New Delhi [India], July 14 : Opening India's dairy sector to US imports could result in an annual loss of Rs 1.03 lakh crore to Indian dairy farmers, according to a recent report by the State Bank of India (SBI).
The report cautioned that the move would significantly impact the livelihoods of small dairy farmers, as the US dairy sector is heavily subsidized.
SBI stated, "If the dairy sector is opened up, price of milk in India is likely to drop by at least 15 per cent which could cause potential annual loss of Rs 1.03 lakh crore to dairy farmers."
The report pointed out that agriculture and dairy continue to be key sticking points in trade negotiations between India and the United States.
One of the major concerns raised by SBI is the risk posed to the livelihood of Indian farmers if the dairy sector is opened up to US competition. This could also increase India's milk imports by approximately 25 million tonnes annually.
The dairy sector in India plays a critical role in the rural economy, contributing about 2.5-3 per cent to the national Gross Value Added (GVA), which amounts to around Rs 7.5-9 lakh crore.
It also provides direct employment to nearly 8 crore people, translating to one job for every Rs 1 lakh contributed to GVA.
The report mentioned that a 15 per cent drop in milk prices would not only reduce farmer incomes but also weaken the sector's overall contribution to the economy.
After accounting for the cost of inputs such as feed, fuel, transport, and unpaid family labour, the estimated GVA loss would be around Rs 0.51 lakh crore.
However, the report also highlighted potential gains if India and the US strengthen trade ties in other areas.
For instance, India currently exports less than USD 1 billion worth of high-value agricultural products such as organic food and spices to the US, but there is potential to expand this to over USD 3 billion based on US demand.
Fruits and vegetables like mangoes, litchis, bananas, and okra could see higher exports if sanitary and phytosanitary (SPS) bans are lifted.
Additionally, the removal of non-tariff barriers could boost the export of Ayush products and generic medicines by USD 1-2 billion.
Other benefits may include easier visa rules, increased outsourcing opportunities, US investments in cold storage and precision farming, and lower costs of agricultural inputs like feed, machinery, and veterinary products.
The report concluded that while opening up the dairy sector could lead to broader economic and strategic cooperation with the US, the adverse impact on millions of Indian farmers should not be ignored.
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