China's New Trade Barrier Targets India's Agriculture
After previously restricting rare earth supplies critical to India's automobile sector, China has now turned its trade tactics toward the agricultural domain by blocking specialty fertiliser exports to India. This move has triggered shortages and caused notable price increases for key fertilisers across several Indian states.
Specialty Fertiliser Shortage Hits Indian Farmers Hard
According to industry insiders, shipments of specialty fertilisers from China to India have been halted for over two months. These fertilisers play a crucial role in cultivating high-value crops such as fruits and vegetables but have not been restricted to any other country besides India.
Indian imports of these fertilisers have plummeted by up to 80%, signaling a severe disruption in supply chains.
Impact on Crop Production and Fertiliser Prices
- Farmers, especially in key agricultural states like Punjab, Haryana, and Uttar Pradesh, are facing acute shortages of fertilisers such as Diammonium Phosphate (DAP), essential for crops like wheat, pulses, and mustard.
- Prices for a bag of fertiliser have surged by Rs 250 to Rs 350, putting additional financial strain on cultivators.
- India's DAP imports from China declined by nearly 75% in the first half of FY25 compared to the previous year.
Geopolitical Context: Investment Restrictions and Trade Tensions
This trade standstill emerges amid ongoing geopolitical friction and India's continued limitations on Chinese investments under Press Note 3 (PN 3), introduced in 2020 following border conflicts. PN 3 blocks Chinese direct investments unless specifically approved by the Indian government.
Union Finance Minister highlighted the importance of cautious foreign investment, citing India's sensitive regional position and the need for protective measures despite welcoming business opportunities.
Signs of Cautious Diplomacy Despite Strained Trade
Notably, this hardening of trade contrasts with diplomatic efforts such as resuming the Kailash Mansarovar Yatra and talks on reinstating direct flights between India and China. However, export restrictions on key industrial inputs and agricultural products illustrate the complex and cautious relationship between the neighboring nations.
What Lies Ahead?
With the fertiliser shortages affecting farmers' input costs and potentially crop yields, India faces challenges in securing alternative sources or ramping up domestic production. The situation underscores how intertwined trade dynamics remain with geopolitical considerations and the strategic leverage countries exercise through critical supply chains.
