Demonetisation effect: Spending on milk and milk products fell in 2017-18

The amount spent on milk and milk products (M&MP) dropped 10%. While households, hotels, and halwai shops spent Rs 6 trn on M&MP in 2016-17, consumption expenditure reduced to Rs 5.4 trn in 2017-18

There would hardly be any Indian who does not remember the advertisement in the 1990s under Operation Flood with the lyric “Doodh hai wonderful”.

It was to popularise milk across the country’s demographics by showing a schoolgirl, a bodybuilder, and an aged couple enjoying milk. It was prescient in the sense that milk production and consumption more than doubled in two decades.

But something unusual happened in 2017-18. The amount spent on milk and milk products (M&MP) dropped 10 per cent. While households, hotels, and halwai shops spent Rs 6 trillion on M&MP in 2016-17, consumption expenditure reduced to Rs 5.4 trillion in 2017-18, the data released by the National Statistical Office (NSO) shows.

While this is a 10 per cent drop in nominal terms, there is a bigger decline of nearly 14 per cent in real terms (at 2011-12 prices) too — from Rs 4.1 trillion to Rs 3.53 trillion.

Experts and official spokespersons have varied interpretations of the data. While, some said falling farmer or labourer incomes accounted for this, according to others, global milk prices, which had tanked that year, made milk cheaper in India, and the amount of consumption did not go down.

Himanshu, who teaches economics at Jawaharlal Nehru University, said this pointed to a grim situation, and stagnant incomes of farmers and labourers were the reason.

“This indicates that the poorest (lowest-income households) did cut down on essential items in that year, which succeeded demonetisation,” he told Business Standard. 

His independent analysis of the NSO data shows that incomes could have dropped in 2017-18. 

Former chief statistician of India Pronab Sen called this “very serious” because it indicated crashing incomes. 

Devendra Shah, chairman of Ahmedabad-based Parag Milk Foods, told Business Standard production and consumption had risen in that year. 

“The numbers appear surprising because they do not match the ground reality,” he said.  About 40 per cent of the milk produced in India is consumed in villages, and the rest (60 per cent) is marketed, he added. International milk prices had crashed to multi-year lows nearing $1,600 per tonne in 2017. The biggest milk player in the country, Amul, said that the drop in consumer spending on milk might have entirely to do with the unorganised sector groups that market and distribute milk in less urbanised regions.

“About two-thirds of the milk market is unorganised. A supply glut in that market could have resulted in prices dropping to an extent that overall spending on milk and products declined,” Amul Managing Director R S Sodhi said.

While organised and branded retail prices of milk are administered to ensure remunerative prices for farmers, the unorganised segment responds to the impulses of the domestic market, which is heavily influenced by global milk (or milk powder) prices. 

Some experts pointed out a very small proportion of milk output went into processing, to be converted into powder or other processed food format, and not consumed in liquid form. They said if a considerable proportion of milk went into processing, that would have partially explained the decline in the value of the milk consumed. 
 

Business Standard’s queries to the National Dairy Development Board (NDDB), the central institution that led the White Revolution and regularly monitors the dairy sector in the country, remained unanswered for two weeks.