants are regulated if they employ more than 20 people and process more than 

10,000 liters. U.S. Dairy Export Council, India: Dairy Industry, March 2006. 57 Government-owed dairy processors or cooperatives in the organized sector are generally more 

concerned with employment than profits. Low productivity rates among processors are often the result of 

poor management and a lack of competition, as new entrants in the dairy processing sector are often denied 

government permits if their plants are close to existing facilities. Many cooperatives also receive government 

aid for providing reasonable prices to consumers, a practice that deters them from maximizing profits. Ibid., 

28. 58 Ibid., 44–46. 

59 Amul India, “Gujarat Cooperative Milk Marketing Federation.” 60 Indian industry representatives, interview by Commission staff, Mumbai, India, March 28, 2009; 

Raghu, “Mother Dairy to Take On Amul Milk in Gujarat,” December 31, 2007. 61 The Hindu Business Line, “Nestlé India Increasing Focus on Dairy Biz,” July 23, 2007. 62 Indian industry representative, interview by Commission staff, New Delhi, India, June 4, 2009. 63 The Hindu Business Line, “Nestlé India Increasing Focus on Dairy Biz,” July 23, 2007. 64 U.S. Dairy Export Council, India: Dairy Industry, March 2006, 47. 65 Dhankhar, India: Livestock and Product, 2008, September 2, 2008. 66 EIU, India Food: Sub-Sector Update, November 11, 2008. 67 U.S. Dairy Export Council, India: Dairy Industry, March 2006, 49. 
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refrigeration. This characteristic is advantageous in India, where refrigeration capacity is 

limited and electricity supply is erratic in many areas of the country. Other traditional 

dairy products include dahi (curds) and paneer (cottage cheese); only 4 percent of dairy 

consumption is in the form of Western-style dairy products such as milk powder and ice 

cream.68 

Meat and Poultry 

Production 

India has the largest livestock population in the world, with 50 percent of the global total 

of buffaloes and 20 percent of the cattle.69 This livestock is not used mainly for meat 

production; Indian per capita meat consumption is well below the world average.70 Only 

11 percent of buffalo, 6 percent of cattle, 33 percent of sheep, and 38 percent of goats are 

slaughtered for meat.71 Cattle are used mainly for dairy production and as farm service 

animals. The main bovine meat processed is male buffalo meat, which is also exported. 

The Indian meat and poultry processing sector had a capacity of 1 mmt in 2008, mostly in 

small slaughterhouses, with about a 40–50 percent capacity utilization rate.72 

Poultry production is the fastest growing meat production, expanding by 50 percent by 

volume between MY 2003/04 and MY 2007/08. However, only about 6 percent is 

processed in slaughterhouses, because Indians generally prefer freshly butchered meats.73

The poultry-processing industry is growing and has become increasingly organized and 

technologically advanced. Large-scale producers that use commercial feed operate in 

India, and domestic corn production has risen accordingly.74 Some vertical integration 

has occurred in the southern part of India, where growers raise but do not take ownership 

of the poultry, while the processors provide them the chicks and feed. Tyson Foods, Inc., 

through a joint venture with the Indian firm Godrej Agrovet, has invested in the Indian 

poultry industry, establishing an integrated growing, processing, and distribution 

operation with production facilities in Mumbai and Bangalore.75

Consumption 

Even though most Indians are not vegetarians, in general they consume low levels of 

meat relative to other counties. Indians consumed on average just 21 calories per day 

from meat from 2001 to 2003, which is dramatically less than the 367–446 calories from 

meat consumed daily in China, Brazil, and the United States. This low level of meat 

consumption may be attributable to religious practices as well as the high cost of meat.76

 68 Ibid., 47. 

69 IBEF, Food Processing: Market and Opportunities, 6. 70 Per capita annual meat consumption in India is 1.5 kg versus the world average of 35.5 kg. 71 IBEF, Food Processing: Market and Opportunities, 5. 72 Dhankhar, India: Food Processing Sector, July 2, 2008, 14. 73 Indian industry representative, interview by Commission staff, Mumbai, India, May 28, 2009. 74 Ibid. 

75 Indian industry representative, interview by Commission staff, Mumbai, India, May 28, 2009. See 

chapter 8 for details on the Tyson-Godrej joint venture. 76 USDA, ERS, India’s Pulse Sector, May 2003, 6; USMEF, “India’s Pork Market: Opportunities,” 

March 2007, 4. 
F-13

Per capita meat consumption has been rising steadily, however, and is expected to 

continue to increase.77 

Indians traditionally prefer fresh meat, and thus there is low demand for chilled meats 

and even less for frozen meat.78 Bovine meat, mainly buffalo meat, and poultry accounted 

for approximately 70 percent of all meat consumption in 2003 (fig. F.2). Buffalo meat 

and poultry are popular, in part, because they are competitively priced and neither is 

taboo to any major Indian religion.79 In recent years, some pulses have become more 

expensive than buffalo meat, making it more popular as a protein alternative to pulses.80

Goat and sheep meat are actually preferred by Indians to buffalo meat and poultry, but 

consumption is low because low production levels keep their prices relatively high.81 

Bovine meat

42%

Pigmeat

8%

Offals, edible

10%

Mutton & goat

12%

Poultry meat

28%

Source: FAO, FAOSTAT (accessed May 27, 2009).

FIGURE F.2 India: Selected total meat consumption, percent share, 

2003

Fruits and Vegetables 

Production 

India is the second-largest producer of fruits and vegetables in the world. Fruit production 

was 62.9 mmt and covered 5.8 million ha in MY 2007/08.82 Although India’s different 

climatic zones allow for the production of many different kinds of fruit, tropical fruit 

dominates, in particular bananas, mangoes, and citrus fruits, which together account for 

 77 EIU, India Food: Sub-Sector Update, November 11, 2008. 78 Ibid. 

79 Dhankhar, India: Livestock and Products, September 2, 2008, 8; industry official, interview by 

Commission staff, Washington, DC, April 7, 2009. 80 Dhankhar, India: Livestock and Products, September 2, 2008, 8. 81 Ibid., 3. 

82 Government of India, Ministry of Agriculture, Directorate of Economics and Statistics, Agricultural 

Statistics at a Glance, 2008. 
F-14

70 percent of total fruit production.83 The lack of a fully developed cold chain particularly 

affects fruit and vegetable production and results in significant postharvest quality 

degradation and losses. Top horticulture-producing states by area are West Bengal, Uttar 

Pradesh, and Orissa.84

India is the world’s largest producer of bananas and mangoes, with MY 2006/07 

production of 20.9 mmt and 13.5 mmt, respectively.85 Citrus ranks as the third-largest 

fruit by production volume, with 7.1 mmt in MY 2006/07.86 Although they are produced 

in much smaller volumes, the production of grapes and apples, at 1.7 mmt and 1.6 mmt, 

respectively, in MY 2006/07 is significant in India. Grape production is mostly of table 

grapes, although wine grapes have been introduced to support a nascent wine industry. 

India is the sixth-largest producer of apples in the world, with the second-largest area, 

after China, but the lowest yields (5.5 mt/ha) of the major world producers.87 

A wide variety of vegetables is produced in India. Potatoes dominate national production, 

while onions, tomatoes, eggplant, tapioca, cabbage, and cauliflower are also important 

vegetable crops. India is the second-largest global producer and consumer of potatoes, 

which are a staple of the Indian diet. India produced 30.2 mmt of potatoes in 

MY 2006/07.88 India is the world’s largest producer of cauliflower, second largest in 

onions, and third largest in cabbage. Rising incomes and growing health awareness 

among Indian consumers are contributing to rising production. 

Processing capacity for fruits and vegetables was 2.5 mmt in 2007.89 The main processed 

products in the organized sector (with a 48 percent share of the sector as a whole90) are 

juices, pulp concentrates, vegetable pastes, ready-to-serve beverages, ready-to-eat 

vegetables, jams, and frozen french fries. Tomato ketchup and jam production are 

currently very small but growing rapidly. About 20 percent of processed fruit and 

vegetable products are exported and consist of fruit pulps, pickles, chutneys, canned 

foods, and concentrated pulps and juices. Mangoes and mango-based products account 

for about 50 percent of those exports.91 

Consumption 

Traditionally, Indians do not consume large quantities of fruit or vegetables. Per capita 

fruit consumption is comparatively lower than other countries (e.g., 37.3 kilograms of 

fruit per capita in India versus 64.6 kilograms in China),92 and only 4 percent of food 

expenditure goes to fruit.93 Indians spend more of their food budget (10–12 percent) on 

 83 Dhankhar, India: Product Brief; Indian Fresh Fruit Sector, December 16, 2008, 3. 84 The Indian state of Gujarat is striving to become a horticulture hub and has recently experienced a 

twofold increase in the land already allotted to horticulture. The state government has plans to bring in 

another 20 million hectares. 85 Government of India, Ministry of Agriculture, Directorate of Economics and Statistics, Agricultural 

Statistics at a Glance, 2008. 86 Dhankhar, India: Product Brief; Indian Fresh Fruit Sector, December 16, 2008, 11. 87 USDA, ERS, Prospects for India’s Emerging Apple Market, January 2006, 8. 88 Government of India, Ministry of Agriculture, Directorate of Economics and Statistics, Agricultural 

Statistics at a Glance, 2008. 89 Dhankhar, India: Food Processing Sector, July 2, 2008, 14. 90 IBEF, Food Processing: Market and Opportunities. 91 Ibid. 

92 EIU, India: Food: Sub-Sector Update, November 11, 2008; EIU, China Food: Sub-Sector Update, 

January 20, 2009. 93 Dhankhar, India: Product Brief; Indian Fresh Fruit Sector, December 16, 2008, 4. 
F-15

vegetables than fruit, and vegetable consumption is higher than fruit consumption. It is 

estimated that Indians each consumed 69.6 kilograms of vegetables in 2008. 94

Nonetheless, India’s vegetable consumption is still low compared to other countries. For 

example, China consumed an estimated 326.1 kilograms per capita of vegetables in 

2008.95

In India, the number of health-conscious consumers is rising, and fresh fruits are 

increasingly popular with this population.96 Major fruits in India are those served by 

domestic production: bananas, mangoes, citrus fruits, papayas, guavas, grapes, and 

apples.97 Citrus fruit consumption includes mousambi (sweet limes), limes, lemons, and 

oranges. 

Fruit consumption in India emphasizes locally grown types that are available in 

abundance at relatively low prices; bananas, mangoes, and citrus all have higher 

consumption levels than apples and grapes, which command higher prices in both 

domestic and imported versions.98 Despite low per capita consumption, because of its 

sheer numbers, India is the sixth-largest consumer of apples in the world.99 In northern 

India, where apples are produced, consumers demand premium apples, but in southern 

India, where the climate is too warm for apple production and infrastructure deficiencies 

leave apples in short supply, consumers reportedly will purchase apples of any quality.100 

Nuts 

Production 

Indians are large consumers of several types of tree nuts, but domestic commercial 

production is limited to cashews and walnuts. India is the second-largest producer of 

cashews in the world after Vietnam and maintains a large, export-oriented cashewprocessing industry that includes significant imports of raw cashews from sub-Saharan 

Africa. The Indian domestic cashew crop was 176,000 mt in MY 2008/09. 101 India 

produces relatively fewer walnuts; the MY 2008/09 walnut crop was 37,000 mt. 102

Walnuts are mainly grown in the northernmost state of Jammu and Kashmir on rocky 

terrain under rain-fed conditions. Yields for walnuts are relatively low because of poor 

genetics, lack of irrigation, and poor soil quality and management practices.103

Consumption 

Indians consume multiple kinds of nuts, including cashews, almonds, pistachios, and 

walnuts. These are generally eaten as snack foods, although some types of nuts are also 

used in confectionery, cosmetics, and soap.104 Cashews are the most prevalent and are 

 94 EIU, India Food: Sub-Sector Update, November 11, 2008. 95 Ibid.; EIU, China food: Sub-sector Update, January 20, 2009. 96 Dhankhar, India: Product Brief; Indian Fresh Fruit Sector, December 16, 2008, 4. 97 USDA, ERS, Prospects for India’s Emerging Apple Market, January 2006, 5; Dhankhar, India: 

Product Brief; Indian Fresh Fruit Sector, December 16, 2008, 3. 98 USDA, ERS, Prospects for India’s Emerging Apple Market, January 2006, 5. 99 Ibid., 1, 3, and 5. 

100 Industry official, interview by Commission staff, Mumbai, India, June 1, 2009. 101 The Cracker, International Nut and Dried Fruit Council Foundation, April 2009, 52. 102 Dhankhar, India: Tree Nuts, August 26, 2008, 4. 103 Dhankhar, India: Tree Nuts, September 14, 2007, 6. 104 Aradhey, India: Tree Nuts, September 11, 2008, 7. 
F-16

reportedly preferred in southern India.105 Pistachios are not grown in India, so demand is 

met entirely though imports.106 Reportedly, they are viewed as a luxury good and are a 

popular gift and festival item during major Indian holidays.107 Almonds are most popular 

in northern India. Walnuts have primarily been consumed during festival season 

(September to January), but they are beginning to be consumed year-round as awareness 

of their health benefits grows and as they become available in vacuum packs.108

 

Beverages 

Production 

India is the largest producer of tea in the world, reaching 944,000 mt in MY 2007/08. 

Indian coffee production, at 262,000 mt in MY 2007/08, is also large and mainly 

exported (75 percent in MY 2005/06). Other nonalcoholic beverages produced in India 

include carbonated and noncarbonated drinks. The carbonated segment has sizable 

organized production. Noncarbonated drinks are mainly fruit based. For alcoholic 

beverages, production includes beer and grain-based alcoholic beverages. Wine 

production is a relatively new endeavor, building on India’s sizable production of table 

grapes. Wine grape production and most of India’s wineries are located in Maharashtra. 

Wine production reached approximately 920,000 nine-liter cases in 2008.109

Consumption 

Among nonalcoholic beverages, the Indian beverage of preference is overwhelmingly tea, 

which Indians call chai. India is the world’s largest consumer of tea, typically brewed 

with a variety of spices, such as cardamom, cinnamon, and cloves.110 A study of the 

Indian hot drinks market found that that tea commanded 69 percent of the beverage 

market by value in 2007, while coffee held only 10 percent.111 A survey found that 

77 percent of Indians drank tea or coffee every day in 2006.112 Historically, there has 

been little interest in coffee, except perhaps in the south, but this pattern is beginning to 

change, and there is a rise in the number of high-end coffee shops.113 

Besides tea and coffee, Indians drink a wide variety of nonalcoholic beverages, including 

carbonated drinks, juices, bottled water, and milk, as well as traditional Indian drinks 

such as lassis (a yogurt drink) and badam doodh (a milk and almond drink). A survey on 

the soft drinks market found that in 2007, carbonated drinks had the biggest market share 

by value, followed by bottled water and juices.114 With regard to international brands, 

 105 Industry official, interview by Commission staff, Mumbai, India, May 11, 2009; Vinayak, “Retailing 

the King of Nuts,” July 31, 2008. 106 USITC, Hearing transcript, April 21, 2009, 30 (testimony of Mr. Masten, Paramount Farms). 107 Government official, interview by Commission staff, New Delhi, India, May 4, 2009; industry official, 

interview by Commission staff, Mumbai, India, May 11, 2009; and USITC, Hearing transcript, 

April 21, 2009, 30 (testimony of Mr. Masten, Paramount Farms). 108 Aradhey, India: Tree Nuts, September 11, 2008, 7. 109 JBC International, Inc., “Comprehensive Study of the Indian Wine Market,” 2008, 10. 110 EIU, India Food: Sub-Sector Update, November 11, 2008. 111 DATAMONITOR, “Hot Drinks in India,” October 2008. 112 Yadav and Kumar, “The Food Habits of a Nation,” August 14, 2006. Given tea’s market share, most 

of these hot drinks are likely tea rather than coffee. 113 EIU, India Food: Sub-Sector Update, November 11, 2008. 114 In this instance, “soft drink” does not refer exclusively to carbonated beverages. 
F-17

some are altered to fit Indian taste preferences, such as adding carbonation.115 A survey of 

the Indian juice market found that fruit drinks (consisting of a maximum 30 percent juice) 

had the largest market share (83 percent) by value in 2003.116 

Although Indians drink a wide variety of nonalcoholic beverages besides tea and coffee, 

most of these drinks are not necessarily cold. A survey found that Indian cold drink 

consumption is low. Specifically, approximately 22 percent of the rural population and 

23 percent of the urban population consume cold drinks, and only 4 percent of the 

population consumes cold drinks every day.117 This low consumption of cold drinks is 

likely because of limited refrigeration in Indian households. 

Indians consume spirits, beer, and wine, but in general, India has a low level of alcohol 

consumption compared with other countries. Alcohol consumption in India was 

1.8 billion liters in 2008, compared to 26.3 billion liters in China.118 A 2008 study of the 

Indian drinks market estimated that spirits held a 75 percent share of the market by 

value. 119 Beer and similar drinks had a 24 percent market share, and wine held the 

remaining sliver of the market. Out of the dominant spirits category, whiskey is most 

popular. In 2007 the top three spirits by value held the following market shares; whiskey, 

71 percent; brandy, 10 percent; and vodka, 2 percent.120 Despite overall low alcoholic 

consumption rates, whiskey is very popular, and India has the highest total whiskey 

consumption in the world.121 Indian youth reportedly prefer white spirits, such as vodka, 

sales of which are increasing.122 With regard to beer, Indians on average drink only about 

0.75 liters per annum, which is much lower than the 99 liters and 116 liters per capita 

consumption in the United Kingdom and Germany, respectively.123 The beer market is 

growing, however, at an estimated 12 percent a year.124

Wine consumption is concentrated in certain cities and states. Mumbai and New Delhi 

are the largest wine markets, followed by Bangalore and the state of Goa.125 Generally, 

Indians prefer red and white table wines, which commanded an estimated 80 percent of 

the Indian wine market in 2008.126 There is a limited market for sparkling wines and 

champagne, which accounted for about 16 percent of the wine market in 2008. The upper 

class, which drives Indian wine consumption, prefers traditional wine presentation that 

includes “real corks, full size bottles, and dry red and white wines.”127 The middle class, 

on the other hand, prefers sweet wines with a more nontraditional presentation that 

includes screw caps and smaller bottles. 

 115 Industry official, interview by Commission staff, Mumbai, India, May 11, 2009. 116 DATAMONITOR, “Juices in India,” May 2004, 9, 6. The 2003 data are the most recently available 

information. 117 Yadav and Kumar, “The Food Habits of a Nation,” August 14, 2006. 118 Ibid.; EIU, India Food: Sub-Sector Update, November 11, 2008. 119 DATAMONITOR, “Alcoholic Drinks in India,” December 2008, 11. 120 DATAMONITOR, “Spirits Drinks in India,” November 2008, 11. 121 Industry official, interview by Commission staff, New Delhi, India, May 4, 2009. 122 Ibid. 123 EIU, India Food: Sub-Sector Update, November 11, 2008. 124 Ibid. 125 JBC International Inc., “Comprehensive Study of the Indian Wine Market,” August 21, 2008, 6. 126 Ibid.; DATAMONITOR, “Wine in India,” December 2008, 11. 127 JBC International, Inc., “Comprehensive Study of the Indian Wine Market,” August 21, 2008, 6. This 

study defined the upper class for its study as the top 2 percent of this population and finds that this class is 

characterized by its monetary means, international experiences, and lifestyle, all of which expose them to 

wine. 
F-18

Cotton 

During MY 2003/04–2007/08, India became the second-largest global producer of cotton 

after China. Indian production feeds India’s extensive textile mills, which enjoyed higher 

textile export demand during this period. India had its sixth consecutive record cotton 

crop in MY 2008/09 as a result of increased planting and higher yields from improved 

hybrid varieties and Bt cotton,128 improved crop management practices, and favorable 

weather. 129 Cotton planted area increased by 24 percent over the period, reaching 

9.4 million hectares in MY 2007/08. This was true even though cotton must compete for 

area with other crops (rice and fodder crops in the north; coarse grains, pulses, and 

sugarcane in the central region; and rice, tobacco, and chilies in the south) that also 

enjoyed strong prices and relative profitability, particularly in MY 2008/09.130 Cotton 

yields have nearly doubled—they increased 90 percent between 2002 and 2007, versus 

10 percent or less for corn, rice, and soybeans during the same period131—but are still 

below the world average, leaving room for production gains despite limited additional 

area for planting cotton.132

 128 Bt cotton was introduced in 2002 and accounted for 85 percent of cotton area in MY 2008/09. 129 Singh, India Cotton and Products Annual 2008, May 12, 2008, 1. 130 Ibid., 4. 131 Ibid., 5. 132 Industry sources expect area for cotton production to peak at 10 million ha. Singh, India Cotton and 

Products Annual 2008, May 12, 2008, 5.
F-19

Bibliography 

Amul India. “Gujarat Cooperative Milk Marketing Federation.” http://www.amul.com/organisation.html

(accessed June 26, 2009). 

Aradhey, Amit. India: Oilseeds and Products; Annual, 2008. GAIN Report no. IN8047. U.S. Department 

of Agriculture, Foreign Agricultural Service, May 19, 2008. 

———. India: Oilseeds; Annual Report. GAIN Report no. IN9051. U.S. Department of Agriculture, 

Foreign Agricultural Service, April 16, 2009. 

———. India: Tree Nuts; Annual, 2008. GAIN Report no. IN8107. U.S. Department of Agriculture, 

Foreign Agricultural Service, September 11, 2008. 

———. India: Tree Nuts; Voluntary, 2008. GAIN Report no. IN8097. U.S. Department of Agriculture, 

Foreign Agricultural Service, August 26, 2008. 

The Cracker. International Nut and Dried Fruit Council Foundation, April 2009. 

DATAMONITOR. “Alcoholic Drinks in India,” December 2008. 

———. “Hot Drinks in India,” October 2008. 

———. “Juices in India,” May 2004. 

———. “Soft Drinks in India,” November 2008. 

———. “Spirits Drinks in India,” November 2008. 

———. “Wine in India,” December 2008. 

Dhankhar, Deepa. India: Food Processing Sector; Annual, 2008. GAIN Report no. IN8030. U.S. 

Department of Agriculture, Foreign Agriculture Service, July 2, 2008. 

———. India: Livestock and Products; Annual, 2008. GAIN Report no. IN8098. U.S. Department of 

Agriculture, Foreign Agriculture Service, September 2, 2008. 

———. India: Product Brief; Indian Fresh Fruit Sector, 2008. GAIN Report IN8150. U.S. Department 

of Agriculture, Foreign Agricultural Service, December 16, 2008. 

Economic Intelligence Unit (EIU). China Food: Sub-Sector Update, January 20, 2009. 

———. India Food: Sub-Sector Update, November 11, 2008. 

Food and Agriculture Organization of the United Nations (FAO). “Factors Determining Indian Sugar 

Production and Its Comparative Advantage.” In Proceedings of the Fiji/FAO Asia Pacific Sugar 

Conference, October, 29–31, 1997. 

———. FAOSTAT database (accessed May 27, 2009). 

———. “Global Analysis: Sugar.” Food Outlook, November 2008.
F-20

Government of India. Agriculture Division Planning Commission. Report of the Working Group 

 on Agricultural Marketing Infrastructure and Policy Required for Internal and External Trade 

for the XI Five-Year Plan 2007–12, January 2007. 

———. Ministry of Agriculture. Directorate of Economics and Statistics. Agricultural 

Statistics at a Glance, 2008. 

———. Ministry of Agriculture. Directorate of Marketing and Inspection. “Post Harvest Profile of 

 Wheat,” n.d. 

———. Ministry of Finance. Economic Survey, 2008–09, July 2009.

———. National Sample Survey Organization (NSSO). Household Consumer Expenditure in India, 

 2006-07, Appendix A, Table 7R, October 2008. 

Govindan, A. India: Exporter Guide; Annual, 2007. GAIN Report no. IN7095. U.S. Department of 

Agriculture, Foreign Agricultural Service, October 1, 2007. 

———. India: Grain and Feed; Monthly Lock-Up Report: January, 2007. GAIN Report no. IN7002. U.S. 

Department of Agriculture, Foreign Agricultural Service, January 10, 2007. 

———. India: Grain and Feed; Quarterly Lock-Up Report: August, 2007. GAIN Report no. IN7067. U.S. 

Department of Agriculture, Foreign Agricultural Service, August 31, 2007. 

———. India: Grain and Feed; Quarterly Lock-Up Report: May, 2008. GAIN Report no. IN8045. U.S. 

Department of Agriculture, Foreign Agricultural Service, May 6, 2008. 

———. India: Grain and Feed Update—June. GAIN Report no. IN9075. U.S. Department of Agriculture, 

Foreign Agricultural Service, June 9, 2009. 

Hindu Business Line, “Nestlé India Increasing Focus on Dairy Biz,” July 23, 2007. 

http://www.thehindubusinessline.com/bline/2007/07/24/stories/2007072451531100.htm

(accessed July 9, 2009). 

India Brand Equity Foundation (IBEF). Food Processing: Market and Opportunities, n.d. 

http://ibef.org/download/Food_Processing_270608.pdf (accessed October 6, 2009). 

India Infoline, Sector Database, “Sugar,” n.d. 

JBC International, Inc. “Comprehensive Study of the Indian Wine Market.” The Wine Institute, 2008. 

Pandit, Virendra. “Amul Ranks Among Top 21 Global Dairy Biz Cos.” The Hindu Business Line, 

June 25, 2009. http://www.thehindubusinessline.com/2009/06/25/stories/2009062550891800.htm. 

Raghu, Sunil. “Mother Dairy to Take On Amul Milk in Gujarat.” LiveMint.com, December 31, 2007. 

http://www.livemint.com/2007/12/30230620/Mother-Dairy-to-take-on-Amul-m.html. 

Singh, Santosh. India: Cotton and Products; Annual, 2008. GAIN Report no. IN8049. U.S. Department 

of Agriculture, Foreign Agricultural Service, May 12, 2008. 
F-21

———. India: Sugar; Semi-Annual, 2008. GAIN Report no. IN8114. U.S. Department of Agriculture, 

Foreign Agricultural Service, October 6, 2008. 

———. India: Tree Nuts; Annual, 2007. GAIN Report no. IN7086. U.S. Department of Agriculture, 

Foreign Agricultural Service, September 14, 2007. 

U.S. Dairy Export Council. India: Dairy Industry, March 2006. 

U.S. Department of Agriculture (USDA). Economic Research Services (ERS). India’s Pulse Sector: 

Results of Field Research. Washington, DC, USDA, May 2003.

http://www.ers.usda.gov/publications/WRS03/may03/wrs0301/. 

———. Prospects for India’s Emerging Apple Market. Washington, DC. USDA, January 2006.

http://www.ers.usda.gov/Publications/fts/2006/01jan/fts31901/. 

———. The Role of Policy and Industry Structure in India’s Oilseed Markets. Washington, DC, USDA, 

April 2006. http://www.ers.usda.gov/publications/err17/. 

U.S. Department of Agriculture, (USDA). Foreign Agricultural Service. Production, Supply, and 

 Distribution (PSD) Database. http://www.fas.usda.gov/psdonline/psdHome.aspx (accessed 

 various dates). 

U.S. Department of Agriculture (USDA). National Agricultural Statistical Service (NASS), 

http://www.nass.usda.gov/QuickStats/index2.jsp (accessed June 26, 2009). 

U.S. Meat Exporter’s Federation (USMEF). “India’s Pork Market: Opportunities for the U.S. Pork 

Industry.” March 2007. 

Venkatraman, Niloufer. “India (Cuisine).” In Frommer’s India, 3rd edition. 2000. 

Vinayah, A.J. “Retailing the King of Nuts.” Hindu Business Line, July 31, 2008. 

http://www.thehindubusinessline.com/catalyst/2008/07/31/stories/2008073150100300.htm. 

Whitcomb, Amelia. “An Overview of India’s Regional Cuisines.” LasVegasReastaurants.com, 

August 5, 2008. http://www.lasvegasrestaurants.com/article.cfm/article/33/An-Overview-ofIndia-s-Regional-Cuisines. 

Yadav, Yogendra, and Kumar, Sanjay. “The Food Habits of a Nation.” Hindu. August 14, 2006.

http://www.thehindu.com/2006/08/14/stories/2006081403771200.htm. 

APPENDIX G 

UNION AND STATE/UNION TERRITORY 

JURISDICTION OVER INDIAN 

AGRICULTURAL MATTERS

G-3

Indian Legal Structure for Agricultural Matters 

India is a democratic republic governed at the national level by a bicameral parliament. 

Members of the lower house, known as the House of the People (Lok Sahba), are directly 

elected, while members of the upper chamber, the Council of the States (Rajya Sahba), 

are elected by the state and territorial legislatures, with a few exceptions. India’s 

president, elected by an electoral college for a five-year term, acts as the head of state, 

and the prime minister of the Lok Sahba is the head of government. 

Governmental responsibilities are divided between the central (“union”) government and 

state governments. The seventh of the 12 schedules1

 in the Indian constitution comprises 

three lists. List I, the union List, sets out the departments, activities, and subjects under 

the control of the union government. List II, the State List, does the same for the states. 

List III, the Concurrent List, specifies the areas where states and the union government 

share powers and responsibilities.2

 Included on the State List is agriculture, meaning that 

unlike such sectors as defense, banking and finance, transportation, and communications, 

agriculture falls within the legal domain of India’s states and not the union government.3

Thus, the agricultural sector is largely, though not completely, controlled at the state level. 

This authority covers agricultural education and research, protection against pests, 

prevention of plant and animal diseases, water supplies and irrigation, and land use rights 

for agricultural land. It also encompasses agricultural tax policy, such as income and 

excise taxes on agricultural products and estate and succession duties (taxes) on 

agricultural land. For alcoholic beverages, state-level authority extends even further to 

embrace nearly all aspects of the “production, manufacture, possession, transport, 

purchase, and sale” of those items.4

The allocation of power to the states on agricultural matters is less absolute than it might 

appear. In reality, other provisions of the Indian constitution give the union government 

the legal means to influence or intervene in agricultural policies throughout India.5

 Very 

broadly, Article 248 of the constitution grants the union government residual powers of 

legislation for policy areas not specified under the three lists. In addition, under Article 

249, the union government has authority to legislate on any subject, even those on the 

State List, if the union government believes it to be “in the national interest.” Subsequent 

cases brought before India’s Supreme Court (e.g., State of Bengal versus Union of India, 

1962) have confirmed the union government’s authority to legislate on issues from the 

State and Concurrent Lists if the national interest is at stake.6

Similarly, under paragraph 33 of the Concurrent List, both the union and state 

governments have legislative authority over trade in foodstuffs, including edible oilseeds 

and oils, cattle fodder, raw cotton, and cottonseed, as well as over their production, 

supply, and distribution. The union List gives the central government certain direct 

powers over agriculture: under paragraph 51, the union government can legislate 

standards of quality for agricultural exports or goods transported from one state to 

another. Under paragraph 52, the parliament is authorized to control the production of 

 1

 A schedule is a statement of supplementary details in a legislative document. 2

 Government of India, Ministry of Law and Justice, The Constitution of India, July 2008, 315–329. 3

 Singh, Federalism, Nationalism and Development, 104. 4

 Government of India, Ministry of Law and Justice, The Constitution of India, July 2008, 323–325. 5

 Singh, Federalism, Nationalism and Development, 105. 6

 Ibid., 106.
G-4

certain agricultural goods in the public interest. Consequently, laws could be passed 

controlling, for example, the production of milk if national control of milk marketing 

were deemed to be in the public interest.7

The boundaries between the union government’s and state governments’ powers to 

implement agricultural policies are complicated—and are evolving. For the most part, the 

Ministry of Agriculture in New Delhi formulates agricultural policies under the five-year 

plans. The ministry and other central government agencies make key decisions relating to 

research and development, infrastructure, investment, credit, and trade. These policies are 

implemented by the states, which have enough individual latitude to make policy 

adjustments to fit their economic and social needs.8

States use this legal leeway in different ways. One example is the State Agricultural 

Produce Marketing (Development and Regulation) Act of 2003, commonly known as the 

Model Act. Among other things, the Model Act allows but does not require states to 

establish private markets and to permit farmers to sell directly to purchasers and engage 

in contract farming.9

 In the past, farmers were required to sell their produce only to 

government-run markets (mandis). Of the 28 states and 7 union territories (UTs) in India, 

all but 8 either have amended their local Agricultural Produce Marketing Committee 

(APMC) Acts to align with at least some of the national guidelines or had no need to 

amend their state laws.10 However, many states and UTs that revised their APMC Acts 

did not accept Model Act recommendations in full, creating a complex regulatory web for 

agricultural producers and distributors to follow.11 A list of APMC Act revisions by 

Indian state or UT is listed below. 

States/UTs and Implementation of the Model Act12

States/UTs That Have Implemented the Model Act 

The following states and UTs have reformed their APMC Acts to closely follow the 

Model Act. Reforms for farmers included direct marketing, contract marketing, and 

private or cooperative mandis. 

Andhra Pradesh (date amended: 10/26/2005) 

Arunachal Pradesh (date amended: 09/05/2006) 

Assam (date amended: 01/19/2007) 

Chhattisgarh (date amended: 02/10/2006) 

Goa (date amended: 08/06/2007) 

Gujarat (date amended: 05/01/2007) 

 7

 Ibid.

8

 OECD, Agricultural Policies in Emerging Economies 2009, 99. 9

 For the draft template created by the Union government for states to follow when creating their own 

APMC Act rules, see http://agmarknet.nic.in/amrscheme/FinalDraftRules2007.pdf (accessed June 8, 2009). 10 Industry representative, interview by Commission staff, New Delhi, India, May 9, 2009. 11 Over the last three years, states such as Uttar Pradesh and West Bengal have denied requests by Indian 

companies to open private mandis. In states where private mandis have been approved, the approval is 

typically for a limited time (e.g., one year) and made under administrative order rather than by statute. Thus, 

the administrative order can be changed at any time. Industry representative, interview by Commission staff, 

New Delhi, India, May 9, 2009. 12 Government of India, Planning Commission, India’s Eleventh Five Year Plan: 2007-12, 23, and 

Chaulan, “Agricultural Marketing Reforms,” April 23, 2008.
G-5

Himachal Pradesh (date amended: 05/26/2005) 

Karnataka (date amended: 08/16/2007) 

Madhya Pradesh (date amended: 06/15/2003) 

Maharashtra (date amended: 07/11/2006) 

Nagaland (date amended: 09/08/2005) 

Orissa (date amended: 05/17/2006) 

Rajasthan (date amended: 11/18/2005) 

Sikkim (date amended: 04/20/2005) 

Tripura (date amended: 05/11/2007) 

Tamil Nadu (no amendments to the state APMC Act needed to implement 

reforms) 

States/UTs Implementing Amended APMC Acts 

The following states and UTs reformed their APMC Acts only partially. The areas 

affected by the partial reforms are listed in parentheses. 

Chandigarh (UT) (contract farming, private and cooperative mandis) 

Haryana (contract farming) 

National Capital Territory of Delhi (direct marketing) 

Punjab (contract farming, private and cooperative mandis) 

States/UTs with No APMC Act 

The following states and UTs have no APMC Acts. No reforms were implemented to 

allow direct marketing, contract marketing, and private or cooperative mandis: 

Bihar (AMPC Act repealed effective 09/01/2006) 

Kerala 

Manipur 

Andaman and Nicobar Islands (UT) 

Dadra and Nagar Haveli (UT) 

Daman and Diu (UT) 

Lakshadweep (UT) 

The following states and UTs have initiated administrative action for reform of their 

APMC Acts: 

Mizoram 

Meghalaya 

Jammu and Kashmir 

Uttarakhand 

West Bengal 

Puducherry (UT) 

Jharkhand 

Uttar Pradesh 
G-6

Bibliography 

Chaulan, Shri U.K. “Agricultural Marketing Reforms: Amendments in State APMC Acts/Rules.” 

 Presentation of the Indian Ministry of Agriculture, Agricultural Marketing Division for the State 

 Agriculture/Agricultural Marketing Ministers Conference, April 23, 2008.

Government of India. Ministry of Law and Justice. The Constitution of India, July 2008.

Government of India. Planning Commission. India’s Eleventh Five Year Plan: 2007–12, vol. 3, 

 Agriculture, Rural Development, Industry, Services, and Physical Infrastructure, New Delhi. 

 Oxford, 2008. http://planningcommission.nic.in/plans/planrel/fiveyr/11th/11_v3/11th_vol3.pdf. 

Organisation for Economic Co-operation and Development (OECD). Agricultural Policies in Emerging 

 Economies 2009: Monitoring and Evaluation, Paris: OECD Publishing, 2009. 

Singh, Pritam. Federalism, Nationalism and Development: India and the Punjab Economy, London and 

 New York: Routledge Contemporary South Asia Series, 2008.
APPENDIX H 

ANALYTICAL FRAMEWORK AND 

ASSUMPTIONS FOR ECONOMIC 

SIMULATIONS 

H-3

Simulation Framework 

The effects of the removal of Indian tariffs on U.S. agricultural exports have been 

simulated with a framework that has a general equilibrium (GE) model component and a 

partial equilibrium (PE) model component. The GE model comprises 57 sectors covering 

all aspects of the economy, including trade among India, the United States, and the rest of 

the world (RoW). The PE model is linked to the GE model and focuses on food and 

agricultural trade among India, the United States, and the RoW for 699 products specified 

at the international Harmonized System six-digit (HS6) level.1

The General Equilibrium Model 

The GE model is the Global Trade Analysis Project (GTAP) model of world trade.2 The 

GTAP framework consists of a database containing global data on international trade, 

together with interindustry relationships, national income accounts, and a simulation 

model. In the GTAP model, domestic products and imports are consumed by firms, 

governments, and households. Product markets are assumed to be perfectly competitive, 

implying zero economic profits for firms, with imports viewed as imperfect substitutes 

for domestic products and with sectoral production equal to global demand. 

In addition to the data on bilateral trade in each of the 57 GTAP sectors, the database 

includes data on domestic production and use for each sector, including intermediate use 

in the production of other commodities and services, as well as data on use of land, 

capital, and labor employment by sector. An additional component of the data is a set of 

parameters that, in the context of the model’s equations, determine economic behavior. 

These parameters are principally a set of elasticities that determine, among other things, 

the extent to which imports and domestically produced goods are substitutes for one 

another. The GTAP data used in this report have been updated from their 2004 base-year 

to 2007 (the most recent year for which data are available), using trade and statistics on 

gross domestic product.3

The Partial Equilibrium Model 

The PE model is organized in 26 groups of HS6 products. Each product group 

corresponds to one of 26 sectors in the GTAP model that contain these HS6 products. 

Table H.1 lists the 26 GTAP sectors and the number of food and agricultural HS6 

products they contain. For example, the product group “Food products n.e.c.” contains 

188 HS6 products, and the group “Fruits, vegetables, and nuts” contains 91 HS6 products. 

Simulations Performed 

A PE-GE simulation of import tariff effects consists of three steps. First, a PE simulation 

of the elimination of Indian tariffs at the HS6 level provides tariff shocks for the 26 

 1

 The 699 HS6 products identified in this work are the products covered by the WTO Agreement on 

Agriculture. 2

 For more information about the GTAP model, see Hertel, Global Trade Analysis: Modeling and 

Applications, 1997; Narayanan and Walmsley, Global Trade, Assistance, and Production: The GTAP 7 Data 

Base, 2008. 

3

 Version 7 GTAP data were used in this report. 
H-4

GTAP sectors in table H.1. Second, tariff effects are simulated using the GE model to 

obtain GE effects. Third, certain GE effects are incorporated in a second-round PE 

simulation of tariff effects at the HS6 level. 

TABLE H.1 GTAP model sectors and number of food and agricultural HS6 products 

contained in each sector

GTAP sector description Number of food and agricultural HS6 products

Paddy rice 2

Wheat 2

Cereal grains n.e.c. 10

Vegetables, fruit, and nuts 91

Oil seeds 16

Sugar cane, and sugar beets 1

Plant-based fibers 3

Crops n.e.c. 62

Cattle, sheep, goats, horses 7

Animal products n.e.c. 47

Wool, silk-worm cocoons 7

Forestry 9

Fishing 3

Meat: cattle, sheep, goats, horses 29

Meat products n.e.c. 49

Vegetable oils and fats 47

Dairy products 24

Processed rice 2

Sugar 7

Food products n.e.c. 188

Beverages and tobacco products 31

Textiles 12

Wearing apparel 5

Leather products 28

Chemical, rubber, and plastic products 16

Manufactures n.e.c. 1

 Total number of HS6 products 699

Sources: Hertel, Global Trade Analysis, January 1997; Narayanan and Walmsley, Global 

Trade, Assistance, and Production , 2008. 

Note: The acronym n.e.c. means not elsewhere classified. 

To illustrate how a PE-GE simulation is generated, figure H.1 specifies supply, demand, 

and trade linkages for a theoretical product group that contains only two HS6 products. In 

the figure, the world is divided into three regions: India, the United States, and the RoW. 

The quantities of total demand for the ith product group in India, QDi,India, and domestic 

supply, QOi,India, are exogenous in the PE model. In a first-round PE simulation of tariff 

effects, the model simulates trade changes for HS6 products under the restriction that 

demand and supply for the GE product groups are not affected by the simulation. In a 

second-round PE simulation of tariff effects, demand and supply for GE product groups 

are changed to reflect GE effects.4

 Market-clearing conditions in the PE model ensure 

that supplies are equal to total demand for each of the HS6 products identified in the 

model. Because products are distinguished by their region of origin, there are 2,097 

(3 multiplied by 699, the total number of HS6 products) market-clearing conditions. 

 4

 Other works applying a PE-GE approach are Grant, Hertel, and Rutherford, “Extending General 

Equilibrium to the Tariff Line,” June 2007; Narayanan, Hertel, and Horridge, “A Nested PE/GE Model for 

GTAP,” June 2008; Jansson et al., “Getting the Best of Both Worlds?” June 2008; U.S. International Trade 

Commission, Global Beef Trade, September 2008; and Tsigas et al., “An Analysis of BSE Restrictions on 

Beef Imports from the United States and Canada,” June 2009. 
H-5

Producers determine the optimal supply for HS6 products (QOi,1,India and QOi,2,India in 

figure H.1) by maximizing revenues subject to a constant elasticity of transformation 

(CET) production possibilities frontier with an elasticity of transformation, ETG.

5

 Optimal 

demand for HS6 products (QDi,1,India and QDi,2,India) is determined by minimizing 

expenditures subject to CES (constant elasticity of substitution) trade-offs with an 

elasticity of substitution, ESG.

6 Optimal demand for the domestic varieties of HS6 

products (QDSi,1,India) and total imports of HS6 products (QIMi,1,India) is determined by a 

CES function with an elasticity of substitution, ESD. Finally, the quantities of HS6 

products imported from the United States and the RoW (QXSi,1,USA,India and QXSi,1,RoW,India) 

are determined by a CES function with an elasticity of substitution, ESM. 

The PE model specifies that the domestic product is differentiated from imports and that 

consumers, whether final or intermediate, view imports of a particular product from a 

specific region as different from imports from all other regions. These two specifications 

constitute the Armington specification of product differentiation by country of origin.7

Data for Partial Equilibrium Model 

The PE model requires certain statistics and economic parameters. The statistics are the 

dollar value of bilateral trade and demand for the domestic variety of a product and the 

corresponding bilateral import tariffs. Bilateral trade statistics were obtained from the 

United Nations Commodity Trade Statistics (UN Comtrade) database for 2007, the latest 

year available at the time of this work, with complete and consistent statistics for India, 

the United States, and the rest-of-the-world.8

Statistics for demand for the domestic variety of a product are not currently available for 

HS6 products. Thus, statistics from two sources were used to construct domestic demand 

statistics. The Food and Agriculture Organization of the United Nations’ (FAO) 

FAOSTAT databases provide export/production and import/demand shares for specific 

products and certain product groups. The GTAP database also provides these statistics for 

26 GE product groups. Trade shares from the FAO and GTAP data were applied to the 

HS6 trade statistics to construct domestic supply and demand statistics.9

 

 5

 A CET production possibilities frontier is characterized by a constant percentage change in a productmix ratio to changes in the marginal rate of transformation. Powell and Gruen, “The Constant Elasticity of 

Transformation Production Frontier and Linear Supply System,” 1968, 315–28. 6

 A CES function is characterized by a constant percentage change in product proportions because of a 

percentage change in the marginal rate of technical substitution. Arrow et al., “Capital-Labor Substitution and 

Economic Efficiency,” 1961, 225–50. 7

 Armington, “A Theory of Demand for Products Distinguished by Place of Production,” 1969, 159–76. 8

 United Nations Commodity Trade Statistics Database, statistics downloaded from WITS (World 

Integrated Trade Solution) on March 24, 2009. 9

 FAO statistics for production, consumption, and trade for various products and product groups were 

downloaded from the FAOSTAT online database. 
H-6

FIGURE H.1 Partial equilibrium model and linkages to general equilibrium model: Indian supply, demand, 

and trade for a general equilibrium product group that contains two hypothetical HS6 products 

____________________________________________________________________________________ 

Source: Developed by Commission staff. 

QDi,India

QDi,2,India QDi,1,India 

QDSi,1,India QIMi,1,India 

QXSi,1,USA,India QXSi,1,RoW,India 

Demand for HS6 product no. 1 in India

Total imports of HS6 

product no. 1 in India 

Exports of HS6 product no. 1 from 

India to the United States and from 

India to the rest-of-the-world 

Imports of HS6 product no. 1 in India from the United States 

and from the rest-of-the-world 

ESM>0

ESD>0

QOi,India

QOi,2,India QOi,1,India 

ETG<0 

QXSi,1,India,USA 

Demand for ith product group in India (this variable is 

exogenous in the partial equilibrium model but it is 

endogenous in the general equilibrium model) 

Domestic supply of 

HS6 product no. 1 in India

Demand for domestic HS6 

product no. 1 in India 

Domestic supply of ith product group in India (this 

variable is exogenous in the partial equilibrium model 

but it is endogenous in the general equilibrium model) 

QXSi,1,India,RoW 

ESG>0 Demands for 

domestic and 

imported HS6 

product no. 2 

are modeled 

as those for 

HS6 product 

no. 1 

Supplies to 

domestic and 

foreign 

markets for 

HS6 product 

no. 2 are 

modeled as 

those for HS6 

product no. 1 

Variable notation 

QO = supply; 

QD = demand; 

QDS = demand for domestic 

 variety; 

 QIM = demand for total 

 imports; 

QXS = bilateral trade.
H-7

Applied ad valorem tariff equivalents were obtained from the United Nations Conference 

on Trade and Development (UNCTAD) Trade Analysis and Information System 

(TRAINS) data and the MAcMapHS6 data.10 Indian food and agricultural tariffs are 

current as of 2007. 

The elasticities ESG, ESD, ESM (fig. H.1) are based on the GTAP database. Estimated 

values for ESM and their standard deviations are shown in table H.2. Employing the “rule 

of two,” values for ESD, and ESG are computed from ESM as follows: ESD = ESM/2 and 

ESG = ESD/2.11 A range of simulated effects is obtained by employing low and high 

values for ESM.

12 Table H.2 also shows the values of ETG, the parameter determining the 

supply response at the HS6 product level (fig. H.1). For most product groups, ETG is 

assigned the value –1. For product groups that may require relatively more resources and 

time to adjust to price changes, ETG is assigned the value –0.8. 

TABLE H.2 Values of partial equilibrium model parameters ESM and ETG

 ESM 

Product group Estimated value Standard deviation ETG

Paddy rice 10.1 4.0 -1.0 

Wheat 8.9 4.2 -1.0 

Cereal grains n.e.c. 2.6 1.1 -1.0 

Vegetables, fruit, nuts 3.7 0.4 -0.8 

Oil seeds 4.9 0.8 -1.0 

Sugar cane, sugar beet 5.4 2.4 -1.0 

Plant-based fibers 5.0 0.4 -1.0 

Crops n.e.c. 6.5 0.7 -0.8 

Cattle, sheep, goats, horses 4.0 0.7 -0.8 

Animal products n.e.c. 2.6 0.3 -0.8 

Wool, silk-worm cocoons 12.9 2.7 -1.0 

Forestry 5.0 0.7 1.0 

Fishing 2.5 0.6 -1.0 

Meat: cattle, sheep, goats, horses 7.7 1.9 -1.0 

Meat product n.e.c. 8.8 0.9 -1.0 

Vegetable oils and fats 6.6 0.7 -1.0 

Dairy products 7.3 0.8 -1.0 

Processed rice 5.2 2.6 -1.0 

Sugar 5.4 2.0 -1.0 

Food products n.e.c. 4.0 0.1 -1.0 

Beverages and tobacco products 2.3 0.3 -1.0 

Textiles 7.5 0.1 -1.0 

Wearing apparel 7.4 0.2 -1.0 

Leather products 8.1 0.3 -1.0 

Chemical, rubber, plastic products 6.6 0.1 -1.0 

Manufactures n.e.c. 7.5 0.2 -1.0 

Source: Estimated values for ESM and their standard deviation are from Hertel et al., “How Confident Can We Be 

of CGE-Based Assessments of Free Trade Agreements?” 2007. 

Note: The acronym n.e.c. means not elsewhere classified.

 10 TRAINS statistics were downloaded from WITS on February 13, 2009. For documentation of the 

MAcMapHS6 database, see Boumellassa, Laborde, and Mitaritonna, “A Consistent Picture of the Protection 

Across the World in 2004,” 2009. 11 This rule was proposed by Jomini et al., The SALTER Model of the World Economy, 1994. Another 

study failed to reject this rule statistically. Lui, Arndt, and Hertel, “Parameter Estimation and Measures of 

Goodness of Fit in a Global General Equilibrium Model,” 2004, 626–49. 12 Low and high values for ESM are computed as ESM + standard deviation (table H.2). 
H-8

Model Limitations 

Simulated effects from this PE-GE model are based on established U.S. export patterns 

that may exist for such reasons as the distance between countries and the presence or 

absence of transport infrastructure. These factors are imperfectly captured by the model. 

Furthermore, the model does not directly account for historical or cultural factors as 

determinants of trade patterns. The model assumes that these factors are unaffected by the 

economic policy changes. 

Economic models capture the most important factors for the question under 

consideration: existing trade flows and trade policies and the degree of consumer demand 

sensitivity to price changes. However, economic models are limited in their ability to 

reflect the degree of complexity evident in the real world.13 Despite these limitations, the 

simulations performed here can be quite useful in providing insights on the effects of 

economic policies. The model presents a unified framework in which the likely effects of 

the policy can be assessed. 

Estimation of Price Gaps for Nontariff Measures 

Estimation of Nontariff Measure Price Gaps 

The quantification of nontariff measures (NTMs) using the method of price gaps, or 

“tariff equivalents,” has been frequently used in Commission studies on NTMs.14 In this 

study, we estimated price gaps at the HS6 subheading level. We estimated separate price 

gaps for Indian imports from the United States and Indian imports from the rest of the 

world in order to account for possible quality differences between U.S. and non-U.S. 

varieties of agricultural exports. The fact that imports from the United States and other 

countries sell at different prices is indicative of quality differences. Estimating separate 

price gaps recognizes both these differences and the possibility that the NTMs may have 

a greater or lesser impact on Indian prices for imports from different sources. 15 We used 

unit values from available trade data to construct the price gaps. In particular, we 

considered price data for 2005–07 to account for variable effects of NTMs under 

different market conditions. The median price gap for the three years was used as the 

estimate. We eliminated some products that presented data difficulties.16

 13 Examples of real-world complexities that are difficult to reflect in the model include the changing 

relative growth of different economies; politically motivated, export-oriented investment; relationships 

between multinational subsidiaries that influence trade patterns; and such events as catastrophic weather or 

violence that are inherently unpredictable (at least in their details). 14 For the foundations of the method for estimating price gaps for NTMs at the Commission, see Linkins 

and Arce, “Estimating Tariff Equivalents of Non-Tariff Barriers,” August 2002. For further descriptions of 

the price-gap method, as well as literature reviews, see Deardorff and Stern, Measurement of Non-Tariff 

Barriers, 1998, and Ferrantino, “Quantifying the Trade and Economic Effects of Nontariff Measure,” January 

2006. The methods used in this study with respect to quality adjustments for different trading partners build 

on a previous Commission study. See USITC, U.S.-Korea Free Trade Agreement, September 2007. 15 In general, it is not feasible to correct for all possible quality differences while estimating NTM price 

gaps because some of these differences are unobservable. Certain countries consistently export products at 

higher unit values than other countries, however, suggesting a quality difference, particularly for relatively 

homogeneous goods. The methods used in this study exploit the observed quality differences arising from 

differences in exporter-specific unit values. 16 These difficulties included, inter alia, nonstandard units of measurement and thinly traded products 

exported from small countries, for which a reference price could not be established. The standard unit of 

measurement for almost all agricultural products is the kilogram or the metric ton. Beverages are typically 

measured in liters. 
H-9

We considered the possibility that some NTMs might prohibit U.S. agricultural exports to 

India completely or almost completely over the period considered. For those products, 

wheat being the most notable, we estimated a quantity gap as described below. 

For Indian imports of U.S. goods, unit values on a cost-insurance-freight (c.i.f.) basis 

were taken from the UN Comtrade database, which was accessed using the WITS system. 

Unit values for U.S. exports to the world were taken from U.S. official data as reported 

on the Commission’s Dataweb system.17 The transport cost adjustment was based on the 

U.S. ratio of import charges to c.i.f. value for imports from India, adjusted by a factor to 

account for the fact that charges for U.S. exports are generally smaller than charges for 

U.S. imports. A calculation based on GTAP model data indicates that U.S. export 

margins to India are 41.3 percent of U.S. import margins from India, but the GTAP 

margins are derived indirectly from balance-of-payments data on transport services. Our 

estimates assume that U.S. export margins to India are 60 percent of U.S. import margins 

from India. This assumption is conservative and tends to understate the price gap. In 

general, the estimated price gaps are substantially larger than the transport margins, so 

they are not greatly affected by the method used to estimate the margins. 

For Indian imports of non-U.S. goods, we constructed unit values using a method that 

adjusts for systematic quality differences among different suppliers to the Indian market. 

In particular, we estimate a price gap for each supplier, again comparing Indian c.i.f. 

values with the various suppliers’ free on board (f.o.b.) values, and then weight these 

gaps by the quantities imported into India, using Indian data for the weights. We adjust 

the weighted average for transport costs. For these calculations, we compared data from 

UN Comtrade with alternate data obtained from Global Trade Atlas, a product of Global 

Trade Information Services, Inc. (GTIS). Occasionally, UN Comtrade data contain 

estimated quantities and thus estimated unit values. In these cases, we believe GTIS data 

to be more reliable. The format of UN Comtrade, however, is more computationally 

convenient than that of the GTIS. The method used here relies on GTIS data for India’s 

largest two suppliers of those HS6 subheadings with larger trade flows (annual Indian 

imports exceeding approximately $100,000). To the extent feasible, when one of India’s 

largest two import sources was a country not reporting data to the GTIS, we replaced the 

missing f.o.b. unit value with a c.i.f. unit value from a country other than India with 

imports from the same supplier. The transport cost adjustment was based on sectorspecific margins for India’s imports from the world, as reported in the GTAP model. 

Market Share Anomalies and Quantity Gaps 

In order to take account of situations in which NTMs might be prohibitive or near 

prohibitive, we considered products for which the U.S. export market share is large in the 

RoW and small in India and products for which Indian imports are zero in the base data. 

To identify such products, we used the same 2007 base data as were used in the PE 

modeling. The single, striking anomaly in this case is wheat. U.S. exports to countries 

other than India accounted for 29.7 percent of world exports of nondurum wheat and 

21.8 percent of exports of durum wheat in 2007. Official U.S. data record zero U.S. 

exports to India of either category of wheat during 2005–07, on which the analysis of 

NTMs was based. Indian data report imports of durum wheat from the United States of 

$217,295 for 2006, but zero otherwise during 2005–07. 

 17 USITC DataWeb. 
H-10

Yet, 2007 was not a representative year for India’s wheat market. Indian imports of wheat 

fluctuate greatly from year to year and were unusually high in 2006 and 2007 by 

historical standards. India’s annual wheat imports in 2006 and 2007 amounted to 

approximately $1.3 billion (5–6 million mt) in each year. By contrast, in the 12-year 

period from 1997 to 2008, India reported imports of less than $1 million (less than 

5,000 mt) during six years, including two years of zero imports, and imports of $180–

$280 million (700,000 mt to 2 million mt) in four years. An assumption that U.S. wheat 

sales would equal an amount equivalent to more than 20 percent of India’s 2007 wheat 

imports leads to unrealistically large displacement of India’s domestic production of 

wheat and similarly unrealistic effects on India’s other crops. 

Accordingly, we assumed that, in the absence of Indian NTMs, U.S. wheat exports to 

India would represent the U.S. global share of world wheat exports over a longer term, 

applied as a share of India’s typical imports of wheat. For the last 10 years in which India 

reported positive imports, the median imports amounted to approximately 1.04 million mt, 

or about 20.6 percent of India’s 2007 imports. The U.S. median share of world wheat 

exports over the 10 years from 1999 to 2008 is 26.0 percent. Thus, a typical U.S. global 

market share in the long term of India’s typical wheat imports amounts to approximately 

5.36 percent of India’s 2007 imports. 18 This share was the basis for the estimation 

presented here. 

Simulation of Economic Effects 

The NTM price gaps were aggregated to GTAP sectors, and the effects of their removal 

were simulated in the GTAP model. The estimated price gaps, before and after 

aggregation, are presented in table 6.1. Because of the large values for many of the price 

gaps (100–1,000 percent), it is not computationally tractable to estimate their removal 

using a PE model simulation. The aggregation to GTAP sectors reflects the fact that, in 

some cases, estimated price gaps at the HS6 level apply to some products in the sector 

but not all, as reflected in table 6.1, which shows the difference between the average 

NTM price gaps for relevant products and for the GTAP sector. The price gaps were 

aggregated to the sector level using a method that holds the implied NTM rents for the 

aggregate equal to the sum of implied NTM rents at the HS6 level.19 For wheat, the 

simulation was performed in such a manner as to set the final share of U.S. exports in 

India’s imports at 27 percent. 

A GTAP model simulation baseline for the NTM estimates was prepared excluding the 

tariffs, and the sector-specific price gaps were simulated as gaps between the c.i.f. value 

and the landed duty–paid value. Such price gaps were then removed. The results of this 

procedure are reported in table 6.2. These results include a sensitivity analysis with 

respect to the elasticities, similar to that performed for tariffs. 

 18 206 * 0.260 = 0.0536, approximately. 

19 This method uses the relation 

(reference export unit value)*(1 + transport margin + NTM price gap) = (reference import unit value). 

Thus, implied NTM rents = (NTM price gap/(1 + transport margin + NTM price gap))*(value of c.i.f. 

imports). 

The usual method of trade weighting yields unrealistic results in this case because, for price gaps 

exceeding 100 percent, the implied tariff revenues are larger than the value of c.i.f. imports and not a realistic 

estimate of the value of NTM rents, which must be a share of the value of imports. 
H-11

Estimation of Effects of Removal of Domestic Support 

The estimated effects of Indian domestic support rely on the work of the World Bank’s 

Agricultural Distortions Project, which calculated the value of this support on an annual 

basis for the period 1984–2004. Commission staff converted the results into a form 

compatible with the GTAP model.20 

The support in question lowers the prices of fuel, electricity, and fertilizer paid by Indian 

producers. In 2004 the total value of support payments for 11 crops was $5.9 billion for 

fertilizer and $1.9 billion for electricity. Most of this support was for rice and wheat. Rice 

received 37.1 percent of the value of input support in 2004, amounting to 15.4 percent of 

the international reference price and 18.3 percent of the domestic price. Wheat received 

35.2 percent of the value of input support, amounting to 18.9 percent of the international 

reference price and 27.2 percent of the domestic price. 21 The magnitude of these 

payments has been relatively stable in recent years. 22 Indian farmers also receive 

discounted water from canal irrigation schemes, as well as discounted credit and 

exemption from income taxes.23 

Commission staff estimated the effects on U.S. exports of removing Indian domestic 

support for certain crops. The estimated effect on U.S. exports of removal of Indian 

support payments for electricity and fertilizer ranges from $11.7 million to $19.0 million, 

an increase of 3–5 percent from the 2007 baseline (table H.3). These effects are largely 

related to increased U.S. exports of plant-based fibers, primarily cotton. 

GTAP simulation of the economic effects of removal of support for electricity, fuels, and 

fertilizer was performed by replacing the standard GTAP base data for Indian support 

with estimates based on the Agricultural Distortions project, which are better documented 

and more reliable. The estimates include a sensitivity analysis with respect to elasticities 

similar to that used in the estimates of tariff effects in Chapter 5 and NTM effects in 

Chapter 6. 

 20 For the main results of the project for India, see Pursell, Gulati, and Gupta, “Distortions to Agricultural 

Incentives in India,” December 2007. For the overall method for the project, which was applied to multiple 

countries, see Anderson et al., “Measuring Distortions to Agricultural Incentives, Revisited,” April 2008. For 

the documentation for the GTAP-compatible results, see Valenzuela and Anderson, “Alternative Agricultural 

Price Distortions for CGE Analysis of Developing Countries, 2004 and 1980–84,” December 2008. 21 Pursell, Gulati, and Gupta, “Distortions to Agricultural Incentives in India,” December 2007. 22 Anderson and Valenzuela, “Estimates of Global Distortions to Agricultural Incentives, 1955 to 2007.” 

The effects are expressed as output subsidy equivalents. 23 Pursell, Gulati, and Gupta, “Distortions to Agricultural Incentives in India,” December 2007.
H-12

TABLE H.3 India: Estimated effects on U.S. exports of removing certain Indian support payments, 2007 

Simulated effects in ranges 

U.S. exports to 

India in the 

absence of 

Indian support 

Change in U.S. exports to India in 

Commodity groups the absence of Indian support 

containing food and 

agricultural products 

2007 U.S. 

food and 

agricultural 

exports to 

India 

Estimated 

ad valorem 

equivalent 

of 

domestic 

support

Low High Low High Low High

Million $ Percent Million $ Million $ Percent 

Paddy rice 0.22 18.300 0.33 0.49 0.11 0.27 48 123

Wheat 0.00 27.200 0.00 0.00 0.00 0.00 0 0

Cereal grains nec 1.13 10.500 1.19 1.26 0.05 0.12 5 11

Vegetables, fruit & 

nuts 

282.61 3.374 285.6

2 

280.3

8 

3.02 -2.22 1 -1

Oil seeds 0.01 9.000 0.01 0.01 0.00 0.00 12 13

Sugar cane, sugar 

beet 

0.00 20.500 0.00 0.00 0.00 0.00 0 0

Plant-based fibers 78.59 13.200 86.94 99.61 8.35 21.02 11 27

Crops nec 8.25 3.374 8.42 8.09 0.17 -0.16 2 -2

Processed rice 0.06 6.385 0.07 0.08 0.01 0.02 9 30

 Total 370.88 5.488 382.5

8 

389.9

3 

11.7

0 

19.05 3 5

Source: Valenzuela and Anderson, “Alternative Agricultural Price Distortions for CGE Analysis of 

Developing Countries, 2004 and 1980–84” for estimated ad valorem equivalent of domestic support; 

commission staff calculations. 

Note: “Low” and “High” refer to elasticities, not effects on U.S. exports. 
H-13

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