In the complex fabric of international trade, few commodities embody both cultural heritage and economic weight as distinctly as Basmati rice. India, the largest exporter of basmati globally, has long leveraged its premium aromatic variety to strengthen agricultural exports and contribute significantly to foreign exchange inflows. However, the recent escalation of U.S. tariffs threatens to undermine this position, placing Indian basmati exporters at a strategic crossroads.
A Sudden Escalation in Duties
The U.S. has imposed an additional 50% import tariff on Indian basmati rice, effectively pushing the total duty burden to 61%. This punitive measure targets an estimated 0.3 million tonnes (MT) of Indian exports, valued at approximately $0.4 billion in FY 2024-25. In contrast, Pakistan—India’s primary competitor—is subject to only a 19% additional tariff, tipping the cost advantage in its favor.
For leading rice exporters, the implications are severe: squeezed margins, domestic surplus, and growing pressure on farm-gate prices in Punjab and Haryana.
Competitive Disadvantage and Market Realignment
India exported nearly $0.4 billion worth of rice to the U.S. in FY 2024–25, with exports projected to face a stark negative outlook under the revised tariff regime. Meanwhile, preferential tariff treatment for Pakistan undermines India’s competitiveness.
India still shipped around 0.27 million tonnes of basmati to the U.S., valued at $300 million that fiscal year.
Despite these setbacks, India’s global basmati exports remain robust—shipments totaled 60.65 lakh metric tonnes (~6.065 MT), valued at approximately ₹ 50,312 crore (about $5.87 billion), marking a 15.7% volume increase from the previous year. These consignments reached 154 countries, up from 150 previously.
Key trading partners according to APEDA include Saudi Arabia (21.5% share), Iraq (15.2%), Iran (11.6%), Yemen (5.9%), and UAE (5.7%)—underscoring the Middle East’s central importance to India’s aromatic rice trade.
Tariff Spillover: Wider Trade Concerns
pThis basmati tariff is not isolated. U.S. trade policy in FY 2024-25 targeted over a dozen Indian export sectors—including garments, shrimp, home textiles, jewelry, and rice—raising duty burdens and threatening the competitiveness of India’s diversified trade portfolio.Strategic Diversification: The Way Forward
While the U.S. market may shrink, India has strategic levers at its disposal. One immediate priority is diverting the 0.3 MT basmati surplus into emerging and underpenetrated markets.
Strategic Diversification: The Way Forward
India must now divert the 0.3 MT surplus previously destined for the U.S. to high-potential markets through targeted strategies:
- Africa: Instead of focusing only on Nigeria and South Africa, India can target East African nations such as Kenya and Tanzania, where basmati rice is preferred for cultural and culinary reasons. Leveraging India’s strong diplomatic and trade links, exporters can negotiate long-term supply contracts to stabilize demand.
- Middle East & GCC: Markets like Saudi Arabia, UAE, and Kuwait already account for a large share of Indian basmati imports. By strengthening branding and ensuring consistent quality, India can consolidate its leadership position here while absorbing part of the diverted surplus.
- Europe: Countries such as the UK, Germany, and the Netherlands are growing hubs for basmati consumption, driven by South Asian diaspora and mainstream adoption of Indian cuisine. India can promote GI-tagged basmati rice to highlight authenticity and premium value, helping offset U.S. losses.
- Southeast Asia: While not traditionally large basmati consumers, countries like Malaysia and Singapore have significant expat populations. Focused marketing campaigns and bilateral agreements can unlock niche premium demand.
- Free Trade Leverage: Platforms like the India–UAE CEPA and proposed agreements with the EU and UK can help reduce tariff barriers, making Indian basmati more competitive in these regions.
Historical redirections suggest a potential to offset 10–20% of U.S. revenue losses, albeit with higher logistics costs and competition from Thailand and Vietnam.
A Broader Trade Tension
This tariff shock is a wake-up call. India must deepen its trade footprint, negotiate tariff relief, and reinforce its basmati brand identity—especially in markets where value recognition is stronger. Strengthening geographical indication (GI) protection, optimizing procurement practices, and developing resilient market connections are now strategic imperatives.
Conclusion: Adapting to Preserve Leadership
India’s basmati rice enjoys global goodwill and unmatched heritage, but goodwill alone cannot neutralize tariff headwinds. As Pakistan gains a temporary advantage in the U.S., Indian exporters must sharpen focus on Middle Eastern strongholds, African growth corridors, and Southeast Asian expansion opportunities. With strategic diversification and stronger trade negotiations, India can safeguard its leadership in the global basmati trade, even as it grapples with the immediate tariff challenge.
