India's Milk Production Growth Declining Since 2017-18, Domestic Supplies to Meet Demand Amidst Rising Milk Prices

India's dairy industry has been facing challenges with declining milk production growth since 2017-18. In the 2021-22 fiscal year, India's milk production was 221 million tonnes, a 6.25% increase from the previous year's production of 208 million tonnes. However, the annual growth rate of milk production has been declining since 2017-18.

Supply Constraint

The recent surge in milk prices is due to a supply constraint for dairy products such as butter and ghee. Milk production remained stagnant in the 2022-23 fiscal year due to the cattle epidemic. The shortage of fodder, with the fodder crop area remaining stagnant over the last four years, is also contributing to the problem.

Domestic Demand

In the same period, the domestic demand for dairy products grew by 8-10% due to a rebound in post-pandemic demand, according to Animal Husbandry and Dairy Secretary Rajesh Kumar Singh.

Import Consideration?

India may consider importing dairy products like butter and ghee due to the supply constraint for such items. However, Union Minister Parshottam Rupala has stated that there is no truth to claims of a shortage of dairy products, and the country will not be importing such products. He assured the public that the government is closely monitoring milk production, which has increased, and that there is still untapped potential in the domestic sector that can be leveraged to improve supplies.

Retail Prices

The surge in milk prices is causing concern among consumers and policymakers alike. The average retail price of milk in India has increased by 12% from a year ago to Rs 57.15 a liter.

Future Outlook

Industry officials estimate demand for dairy products to rise 7% this year. However, milk production is likely to have risen just 1% in the fiscal year to March 2023, well below the average annual rate of 5.6% in the past decade, said a senior official of the government-backed National Dairy Development Board (NDDB). The official declined to be named as he was not authorized to speak to the media.

Export and Production

While India consumes the bulk of its milk produces, exports have also been rising, especially once the global virus disruption eased and demand for milk products picked up across the world. India exported dairy products worth about $391.59 million in the 2021-22 fiscal year compared to $321.96 million in the year before that.

Milk Prices on the Rise in India

The price of milk in India has risen by more than 15% to 56 rupees a litre over the past year - the fastest rise in a decade. This is due to a lethal condition called lumpy skin disease in cattle and a drawdown in market-ready cattle stock after the coronavirus pandemic slowed breeding. A 39% jump in exports of dairy products in 2022, followed by lower milk supplies, has already cut butter and skimmed milk powder inventories in India. Industry officials estimate that demand for dairy products will rise 7% this year, but milk production is likely to have risen just 1% in the fiscal year to March 2023, well below the average annual rate of 5.6% in the past decade.