Milk Demand May Outpace Productivity Without Reforms
Even though milk production in India is growing annually, the country's consumption is rising, potentially creating supply pressures if productivity improvements do not keep up, Brahmani Nara, Executive Director of Heritage Foods, said at the businessline Agri & Commodity Summit 2026.
India’s dairy sector is facing a demand vs productivity challenge that experts say could intensify unless structural reforms are adopted across production, processing and market systems. Rising consumer demand, shifting diets and strong growth in value-added dairy products are expected to continue lifting market size, but without deeper changes in productivity, supply could lag future demand.
Demand Indicators Strong
India — already the world’s largest milk producer with nearly 240 million tonnes annually — has seen robust demand from urban and rural consumers alike, propelled by population growth, rising incomes and increased nutrition awareness. Even premium categories like UHT milk, fortified dairy and protein-rich products are posting double-digit growth in volumes.
Market projections indicate that the Indian dairy market valuation is poised to climb sharply over the coming decade, with organised segments and branded products capturing a growing share of consumer spend. This trend is underpinned by expanding cold chains, rising retail penetration and stronger distribution networks across modern trade and e-commerce.
Productivity Constraints Still Loom
Despite the optimistic demand picture, productivity improvements — such as milk yield per animal, feed efficiency and mechanisation — remain uneven. Many regions still rely heavily on smallholder production with traditional feeding practices and limited access to advanced genetic or nutritional support, slowing potential gains.
Milk yields in India per animal still trail those in developed dairy countries, and structural barriers like fragmented supply chains, inadequate cold storage infrastructure, and inconsistent veterinary support continue to blunt productivity gains. Without targeted policy action and investment to modernise farming systems, these gaps may widen as demand grows.
Value-Added Growth Adds Pressure
Growth in value-added dairy products — such as curd, cheese, ghee and UHT milk — has outpaced basic liquid milk in many markets, further influencing supply chain complexity. While this boosts profitability for processors, it also demands more sophisticated infrastructure, processing capacity and quality control systems.
Calls for Reforms
Industry analysts emphasise that structural reforms are necessary to sustain the momentum. These include:
• Investment in productivity — improving feed quality, animal genetics and farm mechanisation;
• Cold chain expansion & processing — to reduce wastage and match supply with diverse product demand;
• Policy support — aligning procurement pricing, credit access and technology adoption incentives;
• Strengthening cooperatives and private partnerships — to integrate smallholders into formal markets;
Without such reforms, the gap between rising demand growth and productivity gains may widen, potentially leading to higher prices, supply instability or increased import reliance for dairy inputs over the long term.
Source : Dairynews7x7 Feb 28th 2026 Read full story here
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