Dairy stays off the table in India–New Zealand trade deal

India's steadfast refusal to grant import duty concessions for dairy products to New Zealand in their recently concluded Free Trade Agreement (FTA) negotiations offers a fascinating insight into the country's complex economic and political priorities. This decision, while seemingly focused on a niche sector, has profound implications for India's trade strategy, agricultural policy, and rural livelihoods.

**Background Context: The Backbone of Rural India**

India stands as the world's largest milk producer, a position it achieved through the remarkable success of 'Operation Flood' (also known as the White Revolution) launched in 1970. Spearheaded by Dr. Verghese Kurien, this program transformed India from a milk-deficient nation into a dairy powerhouse. Today, the dairy sector is not merely an economic activity but a socio-economic lifeline, especially for small and marginal farmers. It provides supplementary income, ensures food security, and employs over 80 million rural households, a significant portion of which are women. This decentralized, small-holder model is distinct from the large-scale, industrialized dairy farming prevalent in countries like New Zealand. New Zealand, in contrast, is a global dairy giant, highly efficient and export-oriented, with companies like Fonterra dominating international markets. Its interest in FTAs often involves securing market access for its high-quality dairy products.

**What Happened: A Strategic Refusal**

Despite ongoing negotiations for a comprehensive FTA, India consistently maintained its stance on dairy, refusing to open its market to New Zealand's dairy products through tariff reductions. This decision effectively keeps dairy 'off the table' for significant concessions. While the current dairy trade between the two nations is minimal, the potential for a surge in imports, if tariffs were lowered, was perceived as a significant threat to India's domestic industry. The Indian government's position reflects a cautious approach, prioritizing the protection of its vast number of dairy farmers over potential benefits from a wider trade agreement.

**Key Stakeholders Involved:**

1. **Indian Dairy Farmers:** Millions of small and marginal farmers, for whom dairy is a crucial source of income. They are the primary beneficiaries of this protectionist stance. Their livelihoods are directly linked to the stability of domestic milk prices and demand.

2. **Indian Government:** The central government, particularly the Ministry of Commerce and Industry and the Ministry of Agriculture & Farmers Welfare, are the key decision-makers. Their objective is to balance economic growth, farmer welfare, and international trade commitments. The political sensitivity of the agricultural sector, especially dairy, makes farmer welfare a critical electoral consideration.

3. **New Zealand Government:** Seeking to expand its export markets, the New Zealand government aims to secure better access for its dairy products. Dairy is a cornerstone of its economy, and market access agreements are vital for its growth.

4. **New Zealand Dairy Industry:** Large dairy cooperatives and companies in New Zealand, such as Fonterra, are keen to tap into India's massive consumer market, which offers immense growth potential.

**Why This Matters for India: Economic, Political, and Social Impact**

This decision is crucial for several reasons. Economically, it safeguards the domestic dairy market from potentially disruptive competition, ensuring stable prices for local producers and protecting their incomes. Politically, it resonates with the large rural electorate, demonstrating the government's commitment to farmer welfare – a sensitive issue often leading to widespread protests if not addressed. Socially, it preserves a vital source of employment and livelihood in rural areas, contributing to economic stability and poverty reduction. It also aligns with India's broader 'Atmanirbhar Bharat' (Self-Reliant India) initiative, which emphasizes domestic production and resilience in key sectors.

**Historical Context and Broader Themes:**

India has historically adopted a defensive posture regarding its agricultural sector in multilateral and bilateral trade negotiations. This approach was evident in its stance during the Doha Round of WTO negotiations and, more recently, in its withdrawal from the Regional Comprehensive Economic Partnership (RCEP) in 2019, primarily due to concerns about agricultural and dairy imports from countries like Australia and New Zealand. This pattern underscores a consistent policy of protecting vulnerable domestic sectors. This policy reflects a strategic balancing act between integrating into the global economy and shielding domestic producers, particularly in agriculture, which remains a cornerstone of the Indian economy and a significant employer.

**Constitutional Articles and Policies:**

While there isn't a direct constitutional article dictating dairy import policy, the decision aligns with the spirit of the **Directive Principles of State Policy (DPSP)**, particularly **Article 39**, which mandates the State to direct its policy towards securing a decent standard of living and means of livelihood for its citizens. Furthermore, **Article 48** calls for the State to organize agriculture and animal husbandry on modern and scientific lines and to take steps for preserving and improving the breeds. Protecting the dairy sector directly supports the livelihood aspect for millions. The government's **Foreign Trade Policy** and various **dairy development schemes** (like the National Livestock Mission, Rashtriya Gokul Mission) also reflect the emphasis on strengthening the domestic dairy industry.

**Future Implications:**

India's firm stance on dairy in the New Zealand FTA sends a clear signal to other trading partners, including the UK and the European Union, with whom India is also negotiating FTAs. It indicates that India will continue to be highly selective and protective of its sensitive sectors, particularly agriculture. This might lead to longer and more complex negotiations but reflects a pragmatic approach to trade deals. For New Zealand, it means exploring alternative markets or focusing on non-dairy exports to India. For India, it reiterates its commitment to self-reliance in food and agriculture, potentially driving further investments in domestic dairy infrastructure and productivity enhancements to meet growing demand internally, rather than relying on imports. This strategy aims to ensure that global integration does not come at the cost of domestic economic stability and social welfare.