Dairy Sector in India

Posted By Team MCG On


India is the leading producer of milk in the world and accounted 17% of the global milk production during 2012-13. Northern India accounts for a major share of 52% of the total milk production.

The dairy sector plays a significant role in rural economic development generating employment to over 72 million people. The dairy sector in India has witnessed significant developments over the past decade encouraged by Government’s intensive dairy development policies such as ‘Operation Flood’. The sector offers immense scope to private players to tap the growing demand for value added dairy products that offer better margins as compared to liquid milk. Private investments in the dairy sector are witnessing growth. With the spread of organized retailing, multinational players have evinced a keen interest in the value added dairy products segment and are evaluating options to enter the Indian market.

The supply and distribution model practised in the dairy sector in India is different from the practise in western countries- milk procurement, processing and distribution in India are largely carried out by co-operative societies which offer small and marginal farmers a fair price realization for their produce. Domestic dairy sector is characterized by a large share (around 85%) of small local players operating in the unorganized sector. The organized dairy sector comprises co-operative societies and large private players with established supply chain.

Liquid milk constitutes around 65% of the total dairy output in India. Value-added dairy products is the second major category with 22% share. While the liquid milk segment is growing at a rate of 6-8%, the market for value added dairy products is growing at a faster clip of rate of 15-18%.

Dairy Output:  Organised sector, Break-up by Segments, %, 2012-13


Bangladesh, Philippines, Nepal and Pakistan are the top four export destinations for milk powder (HS code 040210) from India. The import of dairy products is small when compared to the export market. Skimmed milk and butter oil are the commonly imported to meet shortfall in milk procurement.

Growth of organized retailing hasi increased the demand for value-added dairy products in the recent years. Anticipating a fast growth in value-added dairy products, many foreign dairy players have evinced keen interest in the domestic dairy sector. In a major recent development, during Jan 2014, Lactalis, a leading dairy major based in France, acquired 100% stake in South India based, Tirumala Milk Products Company.