India - US Trade Deal: A Threat to Indian Dairy Sector

Background Context 

The forthcoming visit of the US president Mr.Trump to India may witness the outlining of the India-US deal targeting some specific sector, this may include enabling the US dairy products, access to the Indian consumer market. However, this venture may have a long-lasting unfavourable and unpleasant effect on the ever prospect of the emerging Indian dairy industry. Although, India world's largest milk and milk product producing nation, prohibited and sanctioned import of dairy products, likely to safeguard the livelihood of 8 crores (80 million) remote and rural households and families involved and engaged in the Dairy Industry.

Indian Dairy Industry and Ecosystem

Significance of the Dairy Sector in India’s overall Economic Blueprint 

The Dairy Sector provides ample employment opportunities along and also a significant contributor to the Indian economy. The portion or contribution of the Agriculture and Allied (A&A) segment in Gross Value Added (GVA) has shown a consistent downfall over the period of four years, from 2014-2017 (from 18.2% to 17.2%), the portion of livestock to GVA has significantly prospered from 4.4% to 4.9% during the same four years of time span. The dairy sector, the subset of A&A has the maximum contribution of around 67.2% in 2017. The dairy sector plays a crucial and vital role in the eradication of poverty and equality in Rural India, finances the education, enhanced standard of living and maintains the socio-economic balance in rural households.

India and United States: Diary Sector Fact Figures and Trade 

  1. Considering the ups and downs of the Indian dairy industry with attention to US and India, the data advocates that the US is the stronger exporter in Diary products around the globe. Put this into numbers and they stand at 4.9 per cent in global dairy export, and the import of 2.8 per cent, the year 2018.
  2. In contrary, the Indian dairy industry is more local market-oriented, less very tiny compared to the US, thus Indian diary industry stands at 0.3 per cent of global export and 0.06 per cent of import, the year 2018. 
  3. It is very early to predict the future of the Indo-US diary trade may only be evaluated through its implementation.
  4. Indian dairy exports to the United States has remarkably enhanced seven times and jumped from a revenue of $2.1 million (2015-16) to staggering $14.9 million (2018-2019). Minuscule from the national revenue perspective, but notable from the context of industrial growth. 

Unfavourable or Unfortunate position of Indian Dairy Industry: 

  1. This isn’t very happening deal, it already started giving anxiety to Indian diary industry, for obvious reason. If, however, this deal gets materialised and comes into effect, i.e. enabling the Indian dairy market to US dairy products, then Indian diary industry might witness a heavy setback.  
  2. From the 2017 statistics, India produced around 21 per cent of the global milk production, thus making India leading milk producer globally. 
  3. There are millions (around 75 million) farmers that directly contribute and work in the Indian dairy industry and on average are responsible for taking care of two milch cattle per farmer.  
  4. Facts from the report put forward by The World Dairy Situation, 2019, at present in terms of the milk production or yield obtained per cattle, in the US is highest on the planet, I.e. 10,500 litres/Cow as against 1715 litres/Cow in Indian, that ranks second from the bottom after Pakistan. 
  5. Dairy Farmers in the United States trade their milk produce at price, approximately 16.6 per cent higher to the global market price, in comparison to the near figure of 15.6 per cent in India. 
  6. Notably, Indian farmers have the luxury of favourable trade protocols and terms in the dairy industry, and their portion of consumer price approximately around 60 per cent (highest in the world), according to the 2018 daily report from International Farm Comparison Network. 
  7. Although there are certain merits of the US dairy industry, they number around 0.04 million and holds an average of 241-250 milch cattle per farmer, which is highest in the world. 
  8. Although US farmers are at winning side on the economic scale and mass production by a single entity, however, they only manage to fetch approximately 43 per cent of the total cost paid by the consumer, 1.4 times lower than Indian dairy farmers.

Ultimate Reality: Indo-US deal affects the Indian Rural Economy 

The US dairy industry asserts that the suggested trade deal with India has the prospect to extend the overall dairy export to Indian, up to $100 million. As per the estimates and assessments, had the India-US dairy trade deal already being materialised, Indian dairy industry would have been in the deficit of approximately $85 million, instead of $14.71 million gain in 2018-19. This is definitely not excellent news for the prospect of Indian dairy industry. The Indo-US dairy trade agreement will not terribly affect the dairy industry but also will have a negative impact on the socio-economic situation of millions of rural households and families, especially women, who play a major and active role in this industry. It will completely create havoc in and badly disrupt the dairy co-operative structure as a whole. It is likely to weaken the belief system of the rural economy, which is already dealing with a wide spectrum of the problem at present.

Conclusion 

As per the report from Agriculture Skill Council of India, the farming activity provides the employment opportunities for the rural and remote workforce for around 90-120 days per year (provide the weather condition are good and favourable), the dairy sector provides alternate, major and self-employment chances throughout the year, with least dependency on weather conditions. Moreover, in recent years in the dairy industry is considered to the mainstream business in many regions coupled with poultry farm and fishery business. This newest agriculture commodity has a surplus of 20.6 per cent of collective output from mainstream cash crops like paddy, millet, wheat and pulses. Hence it is time-tested and evident from facts and numbers that despite lower milk production per unit (farmer) and dominance of landless farmers in the dairy industry, India still manages to produce milk at considerably cheaper prices. Hence enabling open access of Indian dairy market industry to US dairy products would prove a fatal business deal for India’s rural economy and put Indian farmers in a vulnerable situation in comparison to the dairy farmers in the United States.

Post a Comment

Should you need any further information, please do not hesitate to contact us.

Previous Post Next Post