Dairy and Other Dilemmas

India’s refusal to open its dairy market has complicated trade negotiations for years. As global partners demand concessions, is the cost of protectionism outweighing benefits?

- Pushpita Dey

A year before India shook off the yoke of colonialism and emerged as a sovereign nation, the country's dairy sector had already broken off from imperial chains by switching to the cooperative model.

The country, for the past many years, has been the largest milk producer in the world, contributing nearly 25% of the global milk supply. And Indians are the largest dairy consumers in the world. The relationship works.

But ever since the country opened its economy in 1991, a number of nations have been eyeing its dairy market.

New Zealand was the first country to formally ask for access. The tiny island nation is called 'dairy country' Dairy is its largest export. Its dairy industry makes up for a significant chunk of its gross domestic product (GDP). Thus, when India and New Zealand sat together to negotiate a free trade agreement (FTA) in 2010, New Zealand wanted to sell its dairy in India. India refused. In 2015, the potential FTA fell through.

Over the years, many countries have sought access to India's dairy market as part of trade pacts. Some have sought concessions in duties. In every case, India has said no. Governments, no matter who has been in power, have felt that the nation's dairy sector is incredibly sensitive, and have refused to allow foreign players to get a slice of the pie.

But trade pacts involve give and take. And not giving up dairy has come with its own consequences.

Some FTAs have failed while some negotiations have gone on for years.

And now, India has brought its small and medium enterprises (SMEs) and its sustainable food sector into negotiations. The Union Commerce Ministry said in December that India is looking to open these sectors as part of ongoing trade negotiations with the European Union (EU).

But won't global competition choke Indian SMEs? Won't opening sustainable food kill nascent ventures? And is dairy worth the risk?

What's At Stake?