In this episode of the State of the Economy podcast, businessline's Subramani Ra Mancombu talks to Srideep N Kesavan, CEO of Heritage Foods Ltd. talk about the dairy sector in India, a key industry that is vital to the rural economy but faces several challenges. India is the world’s largest milk producer, generating nearly 240 million tons of milk annually. The country is home to over 60 million cows—three times more than Europe—but despite its scale, the dairy sector remains fragmented, unorganized, and lacking technological advancements.  Kesavan discusses the slowing growth in milk production, highlighting that while cow milk production is increasing, buffalo milk production—which accounts for nearly half of India’s milk—is stagnating. This has contributed to a slowdown in the overall growth rate of milk production from a 10-year CAGR of 5.5% to 3.5% in recent years.  Additionally, Kesavan addresses the recent increase in milk prices, explaining that the rise in prices is in line with inflation and the increasing cost of production. Despite these price hikes, he emphasises that the dairy industry has been seeing price stability for a long time, and recent price increases are necessary to maintain balance in the market.  A major issue facing Indian dairy farmers is the low milk yield per animal, especially compared to global standards. Kesavan highlights that while some farmers are beginning to adopt better breeding practices, the cost of quality feed remains a significant barrier. He suggests that improving feeding practices is crucial to increasing milk yield, with balanced diets and concentrated feed essential for boosting productivity.  The discussion also touches on the evolving consumer behavior in India. As consumers become more health-conscious, there is a noticeable rise in demand for nutritious dairy products such as probiotic buttermilk and paneer. Kesavan points out that urban dairy consumption is still relatively low, but with the increasing availability of organized retail and higher spending power, dairy consumption is poised for substantial growth.  Looking to the future, Kesavan is optimistic about the dairy sector’s potential. With organised retail penetration still below 30% in India, there is significant room for growth. As consumption per capita increases and new dairy products find their place in the market, India’s dairy sector is expected to continue growing, driven by both supply-side improvements and changing consumer preferences.  (Host: Subramani Ra Mancombu, Producer: Amitha Rajkumar) About the State of the Economy podcast  India’s economy has been hailed as a bright spot amid the general gloom that seems to have enveloped the rest of the world. But several sectors continue to stutter even as others seem set to fire on all cylinders.