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Rising population, urbanisation, and higher disposable incomes are driving demand for dairy products, says India Ratings in its report.
Government initiatives continue to support dairy exports, even as domestic consumption remains the core growth driver, India Ratings said.
India’s milk production is expected to grow 5% year-on-year in the near to medium term, further widening the gap with global trends, according to a report by India Ratings and Research (Ind-Ra). The agency estimates that milk output in FY25 grew by 5% YoY.
“The country’s dairy industry has seen remarkable growth, reinforcing its status as the world’s leading milk producer. In FY24, India’s milk production rose 3.78% YoY to 239.3 million tonnes, supported by favourable government policies and the sector’s importance as a supplementary income source for millions of rural households, especially women and marginal farmers,” said Anuradha Basumatari, director of Ind-Ra.
Small and marginal producers form the backbone of the sector, which plays a vital role in rural economic development. Milk output accounted for 19.8% of total agricultural output in FY24, highlighting its significance to the Indian economy, according to the report.
Milk Availability and Consumption Trends
Ind-Ra expects per capita milk availability to grow by 4% in the near to medium term, up from a 3.9% increase between FY20 and FY24, alongside a modest population growth of 1%. Nearly 63% of India’s milk production is marketed through organised and unorganised channels, with the organised segment—comprising cooperatives and private enterprises—ensuring transparent, year-round procurement and stable income for farmers.
Rising population, urbanisation, and higher disposable incomes are driving demand for dairy products. Per-capita milk availability in India increased to 471 grams per day in FY24, up from 406 grams per day in FY20, India Ratings stated.
Domestic Demand to Drive Dairy Products Output
“Household consumption is likely to remain the primary driver of milk and dairy product demand even in the medium to long term. We expect manufactured dairy products output to grow at a CAGR of 10.8% to Rs 4,200.6 billion by FY27, up from INR 3,090.8 billion in FY24,” said Mukesh Saxena, senior analyst at Ind-Ra.
Between FY20 and FY24, the sector recorded a CAGR of 9.1%. Milk and dairy products consistently hold the second-largest share of household food expenditure, after cereals, breads, and pulses, averaging 20.7–22% of food expenditure from FY12 to FY24.
Cooperatives to Lead Milk Procurement
Dairy cooperatives are expected to remain key players in milk procurement. Organised entities, including cooperatives and private companies, handle around 32% of marketable surplus milk, which itself is approximately 63% of total production. In FY24, the marketable surplus stood at around 160 million tonnes, with the organised sector handling 51 million tonnes. Dairy cooperatives alone handled 24 million tonnes.
The cooperative model ensures substantial revenue sharing with farmers, with 80–82% of the milk price directly paid to suppliers. Payments are regular, giving dairy farmers a shorter operating cycle compared to crop farmers, who are typically paid only after harvest.
Growth in Dairy Exports
India, while the world’s largest milk producer, is gradually emerging as a significant exporter. In FY25, the country exported 113,350.4 metric tonnes of dairy products worth USD 492.9 million, marking a 77.9% YoY rise in volume and an 80.6% increase in value.
Although milk powder exports declined, products such as fermented milk and butter/clarified butter saw strong performance. Major export destinations include the UAE, Bangladesh, USA, Saudi Arabia, and Bhutan, with leading players like Gujarat Cooperative Milk Marketing Federation Limited, Mother Dairy, Punjab State Cooperative Milk Producers’ Federation, Bihar State Milk Cooperative Federation, and Britannia driving the sector.
Government initiatives continue to support dairy exports, even as domestic consumption remains the core growth driver, according to the report.
Haris is Deputy News Editor (Business) at news18.com. He writes on various issues related to personal finance, markets, economy and companies. Having over a decade of experience in financial journalism, Haris h…Read More
Haris is Deputy News Editor (Business) at news18.com. He writes on various issues related to personal finance, markets, economy and companies. Having over a decade of experience in financial journalism, Haris h… Read More
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