By Heather Weeks, Extension Educator,Penn State
A growing population and increased incomes from an economic boom are the driving forces behind a surge in dairy product demand in India. One key to the success of recent consumption trends has been an American standby: the refrigerator.
Dairy Demand in an Emerging Economy
A new study reports that the demand for milk in India will rise by a compound annual growth rate of about 4% over the next few years (RNCOS, 2012). Research shows that as incomes increase consumption of animal products, specifically milk and dairy products, intensifies (Wenge Fu et al., 2012). In fact, India’s upturn in demand for dairy products far outweighs the growth in demand for animal products such as meat and eggs.
India owes this large demand for milk to its largely vegetarian population. Dairy product demand in India has increased dramatically in both rural and urban sectors. However, as a larger population is emigrating from rural areas to cities an even greater demand may be placed on dairy products. Between 1980 and 2010, India’s level of urbanization increased from 23 to 30 percent of the population. The second largest country in the world, India is projected to grow from 1.2 billion people in 2010 to just under 1.7 billion by 2050 with 55% of that population being urban. This increase in buying power allows consumers to purchase durable goods such as refrigerators that enable larger consumption of dairy products than ever before. Moreover, a more urban population also offers the increased opportunity for cultural exchange, leading to increased consumption of meat and dairy products not only in India but across Asia. All of these factors coupled together lead to growing international market opportunities for milk and dairy products in India previously unnoticed in the global dairy industry.
India is the world’s largest producer of milk. However, the majority of that milk is buffalo, followed by cow and goat milk as shown in Table 1 (FAOSTAT, 2013). Since 2005, 53% of the fluid milk produced in India has come from buffalo, 43% from cows and 4% from goats. In 2011, India produced 34% more milk than the U.S. up from 19% more in 2005 (Table 2). For dairy cow production, the United States produced 70% more milk in 2011 than India. One study by the OECD-FAO in 2011 suggests that India will have sufficient production to meet demand for milk and its products (excluding butter) through 2020. Nevertheless, as Wenge Fu et al. note, the rapid increase in population and changes in consumption patterns make such estimations difficult. Fluid milk demand is projected to grow at 10.2% per year, while production is projected to grow by 3.7% based on 1994 to 2004 growth rates. Competition for land to produce grains and feed products for animal production may limit agricultural growth in all sectors. This pressure on natural resources and its effect on production could lead to a greater reliance on imported dairy products.
In the short run, India’s dairy sector is well positioned to accommodate the rapid growth in dairy product consumption. An increasingly urbanized population with a greater disposable income will drive demand leading to opportunities from the global milk market to supply this new generation of Indian consumers.
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