The core of the concern is a predicted substantial drop in milk prices within India. The SBI report estimates that if the Indian dairy market were liberalized, the price of milk could plummet by at least 15%. Such a price reduction would directly erode the earnings of millions of farmers, severely impacting livelihoods and diminishing the overall economic significance of the sector. Given that India’s dairy industry contributes approximately 2.5-3% to the national Gross Value Added (GVA), equating to Rs 7.5-9 lakh crore, and employs about 80 million individuals, the potential economic fallout is immense.

Beyond direct financial losses, the SBI analysis highlights broader implications for India’s rural economy. A 15% reduction in milk prices would not only reduce farmer incomes but also weaken the sector’s overall contribution to the economy. Factoring in input costs such as feed, fuel, transportation, and uncompensated family labor, the estimated GVA reduction could reach Rs 0.51 lakh crore. Furthermore, the report anticipates that a liberalized market could lead to a surge in India’s milk imports by approximately 25 million tonnes per year, displacing domestic production.

The report also raises concerns about potential public health standards conflicts, particularly regarding the use of growth hormones and genetically modified organisms (GMOs) in U.S. dairy production. India has traditionally maintained stringent non-tariff barriers, including a certification requirement that imported dairy products must come from cows never fed animal-derived feed, which directly conflicts with common U.S. dairy feeding practices. These cultural and safety considerations further complicate the trade negotiations.