As trade negotiations are ongoing between India and the US, the State Bank of India (SBI) has warned that opening its dairy sector may cause a crash in the rural economy. Dairy farmers might suffer an annual loss of Rs 1.03 lakh crore if the dairy sector ends up being part of the trade agreement between the two countries.
“If the dairy sector is opened up, price of milk in India is likely to drop by at least 15 per cent which could cause potential annual loss of Rs 1.03 lakh crore to dairy farmers” SBI mentioned in the report.
The US dairy industry benefits from heavy subsidies, and increased competition could jeopardize the income of millions of Indian farmers. The report estimates that such a move might push India’s milk imports up by around 25 million tonnes each year.
Dairy Sector: A Vital Contributor in GDP
As per the report a 15% drop in milk prices triggered by increased imports would not only shrink farmers’ earnings but also weaken the sector’s overall economic contribution. Once the costs of feed, fuel, transportation, and unpaid family labor are taken into account, the total loss in GVA could reach about Rs. 0.51 lakh crore.
India’s dairy industry is a vital part of the rural economy, contributing roughly 2.5-3% to the country’s Gross Value Added (GVA), which translates to between Rs. 7.5 and 9 lakh crore. It also provides direct employment to nearly 80 million people, effectively supporting one job for every Rs. 1 lakh generated in value.
India US Trade Deal : Positive Aspect of Agreement
The report also highlighted the positive aspect of the deal. Currently, India exports less than USD 1 billion worth of high-value products such as organic foods and spices to the US, but there is potential to increase this to over USD 3 billion, driven by rising demand, if trade deal strenghted on agriculture
Fruits and vegetables like mangoes, litchis, bananas, and okra could see a boost in exports if sanitary and phytosanitary (SPS) restrictions are eased. Furthermore, removing non-tariff barriers could help increase exports of Ayurvedic (Ayush) products and generic medicines by an additional USD 1-2 billion.
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(With ANI Inputs)
