India-US Dairy Trade: SBI Warns of ₹1.03 Lakh Crore Loss

India-US Dairy Trade: As India and the United States edge closer to finalising a much-anticipated interim trade deal, India-US dairy trade concerns have re-emerged as a major flashpoint that could stall progress. India has resolutely hardened its stance on protecting its domestic dairy and agricultural markets, warning of devastating consequences for its rural economy if the sector is opened to American imports.

A recent analysis by the State Bank of India (SBI) has added weight to the argument, painting a grim picture of the potential fallout. According to the report, Indian dairy farmers could incur a staggering annual loss of ₹1.03 lakh crore if US dairy products are allowed to enter the Indian market without restriction.

India-US Dairy Trade: The Backbone of India’s Rural Economy

India’s dairy sector is not just a commodity-driven industry—it’s a lifeline for millions. Contributing between 2.5% to 3% of the national Gross Value Added (GVA), this sector represents a value of approximately ₹7.5 to ₹9 lakh crore. Most notably, it directly sustains over 8 crore individuals, many of whom are small-scale farmers and women in rural households.

“For every ₹1 lakh contribution to GVA, one employment opportunity is generated in the dairy sector,” the SBI report notes, underlining the deep socio-economic threads that bind the industry to India’s grassroots.

Why India Resists Opening Its Dairy Sector

The core of India-US dairy trade concerns lies in the sharp disparity between the American and Indian dairy ecosystems. US dairy farmers receive significant government subsidies, enabling them to offer milk and dairy products at substantially lower prices.

If India were to open its gates to US dairy imports, the SBI analysis warns that milk prices could fall by at least 15% domestically. Such a drop would erode farmers’ incomes drastically and reduce the sector’s GVA by approximately ₹0.51 lakh crore, after accounting for input costs like feed, fuel, transportation, and unpaid family labour.

Moreover, this shift could result in a flood of nearly 25 million tonnes of imported milk per year, outcompeting local farmers who lack the scale or state support that their American counterparts enjoy.

India-US Dairy Trade: The Flip Side – Opportunities in Select Sectors

While the dairy dilemma threatens to derail the broader deal, the SBI report also points to areas of untapped promise in Indo-US trade relations. Currently, India exports less than $1 billion worth of premium agricultural goods—such as organic produce and spices—to the US. However, the potential exists to grow this number to over $3 billion, provided that sanitary and phytosanitary (SPS) barriers are lifted.

Similarly, removing non-tariff barriers could significantly boost the export of Ayush products, generic pharmaceuticals, and fresh fruits like mangoes, bananas, litchis, and okra. Together, these segments could add an estimated $1–2 billion in annual revenue.

Strategic Collaboration Beyond Dairy

The report outlines other potential benefits of an expanded India-US trade relationship, including:

• Eased visa protocols, helping Indian talent access American job markets more smoothly.

• Greater US investment in cold storage infrastructure and precision farming tools, modernising India’s agri-supply chain.

• Lower costs for agricultural inputs, including animal feed, farming machinery, and veterinary supplies.

These advancements could bring much-needed technological infusion into Indian agriculture, without compromising the livelihood of dairy farmers.

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