India’s dairy sector appears to be approaching a defining moment in its global evolution. Currently responsible for roughly 25% of the world’s milk output, India’s share in international dairy trade has remained minuscule at under 1%. This structural gap represents a substantive opportunity for Indian dairy players as global markets open and trade frameworks evolve.
India’s landmark free trade agreement (FTA) with the European Union, widely dubbed the “mother of all FTAs”, marks a pivotal shift in bilateral economic relations, aiming to make 96% of bilateral trade tariff-free over time. However, both India and the EU have strategically excluded sensitive sectors such as dairy and cereals from the immediate tariff liberalisation agenda to protect domestic producers.
From Domestic Dominance to Global Ambition
Amul’s entry into the Spanish market serves as a bellwether for India’s broader international ambitions. The cooperative’s farmer-first operational model, vast procurement scale, and low-cost-to-serve supply chain give it a strategic edge in mature markets that value consistency, quality, and price competitiveness. This expansion is not merely brand extension but operating model arbitrage, applying India’s internal efficiencies on a global stage.
Key competitive advantages underpinning this shift include:
- Economies of scale from India’s vast dairy ecosystem
- High-volume, farmer-first procurement ensuring stability of supply
- Institutionalised distribution networks cultivated over decades
- Capacity to absorb margin pressure relative to private sector peers
These fundamentals position Indian dairy cooperatives to weather competitive pressures while expanding overseas.
Trade Policy: Cautious Opening and Dairy Safeguards
The recent India–EU FTA reflects broader trade policy realities where agricultural sensitivities shape negotiation outcomes. While tariff liberalisation is expected across most sectors, including textiles, leather, gems, machinery and even automobiles, core agricultural products like dairy remain protected from duty elimination in the initial phase of the agreement. This stance aligns with India’s long-standing approach to safeguarding small and marginal farmers against import exposure.
From a strategic perspective, the exclusion of dairy from immediate tariff concessions in such a landmark trade pact underscores two critical imperatives:
Protecting rural livelihoods: With millions of farmers dependent on dairy, tariff protection mitigates income risk from subsidised imports.
Preserving political economy stability: Dairy is sensitive both economically and culturally, making liberalisation without buffer measures politically challenging.
Domestic Market Transformation: Scale vs. Premiumisation
Within domestic boundaries, India’s dairy market is visibly bifurcating. Traditional cooperatives driven by volume and affordability continue to anchor supply. Simultaneously, new-age brands push into premium segments, organic offerings and high-protein innovations, catering to evolving urban demand.
With per capita dairy consumption in India still 2–3 times lower than in developed economies, future growth is less about sheer volume and more about improving product mix. Value-added categories such as flavoured yoghurts, fortified dairy beverages and functional dairy nutraceuticals are increasingly influencing consumer spending.
Strategic Implications for Indian Dairy
The interplay between global trade frameworks and India’s dairy ambitions cannot be understated. While the India–EU FTA’s protection of dairy underscores ongoing sensitivities, it also offers a clear signal: India will engage with global markets selectively, balancing openness with agrarian protections. In this context, Indian dairy’s globalisation moment hinges on:
- Leveraging cooperative scale in international markets
- Maintaining domestic protections while pursuing export niches
- Innovating in value-added products to capture higher value segments
- Cultivating strategic partnerships and distribution channels overseas
Ultimately, India’s dairy sector is moving from a primarily domestic supply engine to an increasingly globally oriented competitor with the potential to export not just products, but institutional models and supply chain excellence.
