Indian dairy sector: shifting from volume to value creation

Historically, India's dairy industry has successfully addressed the challenge of supplying milk to the population and involving millions of farmers in the value chain. Today, the country is the largest milk producer in the world. However, the question arises: has the industry focused exclusively on scaling up volumes to the detriment of value creation?

Out of approximately 150 million metric tons of marketable milk surplus, the organized sector (comprising cooperatives and private dairy farms) collects only about 55 million metric tons. The remaining 90–95 million tons are handled through unorganized channels. At the same time, the informal sector in many cases generates more value per liter than the organized one.

Amid rising milk procurement prices, market participants face margin pressure. According to Kuldeep Sharma, Editor-in-Chief of Dairy News 7x7, from fiscal year 2019 to 2025, the nominal income of dairy farmers grew at an average annual rate of 11.5 percent (CAGR), while the real growth was about 5 percent. This figure lags behind the overall real GDP growth for the same period, making it difficult for producers to cover rising input costs and inflation.

To ensure the long-term stability of the ecosystem, the objective is set to double the nominal income of partner farmers over the next five years. This requires a compound annual growth rate (CAGR) of approximately 14.5 percent, which is achievable by creating and capturing greater value in marketed products.

Domestic demand for dairy products remains resilient driven by urbanization, rising incomes, and interest in nutrition and protein diets, increasing by 4–5 percent annually over the past five years. At the same time, supply grew more slowly—at 3–3.5 percent, which, alongside climate variability, creates imbalances and drives up prices.

Currently, India imports high-protein products (whey and milk protein concentrates) while exporting low-value commodities such as skimmed milk powder. Further development of the industry requires a transition from merely increasing volumes to enhancing the real value of produced goods.