India's Dairy Industry at Cross Roads-Harish Damodaran

India's Dairy Industry at Cross Roads-Harish Damodaran

India’s Dairy Industry at a Crossroad
A Current View of the World’s Largest Milk Producer

Harish Damodaran The Hindu Business Line, New Delhi.

• For the year ended March 31, 2009, India’s GDP was Rs 61642 billion ($ 1.37 trillion) at current market prices, translating into a per capita product of Rs 52,685 ($ 1,170). • For the US, the corresponding 2009 figures were $ 14.26 trillion and $ 46,364. The Indian economy is one-tenth of the US’ and an average Indian’s income 2.5% of the average American! • But India is growing. In 2004-05, GDP was only $ 740 billion, with per capita GDP at $ 680. So in current dollars, the economy has grown to nearly twice its size of five years back.

• Dollar comparisons are, moreover, misleading as they do not capture local purchasing power differences. A dollar can buy two liters (0.5 gallons) of 3% fat ‘toned’ milk in India, whereas it can buy just 1.2 liters (0.3 gallons) in the US. • In real terms, India’s GDP has since 2003-04 grown by an average 8.3% per year, boosting incomes of a rising middle class in particular. • Car and bike sales reflect this trend. Between 2002-03 and 2009-10, annual car sales have trebled from 0.54 to 1.53 million and doubled from 4.81 to 9.37 million units for two-wheelers.

Real GDP growth in % (April-March fiscal years)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 *Advance Estimate 8.52 7.47 9.49 9.71 9.22 6.72 7.17*

• Sustained growth, from low per capita levels, has implications beyond auto sales. With rising incomes, people not only consume more; the composition of their consumption also changes. • It is no different in food. As growth trickles down, the absolute quantities eaten go up alongside diet diversification in favor of ‘superior’ foods like milk, eggs, meat, fruits and beverages. • Meeting these demands pose huge production challenges in terms of pressure on...

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