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Indian dairy sector faces tight supply as demand strengthens ahead of 2026
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Tuesday, 30 December, 2025, 12 : 00 PM [IST]
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Our Bureau, New Delhi
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India’s dairy industry is entering a phase of tightening supply and margin recalibration amid strengthening demand ahead of 2026, according to a recent expert assessment. After navigating cycles of surplus, disruption, and recovery over the past three years, the sector is now confronting fresh challenges that could shape industry dynamics into next year.
During the post-COVID period of 2022-23, the industry experienced unusually low milk prices that failed to cover production costs, prompting many farmers to cut back on cattle induction and, in turn, reducing overall milk output. However, renewed efforts by dairy cooperatives and private players including sustainable fodder programs helped revive production. This led to a sharp rebound during the October 2024–March 2025 flush season, with milk output surging nearly 25%, creating a temporary supply surplus.
To absorb excess milk and broaden consumer appeal, dairy companies expanded their portfolios with value-added products such as curd, paneer, ghee, and ice cream, while strengthening cold-chain logistics and distribution networks.
Despite these measures, early and unseasonal rains in 2025 disrupted the typical supply balance, and robust festive demand further eroded inventories. Geopolitical disturbances in key northern milk belts also contributed to tightening supplies. As a result, procurement costs have increased across regions, even as retail prices remain largely stable following a recent GST reduction on milk and dairy products.
Industry participants now expect procurement cost corrections as dairy companies evaluate selective price increases or consider adjusting volumes to protect margins. The trend toward premium and value-added dairy offerings continues, driven by evolving consumer preferences and competitive distribution channels.
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