The political economy of India’s dairy policy is shaped by powerful cooperative movements led by Amul and the National Dairy Development Board that transformed rural livelihoods while creating influential lobbies controlling trade negotiations. Dairy farmers distributed across politically sensitive states including Gujarat, Maharashtra, and Uttar Pradesh represent an electoral constituency that no government risks alienating, making any concession on dairy imports a trigger for potential farmer protests and cooperative pressure. This defensive stance explains New Delhi’s resistance in both RCEP and bilateral trade talks, where dairy remains non-negotiable despite changing consumption patterns.

Urbanization and post-COVID health consciousness have fundamentally reshaped Indian dietary preferences, with rising incomes, e-commerce expansion, and government initiatives like FSSAI’s Eat Right India campaign boosting demand for branded and consistent dairy products. Value-added dairy segments including cheese, Greek yogurt, and whey have grown at double-digit rates far outpacing liquid milk, with cheese and yogurt volumes surging 18-22% in FY23 against just 8-10% for milk. This dramatic shift in urban demand creates opportunities for global dairy players to serve premium segments without impacting traditional milk supplies or farmgate prices.

Economists Krishan Sharma and Nida Rahman advocate for calibrated opening of premium and processed dairy markets through selective access rather than blanket liberalization, proposing that sensitive commodities like liquid milk, skimmed milk powder, and bulk products remain protected by tariffs while products including mozzarella, cheddar, gouda, probiotic yogurt, protein shakes, and whey isolates are opened selectively. India already imports significant quantities including approximately 80,000 tonnes of lactose in 2025 with the US supplying 13% and over one-fifth of whey proteins, but faces costly 40% tariffs and stringent veterinary certification rules introduced in late 2024.