Why Indian milk prices may crash by 15-25% if dairy sector opens up to US competition

Indian milk prices could decline by 15-25% if the country opens its dairy sector to imports from the United States under the proposed bilateral trade agreement (BTA), a recent SBI Research report has warned.

According to the report, US dairy products, produced with heavy subsidies and industrial-scale efficiencies, could enter the Indian market at much lower prices.

After factoring in cold storage and transportation costs, imported US milk could retail at around ₹32 per litre, compared to the current average domestic price of ₹50 per litre.

The steep price gap, even with partial market penetration, is expected to trigger a price decline of 15-25% in India, said the report.

Assuming a conservative 15% fall, domestic milk prices could drop to ₹42.5 per litre, increasing consumption to 255 billion litres while reducing domestic supply to 230 billion litres.

“Thus, the gap of 25 bn litres will be imported from the US,” the report said.

Such a price decline could severely hit India’s 8 crore dairy farmers, many of whom are small and marginal producers.

SBI estimates annual farmer income losses at around ₹1.03 lakh crore, translating into significant rural distress and potential employment losses.

Experts have also flagged public health concerns, as US dairy practices involve growth hormones and genetically modified feed, which are banned in India.

The dairy sector, contributing around 2.5-3% to India’s gross value added (GVA), remains a key sticking point in India-US trade talks currently underway in Washington. Indian officials have consistently emphasised that any trade deal will prioritise the protection of domestic farmers’ livelihoods and food safety standards.

Negotiations for the first phase of the BTA are expected to conclude by fall this year, with both countries exploring an interim deal before August 1 to avert additional tariffs.

Commerce and Industry Minister Piyush Goyal on Monday said that the negotiations between India and the US for a proposed trade agreement are going at a fast pace.

The Indian team has reached Washington for the next round of talks on the first tranche of the bilateral trade agreement.

"Negotiations are going on at a very fast pace and in the spirit of mutual cooperation so that we can come out with a win-win trade complementing agreement with the United States," Goyal told reporters.