India's Dairy Sector Seeks GST Reforms and Policy Support in 2026 Budget
The dairy industry in India is at the forefront of discussions as the Union Budget 2026 approaches. As a vital component of India’s food security and a significant part of the rural economy, the sector not only supports millions of farmers but also integrates into the broader fast-moving consumer goods (FMCG) value chain.
Industry leaders have acknowledged the government's efforts in providing GST relief but argue for further rationalization. Essential inputs such as packaging materials, refrigeration equipment, animal feed, and veterinary services continue to experience cost pressures. Dr. K Rathnam, CEO of Milky Mist Dairy Food Limited, highlighted the budget as a chance to accelerate growth within the sector by rationalizing GST on key inputs, which would alleviate rising costs and improve efficiency across the value chain.
Dr. Rathnam also pointed out the necessity for incentives to promote value-added dairy products and advancements in automation, quality testing, and sustainability initiatives. These measures, he argued, are vital for organized players to scale in line with global standards.
The broader FMCG sector, which includes dairy, remains focused on consumption-driven growth. While GST reforms have eased compliance, high tax rates on large mass-consumption categories continue to be a concern. Sudhir Sitapati, CEO of Godrej Consumer Products Limited, indicated that moving certain high-volume categories to a lower tax slab could stimulate demand.
Infrastructure and logistics also pose challenges for the dairy sector. Inadequate cold chain infrastructure limits the market penetration of dairy products, particularly in rural areas. Experts suggest the establishment of a dedicated Rural FMCG Infrastructure Fund, which could improve last-mile connectivity and reduce wastage through enhanced cold storage facilities.
India's retail and consumer sector is expanding rapidly, projected to grow from USD 1.06 trillion in 2024 to USD 1.93 trillion by 2030, according to Deloitte. This growth provides opportunities for dairy and food FMCG players to scale both locally and globally.
