How the United States supports farmers and why this matters in Washington-Delhi trade negotiations

In the current trade talks between the US and India, where Washington has insisted that agriculture not be "off the table" in any agreement on lowering tariffs and extending market access, this may be significant. According to US Commerce Secretary Howard Lutnick, India's agricultural sector "cannot stay closed" and needs to "open up" for American produce.

Instead, direct subsidies are the main way that the US government helps farmers. Two important financial assistance programs are Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC). They are intended to protect farmers from low prices or revenue shortages for 22 crops, such as cotton, soybeans, and other oilseeds, as well as wheat, corn, barley, oats, rice, lentils, and peas.

PLC payments are started when the average market price of a covered commodity falls below its "effective reference price," or ERP. The latter is similar to the minimum support price (MSP) that India has established for several crops. For example, wheat's current US ERP is $5.56 per bushel. This is less than India's MSP, at about Rs 1,780 per quintal.

When the gap between the average feed cost and farmgate milk price falls below a specific threshold, producers can receive financial assistance through the Dairy Margin Coverage (DMC) program in addition to PLC and ARC. Again, this strategy ensures farmers a more stable and predictable income by protecting against declines in output prices and rises in input costs.

Each year's gross cash income from the sale of produce and other agri-related sources, as well as federal government payments, are displayed in the accompanying table along with the cost of labour, intermediate inputs, interest, rent, taxes, and fees for the US farm sector.

Direct payments to producers under various federal farm programs have clearly ranged from $9.3 billion to $45.6 billion in recent years. The $45.6 billion payout, which includes $31.4 billion in pandemic and other supplemental catastrophe aid, accounted for nearly 38% of U.S. farmers' net cash income in 2020. The government anticipates making $42.4 billion in direct farm payments in 2025. The American Relief Act of 2025—approved by the US Congress and signed into law by former President Joe Biden in December 2024—is largely responsible for the additional and ad hoc disaster aid for farmers and ranchers.

Indian Situation

Kisan Pradhan Mantri In India, the federal direct income assistance program Samman Nidhi (PM-Kisan) is projected to spend Rs 63,500 crore in 2024–2025.

When paired with central subsidies for fertilizer (Rs 171,300 crore), crop loans (Rs 22,600 crore), and insurance (Rs 15,864 crore), the annual aid to Indian farmers could amount to approximately Rs 500,000 crore, or $57.5 billion. Additionally, state government expenditures on direct payments, free or heavily discounted electricity and irrigation water, and above-market MSP procurement rates would all be included.

That exceeds the $32.2 billion in cash assistance given to American farmers each year, according to the GAO analysis. Nonetheless, a far greater number of farmers in India receive the estimated $57.5 billion than in the US: PM-Kisan alone provides benefits to over 111 million people, each of whom receives a meagre Rs 6,000 ($69) annually. In contrast, the average US manufacturer receives $30,782 (about Rs 26.8 lakh) from the federal government.

That would be a very unfair form of competition if India's agricultural market were "opened up" to US produce. Regulations from the World Trade Organization that give developing countries "special and differential treatment" in terms of tariffs and safeguarding the interests of domestic producers are not negligible.