Market Demand is always a crucial player in ascertaining the production volume in any industry. Talking about milk and dairy production in India, market demand does hold a significant role to play. But, it is not the primary or sole player. The Indian dairy industry developed rapidly ever since its paradigm shift from an unorganized to an organized segment. This was possible after the inception of the White Revolution in 1970.
Dr. Varghese Kurien, the father of the White Revolution in India outlined three basic principles of dairy development in one of his famous books titled “I Too Had a Dream”. The following are the same –
- Production of milk is of no meaning without a ready market.
- The procurement of milk and market demand are not rigidly linked with each other.
- Procurement activities must be carried out by focusing on the markets with a capacity to give enough profits to the farmers.
At the time Dr. V Kurien accessed the Indian Dairy market, things were very different. However, his efforts made the Indian milk and dairy industry the largest milk producer and consumer in the world.
However, the three basic principles hold significant value in today’s production and procurement planning in the Indian Dairy Industry. Let us take a look at these three points in a modern perspective.
Modern Perspective: Dairy Development in India
The Demand Generator: CONSUMERS
The readiness of the dairy market depends on various factors. Some of the major and important factors are consumer demand, consumer preferences, dietary trends, and consumer purchasing power. For milk and dairy products, awareness of health and nutrition also plays a significant role in determining market readiness.
The Product Generator: PRODUCTION FACILITIES
Governed by strict health and hygiene protocols, dairy production facilities in India must have the potential to meet the market. This potential is in terms of investment capacity, milk procurement and processing capacity, and distribution readiness. This is the middle and most crucial pillar of the dairy industry when it comes to maintaining the demand-supply equilibrium.
The Supply Generator: SUPPLY CHAIN & RETAIL
If not properly distributed, the production of milk and dairy products becomes vulnerable to damage with due passage of time. Therefore, the establishment of a competent supply chain infrastructure that includes transportation, storage, and distribution networks is very necessary. A balanced distribution of retail outlets is essential to cater to and record the daily dairy products of consumers.
These 3 stages form a cycle and collectively determine the market readiness for milk and dairy products. Therefore, if there is no demand and no supply facilitation arrangements, the production of milk can never make sense.
According to this statement, there are various factors to determine the scope of the milk production and procurement process in India. Market demand is merely one of those factors. Although market demand has some contribution, yet, certain additional legal and regulatory protocols guide the milk procurement process.
The statement “The procurement of milk and market demand are not rigidly linked with each other” suggests that the amount of milk procured doesn’t strictly correspond to market demand. In other words, fluctuations in milk procurement may not always align perfectly with changes in market demand.
Several factors can contribute to this lack of rigid linkage:
- Storage and Inventory Management: Dairy producers may have storage facilities or utilize preservation methods to store excess milk when procurement exceeds immediate demand. Conversely, they may draw from these reserves during periods of high demand when procurement is insufficient.
- Supply Chain Dynamics: Milk procurement is influenced by factors like seasonality (milk production may vary based on the time of year), transportation logistics, and processing capacity. These factors can affect the timing and quantity of milk available in the market, which may not always align with demand fluctuations.
- Government Policies and Subsidies: Government interventions, such as price support or subsidies for dairy farmers, can influence milk procurement levels independently of market demand.
- Consumer Behavior: Changes in consumer preferences or dietary trends can affect market demand for milk, but these shifts may not immediately translate into corresponding adjustments in milk procurement.
Overall, there is a relationship between milk production & procurement and market demand in India. However, it’s not rigidly linked due to various influencing factors within the dairy industry and consumer market dynamics.
Milk procurement activities, apart from targeting to meet the market demand, should also focus on the profitability of milk farmers. Without proper incentives, farmers won’t be able to take care of their cattle as per standards. And, this will directly harm the quality of milk they produce.
With a deep understanding of this fact and acknowledging the necessity of incentivization policies for farmers, the milk and dairy cooperative societies and the government of India have various schemes in place to facilitate the same.
You must note that meeting demand with quality products is the primary target in today’s market. Without proper support for milk farmers, it will never be possible to yield the desired quality milk, without which, the entire industry will have no role to play in the economy. Therefore, sustaining the basics is very crucial.
The Bottomline
India has been an agriculture-based economy since ancient days. Therefore, every household understands the importance of milk in their daily life. In that case, the demand for milk and dairy products in India will increase in direct proportion to the population rise, as the tradition of milk consumption will continue in every household.
Demand is surely a significant player in ascertaining the volume of dairy production, but it is not the only or primary contributing factor to overall dairy production. Overall, while demand is a crucial factor in shaping milk and dairy production in India, it is not the sole determinant. A combination of factors including government policies, infrastructure, technology, cultural factors, economic conditions, seasonal variations, and market dynamics collectively influence the dairy industry in the country.
