India's dairy sector, the world's largest milk producer, stands at a critical juncture as it navigates increasing domestic demand and the complexities of global trade. While milk production is robust, challenges in quality, infrastructure, and policy continue to hinder the country's ability to become a major dairy exporter. Despite these obstacles, the stage is set for potential transformation in 2026.
India's milk production is forecast to increase to 221.4 million metric tons (MMT) in 2026, a 2% rise from 216.5 MMT in 2025. This growth is attributed to several factors, including an expanding dairy herd, government support, and favorable climatic conditions. The government has allocated INR 48.4 billion (approximately $565 million USD) for the Department of Animal Husbandry and Dairying in the 2025-26 fiscal budget, a 7% increase from the previous year. This financial support aims to improve breeding practices, enhance productivity, and strengthen the cooperative dairy network. The increasing use of advanced tools like artificial intelligence and sexed semen is also contributing to higher yields and improved herd quality.
Domestic consumption is also on the rise, driven by a large and growing population, increasing disposable incomes, and a rising awareness of the nutritional benefits of dairy products. Fluid milk consumption is projected to reach 221.37 MMT in 2026. Demand for processed dairy products such as yogurt and cheese is also expected to increase significantly. This surge in demand is further fueled by the expansion of e-commerce and quick-commerce platforms, making a wider variety of dairy products more accessible to consumers across the country.
Despite its dominant position in milk production, India's share in global dairy exports remains small. In fiscal year 2025, dairy exports scaled an impressive $490 million, a substantial leap from approximately $273 million in the previous year. However, several challenges impede India's export potential. These include gaps in product quality, adherence to international compliance standards, underdeveloped cold chain infrastructure, and a lack of strong global branding. The export basket is also narrow, with ghee and butter dominating shipments, highlighting the need for diversification into higher-value, processed dairy products.
Furthermore, India's dairy sector faces trade barriers and policy hurdles. The country has historically protected its dairy farmers through high tariffs and restrictive import policies. For example, India has kept dairy products outside the scope of its free trade agreement with New Zealand, ensuring that products like milk, cream, and cheese will not receive duty-free access to the Indian market. Commerce Minister Piyush Goyal has stated that India will never open up its dairy sector to free trade, emphasizing the government's commitment to protecting the livelihoods of millions of domestic dairy farmers.
To enhance its export competitiveness, the Indian dairy industry needs to address several key areas. This includes improving milk quality and safety standards, developing new and innovative dairy products, upgrading infrastructure, and strengthening global marketing efforts. The government is also playing a crucial role by providing financial assistance, promoting breed improvement, and implementing disease control programs. The goal is to eradicate Foot-and-Mouth Disease and Brucellosis by 2030, which would significantly enhance the credibility of Indian dairy products in international markets.
Looking ahead to 2026, India's dairy sector has the potential to undergo a significant transformation. By addressing the challenges and capitalizing on its strengths, India can strengthen its position as a major player in the global dairy market. This will require a concerted effort from government, industry, and farmers to enhance quality, improve infrastructure, and promote innovation. With the right strategies in place, 2026 could be a pivotal year for India's dairy sector, paving the way for increased exports and greater global recognition.
