India will keep the dairy industry out of Free Trade Agreements to protect over eight crore families from subsidized foreign competition. NDDB Chairman Meenesh Shah stated that local farmers need time to increase herd sizes and improve efficiency before facing international markets. Domestic demand currently absorbs nearly all national production, helping keep prices stable for producers.
The Indian dairy sector will remain shielded from Free Trade Agreements (FTAs) to protect the livelihoods of millions of small-scale farmers, according to Meenesh Shah, Chairman of the National Dairy Development Board (NDDB). This exclusion is a strategic move to prevent the influx of heavily subsidized dairy products from international markets, which could threaten the stability of the domestic industry.
Challenges of Scale for Indian Farmers
The fundamental issue lies in the difference between India's production model and that of global competitors. In India, most dairy farming is a household activity where families typically own only two to three cows. In contrast, major global exporters operate large-scale farms managing herds of 1,000 to 1,500 animals. These foreign operations often benefit from significant government subsidies, which allow them to lower production costs well below the levels achievable by small Indian farmers. NDDB officials suggest that Indian producers must focus on increasing herd sizes and building productive assets to achieve the economies of scale necessary to survive in an open, competitive global market.
Domestic Demand and Market Stability
India is currently the world’s largest producer of milk, yet its footprint in international trade remains small. This is primarily because domestic demand grows in line with production, meaning almost the entire output is consumed within the country. Producers in India receive high prices for their milk compared to international producers, supporting rural income levels. Allowing imports through trade agreements could disrupt this domestic price stability, potentially leading to lower earnings for farmers who rely on the sector for their daily income.
Competitive Landscape at Home
While the government is limiting external competition, the NDDB remains committed to fostering a more competitive environment within India. There is an active push to create a level playing field between state-owned milk cooperatives and private dairy players. The goal of this domestic competition is to improve processing efficiency, enhance product quality, and drive innovation. Success stories like Amul demonstrate that when Indian entities achieve scale, they are capable of competing effectively with international brands. Investors may monitor how these local cooperatives and private players adjust their business models and technology investments to increase efficiency, as this will determine the long-term health of the dairy sector in the absence of foreign competition.