For all its scale and momentum, India’s dairy sector faces a complex underbelly of bottlenecks—ranging from plateauing production curves and governance lapses to trade tensions and a lingering informal economy. While the narrative of progress is valid, it is incomplete without addressing the structural and systemic frictions that could undermine long-term resilience.
The Milk Surge Slows: Signs of Fatigue in Production Growth
India’s dominance as the world’s largest milk producer masks an uncomfortable truth—the growth rate in milk production is decelerating.
- According to government data, milk production growth has slowed from 6.62% in FY2018 to 3.78% in FY2024.
- This decline is largely driven by reduced buffalo milk output, smaller herd sizes, rising input costs, and the impact of erratic monsoons on fodder availability.
Moreover, while per capita milk availability (470g/day) appears healthy, it is unevenly distributed and often falls short of nutritional standards in underserved populations. This slowdown raises concerns about India’s ability to meet rising domestic demand and maintain its export ambitions without boosting productivity per animal, which remains among the lowest globally.
WTO Disputes: Trade Protectionism vs. Global Pressure
India’s stringent import norms on dairy products—particularly those requiring non-use of animal rennet or hormones—have invited mounting criticism at the World Trade Organization (WTO).
- The United States and other exporting nations have labelled these as “unnecessary trade barriers”, arguing that India is protecting its domestic market under the guise of public health.
- India maintains that these measures safeguard the livelihoods of over 80 million small dairy farmers and align with religious and cultural sensitivities.
A report by the State Bank of India estimates that opening India’s dairy sector to U.S. imports could lead to a 15% drop in domestic milk prices, potentially causing an annual income loss of ₹1.03 lakh crore for Indian farmers.
The policy dilemma is stark: protect livelihoods or liberalize trade. And as bilateral trade deals inch forward, the dairy dispute remains a geopolitical flashpoint.
Quality and Productivity: The Twin Achilles’ Heels
Despite producing over 220 million tonnes of milk annually, India’s per-animal yield remains suboptimal, constrained by:
- Low genetic potential of indigenous cattle, especially in the unorganized sector
- Inadequate cold chains, leading to spoilage and microbial contamination
- Minimal mechanization and digitization among smallholders
- Adulteration and antibiotic residue concerns, impacting export credibility
India’s share in global dairy exports is only about 0.25%, signaling that volume without value is no longer sufficient. Quality assurance, traceability, and productivity improvements must become central to sectoral reforms.
Unorganized Sector Dominance: An Informal Empire
A defining challenge is the continued dominance of the unorganized sector, which handles nearly 80% of the country’s milk.
- These are small-scale producers and vendors with minimal regulatory oversight, often operating outside traceable supply chains or standardized quality norms.
- While they provide affordable access in rural and peri-urban regions, their presence hinders scaling of formal logistics, innovation uptake, and food safety enforcement.
For the sector to modernize holistically, the unorganized sector must be gradually integrated, not displaced—through digitization, training, and cooperative support.
Governance Gaps: When Policy Meets Mismanagement
While India has rolled out progressive dairy schemes like the NPDD and RGM, governance failures in execution remain a recurring roadblock.
The Assam Dairy Project scandal is a cautionary tale:
- Launched with much fanfare, the project suffered from mismanagement, inflated costs, and mass mortality of imported high-yielding cows.
- It highlighted a failure to assess climate adaptability, local disease resistance, and supply chain readiness before rolling out ambitious targets.
- The fallout included farmer distress, public criticism, and erosion of trust in public-private dairy ventures.
Such lapses reveal the critical need for transparency, accountability, and region-specific planning in implementing large-scale dairy initiatives.
Fixing the Frictions for Forward Momentum
India’s dairy sector is not short of ambition or potential—it is short of systemic integration, quality enforcement, and governance depth.
To unlock the next wave of growth, the focus must shift from merely producing more milk to producing better milk, empowering producers, and integrating informal players into a resilient, traceable ecosystem.
The road ahead requires more than policy—it demands execution, equity, and ecosystem thinking.
–Ravindranath P
