The signing of the India-EU FTA is a positive development for how India engages with international agricultural trade in general, and dairy specifically, as the economic, social, and nutritional aspects of the dairy sector are intertwined. Instead of encouraging rapid liberalisation, this agreement embodies a balanced trade approach: one that protects Indian farmers, supports Indian production systems, and at the same time readies the Indian dairy sector for future engagement in the global economy through value-added growth.
In an industry that sustains millions of rural families and makes such a significant contribution to the country’s food security, this kind of careful planning is absolutely essential. The India-EU agreement shows that global engagement and protectionism do not have to be mutually exclusive.
Protecting farmers while enabling stability
One of the most characteristic aspects of the India-EU FTA is the consideration of sensitive agricultural sectors. The Free Trade Agreement between India and the European Union provides for tariff reductions on almost all products traded between these two regions. However, in the dairy sector, there are currently no immediate tariff reductions as per the provisions of the treaty. This is an acknowledgment of the reality of the Indian dairy sector, which is primarily composed of many small and marginal farmers who rely heavily on a steady stream of revenues from the sale of milk. Not only is India the largest milk producer in the world (almost 25% of total production), but the dairy industry itself is also very decentralised and demand driven.
In this scenario, the sector would be vulnerable to the effects of subsidized dairy imports. The agreement shields the sector from such impacts and gives farmers the assurance that trade liberalization will not compromise their income streams. This is critical for encouraging investments in the sector.
Strengthening local production as a trade strategy
The competitiveness of dairy products on a global scale does not start at the border but starts in the local supply chain. The India-EU FTA, through the preservation of safeguards and the promotion of regulatory cooperation, indirectly supports local production systems. This gives the industry time to improve efficiencies, upgrade processing facilities, and bring farmers into the organized value chain.
The strength of the local industry is also a necessary condition for being export-ready. Better procurement practices, improved cold chain reach, and better quality testing will benefit local consumers as well as the export market. In this regard, the protection of the local industry is not protectionist but enabling.
Processed dairy: Opening the door to global markets
The brightest prospects for Indian dairy exports are in processed and value-added segments, and not in liquid milk. The world over, dairy trade is dominated by categories such as butter, milk powders, cheese, whey, and dairy ingredients, where the shelf life and quality are of greater importance than distance. In FY 2024-25, there has been a substantial rise in the export of dairy products, particularly ghee, butter, and milk powders.
The agreement between India and the EU, although not liberalising the dairy sector at this stage, has certainly created a more favorable trade environment with more clarity in regulations. This, in turn, opens the way for Indian processed dairy exports to enter the highest quality markets of the world, not only in Europe but also in other countries that follow the EU standards.
The decentralised dairy production system in India, combined with the increasing processing capacity, provides natural resilience, as long as this is combined with efficient logistics and transparent systems. Trade agreements such as the India-EU FTA facilitate this transition by connecting market access with quality assurance and compliance.
Quality, innovation, and sustainability as differentiators
The competitiveness of the global dairy market is increasingly based on more than just price. Food safety, traceability, environmental sustainability, and ethical sourcing are now core to purchasing decisions, especially in developed countries.
The Indian dairy industry is slowly meeting these requirements. Quality testing, sustainable use of energy in processing, improved feed practices, and water management are becoming more common. Innovation in product form, packaging, and processing efficiency will further shape the global positioning of India. Value-added products suited to the market allow the Indian dairy industry to compete on differentiation rather than sheer volume.
The road ahead
The Free Trade Agreement between India and the EU represents a significant shift in the way India thinks about dairy in the global trade environment. The agreement provides a foundation for sustainable engagement in the global trade environment by securing Indian farmers, promoting Indian production, and facilitating a gradual convergence towards global norms.
The future of the Indian dairy sector in the global trade environment is based on processed dairy, robust value chains, and growth through quality. With the welfare of farmers at the heart of its strategy and innovation as the engine, the Indian dairy sector is poised to make its presence felt in the global trade environment not through sudden liberalisation but through a smooth and confident entry into the global trade environment.
The author is Director – Sterling Agro Industries Ltd .(Nova Dairy)
Published on February 14, 2026
