A look into the dairy industry

When most people think about agriculture, they think about lush green fields, crops, fertilizers and irrigation. They don’t really consider dairy a part of agriculture. But, did you know that a whopping 73 million farmers in India are engaged in the dairy sector? In terms of value, milk trumps all others to be the largest crop in India - at Rs 6.5 lakh crore (which is more than the value of wheat and paddy put together) - and contributes to around 26% of the agriculture GDP. In today’s article, we put the spotlight on the silent workhorse of Indian agriculture - the dairy industry.

What is dairy farming and how does it benefit the farmer?

Dairy farming is a class of agriculture that involves long-term production of milk and processed milk products. From the early 1950s, when we were a milk deficit country, India has indeed come a long way. In 1998, we overtook the US to become the largest producer of milk and today we contribute approximately 22% to the global milk production. Dairy is one of the most important sectors in the Indian economy. Annually, it provides livelihood and income to more than 8 million farmers, of which, about 70% are women and a majority are landless and marginal. Unlike traditional crop production which employs the rural workforce for only 3 or 4 months a year, dairy farming provides employment opportunities all through the year. Moreover, about 60% of the price of milk paid by the consumer goes to the farmer - a refreshing departure from traditional farming which is plagued by multiple middlemen, leaving the farmer with barely anything. All these together make dairy an important and attractive sector for the Indian farmer and the country’s rural economy.

From crawling to walking to running

A large market in itself, India has switched gears from being a milk-deficit country to self-sufficiency. A number of reforms undertaken by successive governments have seen per capita availability of milk increase over the years, from 178 grams per day in 1991 to 394 grams per day in 2018. According to the NITI Aayog working group report, milk supply is slated to exceed demand by 38 million tonnes by 2032-33. Contributed by increasing affordability and changing eating habits, the dairy market has been attracting a steadily growing spotlight. Over the last several years, a number of home-grown as well as international players have made/committed to making significant investments in the space. The focus is on value-added dairy products such as probiotic yoghurts, cheese, drinks etc. According to a CRISIL report, these products are expected to see a CAGR of 15% over the next 3 years. Stiff competition in the sector is resulting in a number of product innovations and operational efficiencies.

Where there is an opportunity, there is startup activity

Given its potential, the sector has seen an explosion of startup activity. Techies and entrepreneurs are making a beeline to solve problems across the value chain, be it improving production and quality or expanding product lines and achieving faster delivery to the doorstep of the customer or digitizing the supply chain to make it more efficient and increase the income of farmers.

The Indian dairy sector is all set to emerge from the shadows of its big brother, the traditional crop production, and claim its rightful place as a force to reckon with in the economy. The sector is buzzing with activity and we are excited! What do you think? Do let us know your thoughts in the comments below.


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