What Happened
- The India-EU Free Trade Agreement represents a significant shift in how India engages with global dairy trade, though India has kept its dairy sector fully protected.
- India excluded dairy, rice, wheat, pulses, tea, and coffee from any import duty concessions to the EU.
- The government has stated that the dairy sector will not be opened up to foreign competition under the current dispensation.
- This continues India's consistent approach across all 9 FTAs signed under the current government -- dairy has remained protected in every agreement.
- The FTA uses phased tariff liberalisation to gradually reduce tariffs, giving sensitive sectors including dairy time to adjust.
Static Topic Bridges
India's Dairy Sector -- Scale, Structure, and Significance
India is the world's largest milk producer, contributing approximately 24% of global milk production. Milk production reached approximately 230 million tonnes in 2023-24, growing at approximately 6% annually. The dairy sector employs approximately 80 million dairy farmers, predominantly smallholders with 1-5 cattle. The cooperative model, pioneered by Operation Flood (1970-1996) under Dr. Verghese Kurien, transformed India from a milk-deficit nation to the world's largest producer. Amul (Gujarat Cooperative Milk Marketing Federation) remains the world's largest dairy cooperative.
- India's milk production: approximately 230 million tonnes (2023-24); world's largest producer since 1998
- Operation Flood (White Revolution): 1970-1996; Dr. Verghese Kurien; 3 phases; established dairy cooperatives nationwide
- National Dairy Development Board (NDDB): established 1965 by Act of Parliament; headquarters: Anand, Gujarat
- Dairy cooperative model: village-level societies --> district unions --> state federations --> national marketing
- Per capita milk availability: approximately 459 grams/day (2023-24) vs world average of approximately 310 grams/day
- Major dairy states: Rajasthan, Uttar Pradesh, Madhya Pradesh, Gujarat, Andhra Pradesh
Connection to this news: India's decision to exclude dairy from the EU FTA reflects the sector's structural vulnerability -- 80 million smallholder farmers cannot compete with highly subsidised European dairy producers, whose Common Agricultural Policy (CAP) support makes their products artificially competitive.
EU Common Agricultural Policy (CAP) and Dairy Subsidies
The EU's Common Agricultural Policy (CAP), established in 1962, provides extensive support to European farmers through direct payments, market interventions, and rural development funds. The CAP budget for 2021-2027 is approximately EUR 387 billion (approximately one-third of the entire EU budget). European dairy producers benefit from direct income support (Pillar 1), market intervention mechanisms (public intervention for butter and skimmed milk powder), and export subsidies. This creates a significant competitive asymmetry with unsubsidised Indian dairy producers.
- CAP budget (2021-2027): EUR 387 billion; approximately 31% of total EU budget
- Pillar 1 (direct payments): approximately EUR 270 billion; Pillar 2 (rural development): approximately EUR 95 billion
- EU milk production: approximately 155 million tonnes (2024); top producers: Germany, France, Netherlands
- EU dairy export subsidies: technically eliminated in 2015, but extensive domestic support continues
- EU dairy sector: highly mechanised, average herd size 80-100 cows vs India's 1-5 per farmer
- India's import duty on dairy products: 30-60% (maintained across all FTAs)
Connection to this news: India's refusal to open dairy is grounded in the vast structural difference -- EU dairy farming is industrialised, mechanised, and subsidised through CAP, while India's sector is fragmented, smallholder-dominated, and largely unsubsidised beyond MSP for milk.
FTA Sensitive Lists and Negative Lists in Trade Negotiations
In FTA negotiations, countries categorise products into different liberalisation tracks. The Normal Track covers products where tariffs will be eliminated or significantly reduced over 5-15 years. The Sensitive Track includes products where tariff reduction is partial or phased over a longer period. The Exclusion List (Negative List) covers products where no tariff concessions are offered. India has consistently placed dairy, certain agricultural products (rice, wheat, pulses), and specific manufactured goods on exclusion lists across its FTAs.
- ASEAN-India FTA: India excluded 489 tariff lines (approximately 5%); included dairy, auto parts, palm oil on sensitive list
- India-UAE CEPA: dairy, certain agricultural products on exclusion list
- India-Australia ECTA: dairy explicitly excluded; to be addressed in comprehensive CECA
- WTO MFN tariff on dairy products: 30-60% (India); EU average for dairy: 36%
- Trade deflection risk: FTA partners could re-export subsidised EU/NZ dairy to India at preferential rates
- India withdrew from RCEP (2019) partly due to concerns about dairy imports from Australia and New Zealand
Connection to this news: The consistency of dairy exclusion across all 9 FTAs reflects India's strategic approach -- opening competitive sectors (IT services, textiles) while firmly protecting sectors with livelihood implications for millions of smallholder farmers.
Key Facts & Data
- India: world's largest milk producer; approximately 230 million tonnes (2023-24)
- Dairy farmers in India: approximately 80 million (predominantly smallholders)
- India-EU FTA: dairy, rice, wheat, pulses, tea, coffee fully excluded from tariff concessions
- EU dairy subsidies (CAP 2021-27): approximately EUR 387 billion total CAP budget
- India's dairy import duty: 30-60% (maintained in all FTAs)
- Per capita milk availability in India: approximately 459 grams/day
- RCEP withdrawal (2019): dairy import concerns a key factor