India produces 25% of the world’s milk — so why are its dairy exports stuck below 1%?

India is the world’s largest milk producer, contributing nearly a quarter of the global output; however, it is barely on the map when it comes to dairy exports. As per recent data, India produced 248 million tonnes of milk in 2024-25, accounting for about 25% of the global milk output, contributing 5% to the national economy, and supporting nearly 450 million people across 90 million rural households, especially women and small farmers. Yet, its share in global dairy exports was less than 1%. 

This imbalance becomes even more puzzling when viewed over time. During the past decade (2014-2015 to 2024-2025), milk production grew at a CAGR of 5.4%, while the export quantity grew at a meagre 0.13%. So why does the world’s largest milk producer remain a marginal player in global dairy trade? 

One clue lies in the mismatch between what India produces and what the world demands. Currently, global trade is dominated by countries specialising in high-value products. European nations such as the Netherlands, Germany, and France lead in cheese exports, while the United States and Australia have a strong presence in milk powders, whey, and lactose. New Zealand offers the sharpest contrast. Despite producing only about 8% of India’s milk, it exports nearly 28 times more in value, driven by high-margin products such as cheese, butter, infant formula, and protein concentrates. 

In contrast, India’s milk production remains predominantly unprocessed. Of the total milk production in 2024-2025, 85% was in the form of fluid milk. While global demand is steadily shifting toward high-value processed items such as cheese, whey, and infant formula, India’s dairy export basket continues to be dominated by traditional products, including butter and ghee (59%) and skimmed milk powder (27%), while cheese accounts for just 10%. 

Another reason for constrained export potential is India’s huge domestic consumption. Milk has a central role in the largely vegetarian Indian diet, with 93% of rural households and 95% of urban households reporting daily milk consumption. In fact, per capita milk availability in India reached approximately 485 grams per day in 2024-2025, significantly higher than the global average of 328 grams per day.

Structural constraints further limit export readiness. In India, about 37% of the milk produced is either consumed by the producer or sold locally to non-producer households in the rural areas, leaving a substantial share out of the market. Of the 63% marketable surplus, only 32% is handled by the organised sector, while the remaining 68% lies with the unorganised sector. This is in stark contrast to the developed countries, where up to 90% of surplus milk is handled through the organised sector. Milk handled in the unorganised sector is vulnerable to challenges such as adulteration, exploitation of dairy farmers, and lack of value addition.

Moreover, India’s dairy structure is highly fragmented, with 80% of farmers owning only one to three animals while producing nearly 70% of total milk output. This fragmentation leads to quality inconsistency, hinders economies of scale, and limits processing capabilities, which are essential for export competitiveness. 

Compounding these issues are infrastructural bottlenecks, particularly in cold-chain facilities. India faces an 80% shortage of essential refrigeration systems, making it challenging to rapidly cool fresh milk from 38 degrees Celsius to 4 degrees C within the critical three-to-five-hour window. According to ASSOCHAM and MRSS (2023), nearly 3% of India’s milk, or approximately 6.3 million tonnes, is lost each year due to spoilage, primarily caused by inadequate cold-storage and transport systems. This constraint severely limits export capabilities by significantly reducing milk’s shelf life and quality.

Even where supply exists, regulatory and cost barriers restrict market access. India’s dairy exports often fall short of the sanitary and phytosanitary (SPS) standards required by markets like the European Union. In a 2018 survey by FSSAI, of 6,432 milk samples tested nationwide, 5.7% contained cancer-causing aflatoxin M1, 3% had ammonium sulphate, and 1.2% tested positive for antibiotics, raising concerns about both food safety and export readiness. On the cost side, poor logistics and energy inefficiencies add a 10-15% cost burden to food exports, eroding India’s price advantage and undermining export competitiveness.

All these factors together impede India’s significant export potential. India currently ranks 20th in global dairy exports, earning about $374 million with its exports concentrated in a few countries, including the UAE, Saudi Arabia, Bahrain, the US, and Egypt. Realising this potential will require a shift from quantity-driven growth to quality-led competitiveness through stronger cold-chain and testing infrastructure, improved processing capacity, and greater focus on high-value products such as cheese, infant formula, and specialised dairy ingredients.

(Resham is an assistant professor, NIPFP, and Kritika is an independent researcher)