Current State of Dairy Industry in India

India is the world’s largest producer of milk – a position it has held for nearly three decades. Yet this achievement did not come overnight. It is the result of a long journey from post-independence scarcity to a thriving cooperative-led industry that today feeds hundreds of millions of people and supports the livelihoods of over 80 million rural households. Understanding where India’s dairy sector stands today requires looking at both its extraordinary progress and the structural gaps that still need to be addressed.

From milk-deficit nation to global leader 🔗

In the years immediately after Independence, India’s dairy situation was precarious. Annual milk production growth during the 1950s was just 1.64%, and declined further to 1.15% in the 1960s. Per capita milk availability, which stood at 124 grams per day in 1950-51, had actually fallen by nearly 14% between 1955 and 1970, pushing it among the lowest in the world. India was importing dairy products and struggling to meet even basic nutritional needs.

The turning point came in 1970 with the launch of Operation Flood – the world’s largest dairy development programme – by the National Dairy Development Board (NDDB) under the leadership of Dr. Verghese Kurien, widely called the “Father of the White Revolution.” The programme replicated the Anand Pattern of dairy cooperatives – a three-tier structure linking village-level cooperative societies to district milk unions and state-level marketing federations – across the country.

Operation Flood unfolded in three phases. Phase I (1970-1980) connected milk producers in key rural milk sheds directly to consumers in the four metro cities of Mumbai, Kolkata, Delhi, and Chennai. With some 1.5 million farm families taking part in Phase I, rural procurement rose from 460,000 litres per day to 2.2 million litres per day. Phase II (1981-1985) expanded the number of milk sheds from 18 to 136, and Phase III (1985-1996) added 30,000 new dairy cooperatives, bringing the total to over 73,000. The programme created a national milk grid linking producers to consumers in over 700 towns and cities, reducing seasonal and regional price variations.

India’s current position in global milk production 🔗

India currently ranks first in milk production, contributing 24.76% of global milk output, with production growing at a CAGR of 5.62% over the past decade – from 146.31 million tonnes in 2014-15 to 239.30 million tonnes in 2023-24. This places India well ahead of the European Union and the United States in total output.

The per capita availability of milk in India is 471 grams per day in 2023-24, which is significantly above the world average of 329 grams per day. This is a remarkable reversal from the 107 grams per day recorded in 1970 – a more than fourfold increase in roughly five decades. Per capita availability has risen from just 112 grams per day in 1968-69 to 445+ grams per day in recent years, driven primarily by cooperative-led expansion in procurement and processing.

The livestock sector itself has become a major economic force. The contribution of livestock to the total agriculture and allied sector Gross Value Added (GVA) has grown from 24.38% in 2014-15 to 30.23% in 2022-23, with the sector contributing 5.50% of total national GVA.

Which states lead milk production? 🔗

The top five milk-producing states in 2023-24 were Uttar Pradesh (16.21%), Rajasthan (14.51%), Madhya Pradesh (8.91%), Gujarat (7.65%), and Maharashtra (6.71%) – together accounting for over half of India’s total milk output.

Buffaloes and cattle are the two dominant sources of milk. Buffaloes contribute approximately 45% of total milk production, while cattle account for around 44.5%. Buffalo milk, with its higher fat content, is favoured for making traditional products like ghee, paneer, and curd.

However, state-level production figures can be misleading. High production does not automatically translate into high per-capita access – Uttar Pradesh, despite being the largest producer, sees its per-capita availability moderated by population pressure, while Maharashtra’s milk is channelled into value-added and institutional consumption. This points to a deeper structural issue: the gap between where milk is produced and where it is actually accessible to people.

The cooperative backbone and organised sector 🔗

The cooperative model remains the institutional backbone of India’s dairy success. Dairy cooperatives currently cover 70% of India’s districts, with over 1.7 lakh cooperatives operating across more than 2 lakh villages. Cooperatives such as the Gujarat Cooperative Milk Marketing Federation (GCMMF), which markets dairy products under the Amul brand, have become globally benchmarked models for efficient farmer-linked supply chains.

Unlike conventional market systems, cooperatives return a substantially higher share of consumer prices to farmers. Cooperatives like Amul ensure farmers receive 55-75% of consumer prices, compared to approximately 35% in the United States. This farmer-first pricing structure has been central to sustaining participation and growing the milk procurement base.

Still, the organised sector handles only a fraction of total milk. According to NDDB data, only about 20% of total milk produced is consumed through the organised sector, while around 34% is sold through unorganised channels, and the remaining 46% is consumed within the households that produce it. This dominance of the unorganised sector – local milkmen, contractors, and vendors operating without standardised pricing or quality control – remains one of the sector’s most persistent structural weaknesses.

Key challenges facing India’s dairy sector 🔗

Low productivity per animal 🔗

Despite India’s massive dairy herd, productivity per animal is far below global benchmarks. Average cattle productivity in India is around 1,777 kg per animal per year, well below the global average of 2,699 kg. Compare this to the United States, where annual yield per cow exceeds 11,000 kg, or Israel, which achieves even higher yields through superior feed, water management, and genetics. Within India, exotic and crossbred cows yield an average of 8.12 kg per day, while indigenous and non-descript cows produce only 4.01 kg per day – a wide gap that reflects the uneven adoption of improved breeding.

Only 33% of breedable bovines currently undergo artificial insemination (AI), while 70% are still bred using scrub bulls of unknown genetic merit – limiting the pace at which productivity can be improved across India’s smallholder-dominated herd.

Milk quality and hygiene gaps 🔗

Maintaining consistent milk quality is a serious challenge. Poor hygiene practices in milking parlours and cattle sheds lead to quality deterioration and increase the risk of contamination, reducing consumer confidence. The unorganised sector’s lack of cold chain infrastructure further compounds this. Over 60% of villages still lack proper milk chilling centres, resulting in significant spoilage, especially during summer months. Instances of adulteration and unhygienic milking practices have also led to rejection of Indian dairy products in international markets, limiting export potential.

Regional disparities 🔗

Milk production in India is geographically uneven. While states like Punjab, Haryana, Gujarat, and Rajasthan show strong dairy infrastructure and per-capita availability, eastern and northeastern states lag significantly. In states like West Bengal and Odisha, less than 10% of all villages are covered by dairy cooperative societies – leaving farmers in these regions without access to organised procurement or fair pricing. Within top-producing states, variability is stark: Punjab achieves 13.49 kg per animal per day, while West Bengal records only 6.30 kg.

Fodder shortage and feed costs 🔗

Feed costs account for 60-70% of total milk production expenses, making fodder price volatility a direct threat to farmer profitability. India faces a deficit of about 35.6% in green fodder and 44% in concentrate feed, directly affecting animal nutrition and milk yields. Rising input costs, urbanisation reducing cultivable land for fodder crops, and climate-related disruptions are making this challenge increasingly acute.

Slowing growth rate 🔗

Despite strong overall numbers, the pace of growth in milk production is showing signs of deceleration. Annual milk production growth has slowed from 6.47% in 2018-19 to 3.83% in 2022-23 – a trend that raises questions about whether India’s current model can sustain the momentum needed to meet rising domestic demand.

Government initiatives and the road ahead 🔗

The government has continued to invest heavily in the dairy sector. Key programmes include the Rashtriya Gokul Mission, focused on breed improvement and productivity, the National Programme for Dairy Development (NPDD), which targets cold chain and processing infrastructure, and the Animal Husbandry Infrastructure Development Fund (AHIDF), which supports private investment in dairy processing and value addition.

The most recent strategic push is White Revolution 2.0, launched in 2024 by the Ministry of Cooperation. The initiative aims to increase milk procurement by cooperatives from 660 lakh kg per day to over 1,000 lakh kg per day by 2028-29, while establishing around 56,000 new multipurpose dairy cooperative societies in underserved areas. A specific focus on women’s empowerment is also built in – women make up around 70% of the dairy workforce and lead over 48,000 cooperatives and 16 all-women Milk Producer Organisations.

On the market side, India’s dairy market, valued at ₹18,975 billion in 2024, is projected to grow at a CAGR of 12.35% through 2033, reaching approximately ₹57,001 billion. The fastest growth is coming from value-added dairy products – ghee, paneer, yogurt, cheese, and flavoured milk – driven by urbanisation, rising disposable incomes, and health-conscious consumption.

India’s dairy exports, while still modest relative to its production scale, are growing. Despite being the world’s largest milk producer, India currently occupies only a small share of global dairy trade – a gap that the government and industry are actively working to close through quality upgrades and market access initiatives.

What makes India’s dairy model unique 🔗

India’s dairy sector cannot be compared directly to any other major milk-producing country. It is overwhelmingly driven by millions of small and marginal farmers, most owning just two to five animals. The sector is largely built around smallholder farmers, and buffalo milk plays a critical role due to its higher fat and solids content, making it ideal for traditional products such as ghee and milk powder.

This smallholder structure, while less efficient in terms of per-animal yields, has deep social and economic significance. It spreads income across rural households, provides women with a reliable livelihood, and keeps production costs low enough to remain competitive on the international market. India’s farmgate milk prices are broadly at par with those in the United States, despite substantially lower yields per animal – a reflection of the low labour costs and the efficient use of crop residues as feed.

India’s dairy story, in many ways, mirrors its broader development trajectory: impressive macro-level achievements coexisting with micro-level inequities that demand continued policy attention. The challenge ahead is not simply to produce more milk, but to improve the quality, productivity, and distribution of that milk across all regions and income groups.

What do you think? Given that India produces more milk than any other country yet still struggles with low per-animal productivity and regional disparities in access, where should the next phase of dairy policy focus its priorities – improving animal genetics and yield, or strengthening cold chain infrastructure and cooperative reach in underserved states? And with two-thirds of milk still flowing through the unorganised sector, how realistic is the goal of achieving consistent quality standards at the national level?

References

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