Indian market has 'massive' potential

Demand for dairy products could rise by almost 40 per cent over next five years.

India's growing demand for dairy products, coupled with a limited domestic ability to meet that demand, might create opportunities for exporters like New Zealand.

In a report for ASB, US-based agribusiness expert Prof Bill Bailey said the Indian market had "massive" potential for the likes of New Zealand and the United States.

Both countries had made efforts to enhance and broaden opportunities to increase exports to India, particularly for food and agricultural products.

In view of the changing political climate in the US, particularly relating to trade policy, the potential for India to open up its economy to imports had improved.

India was projected to overtake China and become the world's most populous country by the early 2030s. However, unlike China, it had minimal dependence on imports of agricultural and food products.

China imported about $220 billion worth of food and agricultural products in 2015 while India with only a slightly smaller population imported $32 billion. That was likely to change as India's food needs grew, Prof Bailey said.

The Indian Government estimated growth in dairy product consumption would increase demand by almost 40per cent over the next five years.

With Indian dairy production increasing at about 4per cent a year, 2017 production was forecast to be 160 million metric tonnes, and meeting increased consumer demand from domestic production would be "extremely difficult", he said.

Growth in domestic production was constrained by a variety of factors, including genetics, diseases, lack of adequate veterinary and breeding services, and poor farm management.

While the Indian Government was attempting to improve those areas through its national dairy plan, the impact had been limited so far.

Poor infrastructure - highly dispersed production, lack of cold storage and weak procurement and retail systems - when combined with domestic production constraints, would eventually force India's Government to begin importing dairy products.

An increasingly prosperous middle class is also looking for value-added dairy products that were difficult for the Indian food and dairy industries to provide.

In addition, consumers had begun to focus more intently on product safety, another significant challenge for the domestic industry.

All those changes were positive for the possibility of increased New Zealand dairy exports to India.