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17 Sep 2025
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Dairy | India protects its dairy sector in the showdown with the U.S.

The India-US negotiations, described as "positive and forward-looking," aim to address tariff hikes linked to India's Russian oil imports and stalled issues like agriculture and dairy access. 
India protects its dairy sector in the showdown with the U.S.

India’s dairy sector takes center stage in trade talks with Washington, as New Delhi resists U.S. market access demands to protect rural livelihoods and food security.

In the heart of New Delhi, as of September 16, 2025, high-level India-US trade talks resumed under a cautiously optimistic cloud, marking the first in-person discussions since President Trump’s imposition of 50% tariffs on Indian goods in August. 

Led by US negotiator Brendan Lynch and India’s Rajesh Agarwal, these meetings signal a potential reset in bilateral ties, yet the dairy sector remains a red line for India. 

With over 80 million rural households relying on dairy for livelihoods, the government is steadfastly resisting US demands for broader market access, viewing it not merely as trade but as a safeguard for food security and social stability. 

This stance underscores India’s position as the world’s largest milk producer, with output forecasted at 216.5 million metric tons (MMT) in 2025, up from 211.7 MMT last year. 

The sector, contributing 31% to agricultural GDP, is projected to grow from USD 146.80 billion in 2025 to USD 274.09 billion by 2032 at a CAGR of 9.33%, driven by rising urban demand for protein-rich products. 

Amid this, recent GST reductions—slashing rates on UHT milk to 0%, paneer to 0%, and ghee/butter/cheese to 5%—are set to lower consumer prices starting September 22, boosting domestic competitiveness without external pressures. 

For traders, processors, and suppliers in the dairy ecosystem, these talks present both risks and opportunities, demanding strategic foresight to protect and expand market share.

Analyzing the Trade Landscape: Risks and Resilience

The India-US negotiations, described as “positive and forward-looking,” aim to address tariff hikes linked to India’s Russian oil imports and stalled issues like agriculture and dairy access. 

While the US has softened its position—expressing interest in exporting only premium cheeses rather than flooding the market with milk powder or bulk dairy—India remains vigilant. 

Experts from the Global Trade Research Initiative (GTRI) warn that no breakthrough is likely until the US lifts its extra 25% oil-linked tariffs, urging a firm stance on dairy to prevent livelihood disruptions for millions. 

On X, industry voices echo this, highlighting that dairy protection is about strategic autonomy, not isolationism.

To evaluate impacts, consider this comparative framework tailored for sector stakeholders:

Scenario Impact on Traders Impact on Industrials Impact on Suppliers
Partial Liberalization (e.g., limited premium cheese imports) Potential price dips from niche competition; opportunities in exporting A2 milk to US markets, where India’s dairy exports grew 12.6% to USD 5.1 billion in FY24-25. Pressure to innovate in high-value processing (e.g., organic whey); benefits from GST cuts reducing costs on ghee and cheese by up to 30%. Increased demand for import-grade tech like packaging; risks to local feed suppliers if global prices fluctuate.
Status Quo Resistance (no major concessions) Price stability in domestic markets; focus on internal growth via cooperatives like Amul. Enhanced margins from recent GST relief, e.g., paneer prices down by INR 6/kg; room for capacity expansion without foreign dumping. Strengthened local chains; lower volatility in insumos like veterinary services, supported by initiatives like ‘Gausort’ sexed semen technology.

Liberalization could erode thin margins—dairy’s average ROCE hovers at 1.6%—by introducing cheaper imports, potentially displacing small producers. 

Yet, India’s resilience, forged by Operation Flood since 1970, positions it well. GTRI emphasizes that dairy is a “livelihood concern,” not a bargaining chip, aligning with X discussions where users stress protecting 80 million dependents. 

Recent Mother Dairy price slashes—UHT milk down INR 2/liter, ghee by INR 30/kg—pass on full GST benefits, signaling internal reforms that fortify the sector against external shocks.

Actionable Tools for Decision-Makers

eDairyNews equips you with practical strategies to thrive amid uncertainty. Tailored for traders, industrials, and suppliers, these tools draw from current dynamics to guide informed choices.

For Traders: Monitor global benchmarks like SMP prices (stable at ~USD 2,500/MT) and US tariffs via real-time alerts. Diversify beyond US: Target ASEAN under potential RCEP revival, where India’s dairy exports could surge 15-20%. Checklist for preparedness:

  1. Assess exposure: Calculate 10-20% import risk if talks yield concessions—use hedging via futures on NCDEX.
  2. Opportunity scan: Evaluate premium exports; e.g., A2 milk commands 20% premiums in the US.
  3. Scenario planning: If tariffs drop, pivot to bilateral deals; model via simple Excel: Projected revenue = Current exports × (1 + CAGR 9.33%) × Tariff adjustment factor.

 

For Industrials: Leverage GST cuts for cost optimization—e.g., cheese production costs fall 7-10%. Invest in value addition: Scale whey protein (market growing 15% YoY) or organic lines to counter any niche imports. Framework for resilience:

  • Short-term: Audit supply chains for 20% efficiency gains via tech like IoT monitoring.
  • Medium-term: Partner with cooperatives; Amul’s model shows 25% higher yields.
  • Risk hedge: Secure insurance against price volatility, covering 80% of output value, especially post-‘Gausort’ productivity boosts.

 

For Suppliers: Focus on domestic fortification—feed and equipment providers can tap government subsidies rising 10% in 2025 budgets. Toolkit steps:

  1. Align with reforms: Supply chains for GST-compliant products to capture price-sensitive demand.
  2. Innovate locally: Develop affordable sexed semen alternatives to ‘Gausort,’ reducing import reliance.
  3. Network build: Form alliances with 500+ dairy clusters for stable orders, mitigating trade talk ripples.

These tools, grounded in data, empower you to turn talks into tailwinds, ensuring the sector’s projected 9.33% CAGR materializes.

Looking Ahead: A Resilient Path Forward

As talks progress toward a possible first-phase deal by late 2025, India’s dairy sector emerges stronger through protection paired with innovation. 

By holding firm on core interests while embracing internal efficiencies like GST relief and tech upgrades, stakeholders can secure sustainable growth. 

In eDairyNews, we stand with you—comment below on your strategies, and subscribe for real-time updates. What move will you make next?

 

Sources

1. Negociaciones Comerciales India-EE.UU. y Resistencia en el Sector Lácteo

2. Estadísticas de Producción Láctea en India (2025)

3. Proyecciones de Mercado Lácteo (2025-2032)

4. Reducciones de GST en Productos Lácteos (Septiembre 2025)

5. Exportaciones, ROCE y Otras Métricas (e.g., Gausort, Amul)

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