New Delhi: Milk production in India is set to grow 5 percent year-on-year (YoY) in the near to medium term, as projected by India Rating and Research (Ind-Ra) in its report. The report titled “Indian Milk Sector Growth Likely to Surpass Global Trends in Medium Term” predicts the milk production in India for FY25 is set to surpass the global trends and expects its output to grow by 5 percent.
“The country’s dairy industry has seen remarkable growth, reinforcing its status as the world’s leading milk producer. In FY24, India’s milk production rose 3.78% YoY to 239.3 million tonnes, supported by favourable government policies and the sector’s importance as a supplementary income source for millions of rural households, especially women and marginal farmers,” said Anuradha Basumatari, director of Ind-Ra.
India’s dairy sector: A growth story
The dairy sector contributes significantly to the primary sector of the economy. The small and marginal dairy farmers are the backbone of the sector that plays a vital role in the economic development of the rural landscape. As per the report, milk accounted for 19.8 percent of total agricultural production in FY24.
Ind-Ra expects per capita milk availability to grow by 4 percent in the near to medium term. A 3.9 percent increase was observed between FY20 and FY24 alongside a modest population growth of 1 percent.
Dairy sector’s growth drivers
The increasing population, urbanisation, and higher disposable income are the primary levers for sustaining demand in the dairy sector and its products. The per capita milk availability in India stands at 471 grams per day in FY24, increasing from 406 grams of milk per day that was available in FY20, stated the report
“Household consumption is likely to remain the primary driver of milk and dairy product demand even in the medium to long term. “We expect manufactured dairy products output to grow at a CAGR of 10.8% to Rs 4,200.6 billion by FY27, up from INR 3,090.8 billion in FY24,” said Mukhesh Saxena, who is a senior analyst at Ind-Ra.
The sector recorded a CAGR of 9.1 in the time period between FY20 and FY24. Milk and dairy products constitute the second largest portion of household food expenditure after cereals, pulses, and breads. The dairy expenditure averages between 20 and 22 percent of food expenditure between the time period of FY12 to FY24.
Cooperatives’ role in dairy sector
Dairy cooperatives are the key players in milk procurement. The cooperative model includes organized entities, which ensures that the revenue must be shared with the farmers. Approximately 80 and 82 percent of the milk price is paid directly to the farmers. Payments are regular, giving dairy farmers a shorter operating cycle compared to crop farmers, who are typically paid only after harvest.
Nearly 63 percent of India’s total milk production is marketed through the cooperatives and private entities combined, which ensures the transparent year-round procurement and stable income for farmers.