Working paper.

DEMAND FOR MILK AND

MILK PRODUCTS IN INDIA
Rakesh Saxena
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Institute of Rural Management, Anand 388001
September 1996
DEMAND FOR MILK AND MILK PRODUCTS IN INDIA
Rakesh Saxena
Abstract
This paper has the following objectives: (I) To assess the present market size
for milk and various milk products in India and study the pattern of change
over time. (2) To assess the relative sizes of regional markets for various milk
products. (3) To review the information available on elasticity of demand and
demand projections for milk and milk products.
It is observed that about three-fourth of the total milk production in India is
consumed in the form of liquid milk and ghee alone leaving a wide scope for
development of other milk products. The markets for milk powders and milk
foods are higWy concentrated in the eastern region of the country which is
deficient in milk production. The markets for ghee and butter, on the other
hand, are concentrated in the northern region which is considered a surplus
region in milk production. The western and southern regions have only modest
shares in the markets for these products. Based on the information available on
price, cross price and income elasticities, it is expected that the demand for
milk in India would grow at a rate of3.8 per cent per annum during the nineties.
DEMAND FOR MILK AND MILK PRODUCTS IN INDIA *
Introduction
The production of milk in India during the year 1994-95 has been estimated as
63.53 million metric tonnes (CMIE, 1995). Though India is the second largest
milk producing country in the world, her position in terms of per capita milk
production is very low. Considering the per capita milk requirement prescribed
by the Indian Council of Medical Research as 220 gms per day (80.3 kgs/year),
only five States, namely, Punjab, Haryana, Himachal Pradesh, Rajasthan and
Gujarat, have a per capita production which is above this nutritional requirement.
The average per capita production of milk in India at 70 kgs in 1994-95 is also
short of this requirement. On a regional basis, only the northern region has a
per capita milk production which is above this requirement. However, the
sufficiency in production alone cannot ensure the fulfillment of the nutritional
requirement of milk in a market economy. People should want to buy milk and
milk products, and have the ability and willingness to pay for them. It is such
demand on the part of consumers and the factors affecting it that are important
to understand for future planning.
This paper attempts to do the following: (1) To assess the present market size
for milk and various milk products in India and study the pattern of change
over time. (2) To assess the relative size of regional markets for various milk
products. (3) To review the information available on elasticity of demand and
demand projections for milk and milk products.
Market Size for Milk and Milk Products
In India, most of the milk has traditionally been consumed in the form of liquid
milk, ghee, curd, butter and ~weets. The product mix changed significantly
during fifties to mid-eighties. The important changes were in the form of increase .
in the use of milk as liquid milk, availability of new milk products in the form of
milk powder and cheese, and decrease in the use of milk for making ghee. It
* A short version of this paper has been accepted for publication in Gupta, PR
(ed.) Dairv India. New Delhi, (forthcoming).
1
appears that improvement in transportation, storage and marketing facilities
available for liquid milk, and access to technology of making new products,
have reduced the need for converting milk into ghee. The utilisation pattern of
milk has remained more or less the same during the last decade. It is estimated
that presently about 46 per cent of the total milk produced in India is used as
liquid milk, 28 per cent as ghee, 7 per cent as curd, 6.5 per cent as butter, 5.5
per cent as khoa, 3.5 per cent as milk powder, 2 per cent as cheese, 0.5 per cent
as cream, 0.2 per cent as ice cream, and the remaining 0.9 per cent in various
other forms.
The estimates of market size for various milk products during 1994-95 have
been given in Table-I. These estimates have been arrived at by making use of
information on milk utilisation pattern, production figures and discussions with
the experts in the area.
The total market size for all milk powders including baby food has been estimated
at 1,93,000 metric tonnes most of which is for skim milk powder and baby
food. These two products account for about 70 per cent of the powder market.
There is very little market for whole milk powder which has a share of only
about nine per cent in the powder market. The share of dairy whiteners in the
Table 1
Estimated market size for various milk products, 1994-95
Product Market size
(metric tonnes)
Baby food 65,000
Dairy whitener 40,000
Whole milk powder 18,000
Skim milk powder 70,000
Ghee 8,89,000
Butter 2,62,000
Cheese 3,100
Malted foods 43,500
Condensed milk 8,150
2
market is about one-fifth. Only about 16 per cent of whole milk and skim milk
powder is sold in consumer packs; the rest is sold in bulk packs. Indian army is
the largest buyer of whole milk powder in bulk packs.
The estimated market for ghee is eight to ten lakh metric tonnes. Considering
that 28 per cent of total milk production is used for making ghee and assuming
that the average fat percentage in milk is five per cent, the production of ghee
in 1994-95 can be estimated at about 8.9lakh metric tonnes. Only about 10 per
cent of the total production of ghee is produced in the organised sector. Similarly,
the production of butter for 1994-95 can be estimated at about 2,62,000 metric
tonnes considering it has about 80 per cent fat. Only about nine to ten percent
of total butter is marketed as table butter.
The change in the size of market for various milk products over the years can
be assessed to a good extent by the changes in the annual production of these
products over the years. However, the information on production is available
only for certain milk products being produced in the organised sector. This
information is presented in Table-2.
Table 2
Production of various milk products in India (metric tonnes)
Products 1989 1990 1991 1992 1993 1994
1. Milk powders 165000 155000 150000 165000 185000 195000
- Infant milk powder 78108 90867 94773 75662 83347 78740
- ~ers 86892 64133 55227 89338 101653 116260
2. Malted food 35000 39000 41000 41300 32300 43500
3. Condensed milk 7900 NA 8100 8400 7800 8150
4. Cheese - 2500 2500 2900 3100 3100
Sources: GOyt. of India (1990-95) & CMIE (1996).
It appears that the size of market for infant milk powder which was rising
steadily during 1989-91 slumped heavily during 1992. This market has rem(!.ined
sort of stagnated since then. On the other hand, the size of market for other
milk powders which was declining during 1989-91 has been rising steadily
3
since 1992. The size of market for malted foods appears to be fluctuating around
40,000 metric tonnes over the last five to six years. There is hardly any growth
in the market size for malted foods. The size of market for condensed milk and
cheese as compared to the total market for milk products is very small. While
the market size for condensed milk has been sort of fluctuating around 8,000
metric tonnes, the market size for cheese has been rising slowly. Considering
the constant shares of ghee and butter in the utilisation of milk over the years,
it may be said that sizes of their markets have been rising steadily.
Share of Regional Markets
Markets for various milk products in various regions of India have evolved
according to various characteristics of these areas like level of milk production,
food habits, income levels, etc. Based on the size of urban retail markets for
various milk products in India, Table-3 presents the estimated shares of regional
markets in 1995. The eastern region which is too deficient in milk production
has a large share in milk powder and baby food market. On the other hand,
more than half of the market for ghee and butter is concentrated in the northern
region alone which is a milk surplus region.
Table 3
Shares of regional markets for various milk products in India, 1995
Particulars North East West South Total
Milk powders 23.1 41.4 12.6 22.9 100.0
Baby food 11.7 66.7 6.4 15.2 100.0
Pure ghee 57.2 9.5 23.4 9.9 100.0
Butter 52.0 21.0 17.6 9.4 100.0
Trend in Prices of Milk and Milk Products
The market prices are an important determinant of the size of market for any
commodity. Table-4 presents the wholesale price indices for milk and milk
products so as to take a look at the trend of their prices over the years. The
average wholesale price index for all commodities has also been given in the
table to assess the change in real prices of milk and milk products.
4 '
, Let us first consider the price trend from 1981-82 to 1992-93 during which, on
an average, the prices of milk and all milk products have risen. During this
period, the prices of baby food have grown at the lowest rate, perhaps due to
stagnation of its demand as mentioned earlier. The prices of ghee have risen at
a slightly higher rate as compared to that of baby food. The prices of tinned
milk powder, skim milk powder, milk and butter have grown at a higher rate,
perhaps due to their strongly growing demand. Comparing the price index of
milk and each individual milk product with the overall price index for all
commodities, it can be seen that only in the case of baby food the real prices
have declined over time. In case of milk and all other milk products, the relative
prices have gone up.
Table 4
Wholesale price indices for milk, milk products and all commodities
(1981-82= 100)
Commodities 1990-91 1991-92 1992-93 1993-94 CARG(%)
1981-93
Milk 209.2 236.4 264.8 279.7 9.26
Butter 216.7 245.6 262.6 260.2 9.17
Ghee 188.7 227.2 239.1 235.0 8.25
Baby food 179.6 198.5 211.4 211.0 7.04
Skim milk powder 178.6 220.9 289.9 257.8 10.16
Tinned milk powder 203.6 230.1 305.2 304.2 10.68
All commodities 182.7 207.8 228.7 247.8 7.81
CARG = compound annual rate of growth (1981-82 to 1992-93)
Source: CMIE (1994).
The prices of all milk products have fallen during 1992-93 to 1993-94 which is
indeed a rare occurrence. While such decline is only marginal in case of other.
milk products, the prices of skim milk powder have declined by as much as
about 11 per cent. The price of milk has continued to rise even during this
period.
5
Demand Elasticity
Demand for milk and milk products is expected to be influenced by their prices,
income and tastes of the people, prices of related goods like cereals, pulses,
meat, fish, eggs, vegetable oils, and many other factors. Given a certain level of
demand for milk or any milk product during a period, an increase in its own
price, while other factors as mentioned above remain the same, is expected to
decrease this demand. Conversely, a decrease in the price would increase the
demand, other things remaining the same. An increase in the income of people
is expected to increase the demand for milk and milk products and vice versa.
If there is a change in more than one factor that affect the demand for milk and
milk products, the actual change in demand will depend on the net impact of
these factors. The demand for milk and various milk products can be projected
for future by considering the expected changes in the factors that influence it.
The relationship between the demand for a commodity and a factor that
influences it is usually expressed through the concept of elasticity of demand.
The elasticity of demand with respect to a particular factor indicates the
percentage change in the quantity demanded with respect to one percent change
in the level of that factor. Various studies have been done in India to estimate
various elasticities of demand for milk and milk products. These studies are
mostly based on the data collected by the National Sample Survey Organisation
on consumer expenditure. Due to the limitation of data, many such studies
have treated milk and milk products collectively. There is hardly any study that
has estimated elasticities at the national level for individual milk products like
skim milk powder, ghee, butter, etc.
Income and/or Expenditure Elasticity of Demand
The value of income elasticity of demand for a commodity (or a commodity
group) shows the percentage by which the existing demand for that commodity
is expected to change if the income of the present consumers changes by one
per cent. The change in both income and demand is with respect to a time
period. Similarly, the value of expenditure elasticity of demand for a commodity
indicates the expected percentage change in the existing demand for that
commodity if the consumption expenditure of the present consumers changes
6
The value of income elasticity varies for various income groups of consumers
in both rural and urban areas (Gandhi and Mani, 1995). The income elasticities
estimated by Gandhi and Mani (1995) for various expenditure groups are
presented in Table-5. It shows that as the income level increases, the value of
income elasticity of demand for milk decreases. The differences between the
values of income elasticity for rural and urban areas appear to be largely due to
the differences in income levels. The income elasticity of milk will reduce to
less than one, only after the per capita incomes have risen substantially.
Table 5
Income elasticity of demand for milk across various expenditure groups
of consumers in India, 1987-88
Particulars Quin- Quin- Quin- Quin- Quin- Average
tile 1 tile 2 tile 3 tile 4 tile 5
A. Rural
- AMPCE(Rs) 78.73 112.13 143.90 188.49 344.49 158.10
-Elasticity 2.509 2.098 1.809 1.496 0.796 1.700
B. Urban
- AMPCE(Rs) 128.86 151.64 203.19 282.11 616.97 249.93
- Elasticity 1.479 1.375 1.188 0.979 0.481 1.057
AMPCE = average monthly per capita consumption expenditure
Source: Gandhi and Mani (1995).
Milk and milk products have a higher income elasticity as compared to the
other food products in both urban and rural areas. It implies that the demand
for milk and milk products will grow relatively faster with an increase in the
consumer income (Jain et. al., 1992; Gandhi and Mani, 1995). In this context,
Table-6 provides the information on the shares of various ,food items in total
consumer expenditure over the years. It can be observed from this table that
while the cereals and pulses have dominated the share in the expenditure on
food items, their share in the same has been declining sharply over time in both
rural and urban areas. This is due to the low expenditure elasticity of cereals
and pulses which has been estimated at 0.49 for rural areas and at 0.19 for
urban areas (Jain et. al., 1992).
8
, On the contrary, the share of expenditure on milk and milk products has been,
in general, rising over time in both rural and urban areas. It is difficult to explain
such changes on the basis of the estimates of income elasticities alone. The
estimate of income elasticity for urban areas by Jain et. al. (1992) at 0.61 is too
low to explain the above rise in urban areas. Similarly, the estimate of income
elasticity for rural areas by Gandhi and Mani (1995) at 1.7 appears to be too
high to explain a marginal rise in the share of milk and milk products in rural
areas.
We find that the share of expenditure on meat, fish and eggs has also increased
slightly over time. The expenditure elasticity of meat, fish and eggs has been
collectively estimated at 1.18 for rural areas and 0.54 for urban areas (Jain et.
al., 1992). It is interesting to note that the share of meat, fish and eggs in the
total consumer expenditure has risen in urban areas despite the value of
expenditure elasticity being much less than one. This is perhaps due to the
changing tastes of urban people in favour of such items. Gandhi and Mani
(1995) have estimated the income elasticities of demand separately for meat,
fish and eggs by using the 1987-88 data on consumer expenditure. Their
estimates of income elasticities for meat, fish and eggs are 1.094, 1.693 and
0.933 for rural areas and as 0.388,1.268 and 0.640 for urban areas respectively.
That is, within livestock products used for food, milk and eggs have the highest
income elasticities in both urban and rural areas.
Table 6
Shares of food items in total consumer expenditure (%)
Cereals & pulses Milk & milk prod. Meat, fish & eggs Total food
Year
Rural Urban Rural Urban Rural Urban Rural Urban
1970 44.4 26.3 8.6 9.5 2.9 3.6 73.6 64.4
1977 37.6 24.4 7.5 9.5 2.7 3.5 64.4 60.0
1983 36.2 22.9 7.5 9.2 3.0 3.6 65.5 59.1'
87-88 30.5 18.4 8.7 9.5 3.2 3.5 63.8 55.9
88-89 30.5 19.2 8.9 10.0 3.5 4.0 63.9 57.1
89-90 28.7 17.9 9.7 9.9 3.6 3.8 64.3 55.2
Source: Jain et. ai. (1992) & NSSO (1991.1992).
9
~,'
\"~
Due to the relatively faster growth of demand for milk and milk products with
the rising consumer income, it is expected that milk and milk products would
ultimately dominate the food items in terms of per capita expenditure. It has
been shown by Gandhi and Mani (1995) that, in urban areas, the average per
capita expenditure on livestock products has almost equalled the average per
capita expenditure on cereals by 1989-90. It can be observed from the consumer
expenditure data across various income groups that the expenditure on livestock
products has also exceeded the expenditure on cereals in top income groups of
rural areas (NSSO, 1992).
In order to explore the relative importance of 'cereals and pulses' and 'milk
and milk products' in future with the rising consumer income, Table- 7 presents
the information on the monthly per capita expenditure for some income groups
in urban and rural areas. It can be seen from this table that the urban consumers
in the monthly expenditure classes of Rs 596 and Rs 1157 per capita spend
more on milk and milk products than on cereals and pulses. The same may be
expected as the income of rural consumers and lower income urban consumers
rise to similar levels.
Table 7
Monthly per capita consumption expenditure in India, 1989-90
(in Rupees)
Rural Urban
Exp class Av Exp C & P M&MP Exp class Av Exp C & P M&MP
-
0- 65 57.51 30.12 0.40 0- 90 75.46 30.67 3.51
95-110 102.29 44.45 5.12 135-160 148.27 45.93 12.81
125-140 131.85 48.77 9.50 185-215 199.65 53.59 18.07
160-180 169.85 56.58 14.40 255-310 280.05 55.56 31.95
215-280 242.27 60.63 28.25 385-520 441.18 61.58 52.18
280-385 310.72 62.56 45.82 520-700 596.29 61.33 64.20
385- 585.31 80.11 59.10 700- 1157.30 73.20 78.57
All 189.46 54.33 18.35 298.00 53.19 29.53
Exp= Expenditure,' Av= Average,' C&P= Cereals & pulses
M&MP= Milk & milk products
Source: NSSO (1992)
10
Own Price Elasticity of Demand
The own price elasticity of demand for milk and milk products in India has been
estimated as -1.404 for rural areas and as -0.535 for urban areas (Jain et. al.,
1992). It shows that a one per cent increase in the price of milk and milk products
will reduce the demand for milk and milk products by 1.404 per cent in rural
areas and by 0.535 per cent in urban areas. Conversely, a one per cent decrease
in the price of milk and milk products will increase the demand for milk and
milk products by 1.404 per cent in rural areas and by 0.535 per cent in urban
areas.
The absolute value of own price elasticity being greater than one for rural areas
means that a decrease in the prices of milk and milk products will increase the
total expenditure on milk and milk products in rural areas. Conversely, an increase
in the prices of milk and milk products will reduce the total expenditure on milk
and milk products in rural areas. That is, with a given level of income, the share
of milk and milk products in the total consumer expenditure would rise with a
decrease in the prices of milk and milk products and would decline with an
increase in the prices of milk and milk products.
In urban areas, the demand for milk and milk products is highly price inelastic.
There will not be much change in the quantity demanded in response to changes
in the prices of milk and milk products. Therefore, an increase in the prices of
milk and milk products in urban areas will result in an increased expenditure on
milk and milk products. On the other hand, a decrease in the prices of milk and
milk products will decrease the expenditure on milk and milk products. It is
just the opposite of what was discussed above in case of rural areas. Such
changes in the total expenditure in rural and urban areas would have a significant
bearing on the profitability of milk producers.
Cross Price Elasticity of Demand
.
The demand for milk may also be influenced by the changes in the prices of
related commodities. The magnitude of such influence is expressed through the
values of cross price elasticities. There is very little information available on
these elasticities. Table-8 presents some information available on cross price
11
.
elasticities of demand for milk and milk products with respect to prices of some
other food items. One can see that all the cross price elasticities, except the
ones with respect to prices of edible oils, are negative. The absolute values of
all the cross price elasticities, except the ones with respect to prices offoodgrains,
are quite low.
Table 8
Cross price elasticity of demand for milk and milk products
With Respect to prices of Urban Rural
1. Cereals & pulses -1.195 -0.857
2. Edible oils 0.226 0.047
3. Meat, fish & eggs -0.241 -0.062
4. Sugar -0.116 -0.117
5. Other foods -0.636 -0.098
Source: Jain et. al. (1992)
The changes in the prices of cereals and pulses have a strong impact on demand
for milk and milk products both in rural and urban areas. If the prices of cereals
and pulses go up by one per cent, the demand for milk and milk products is
expected to decline by 1.195 per cent in urban areas and by 0.857 per cent in
rural areas. As noted earlier, the share of expenditure on cereals and pulses in
total per capita expenditure is quite high in both rural and urban areas. An
increase in the prices of cereals and pulses is therefore expected to reduce the
real income of both rural and urban people significantly. The impact of such
reduced real income perhaps plays an important role in reducing the demand
for milk and milk products whenever there is a rise in the prices of cereals and
pulses.
Demand Projections
The future projections of demand for milk in India have been based mainly on
the estimates of income elasticity. Such projections have ignored the own price
and cross price elasticities. They have also used a constant value of income
elasticity for successive years assuming that the value of income elasticity would
not change with rising incomes over the years. For example, Mishra and Sharma
12
(1990) have estimated the demand for milk in India by considering the
expenditure elasticity of demand as 1.188 and the annual growth in private
consumption expenditure as 4.2 per cent. That is, the demand has been projected
to grow at a compound rate of about five per cent per annum. Patel (1993) has
projected the demand for milk with an annual compound growth rate of 5.2 per
cent by using the income elasticity as 1.3 and the rate of growth in gross national
product as four per cent. The figures of projected demand by Patel (1993) have
been presented in Table-9 for some years. Such projections should ideally be
close to the actual domestic production of milk, if it is the main source of
supply. One can see that the projected figures of demand for various years have
turned out to be quite close to the actual production of milk in those years.
However, the projections would have been made more accurately if the changes
in the price of milk and in the prices of closely related commodities were also
taken into account.
Table 9
Projection of annual demand for milk in India
Particulars 1990-91 91-92 92-93 93-94 94-95
Production of milk (mmt) 53.9 55.7 57.8 60.2 63.5
Projected demand (mmt)* 54.1 57.0 60.0 63.1 66.4
WPI offoodgrains (1981-82 = 100) 179.2 216.4 242.4 260.3 -
Corrected demand projection (rnrnt) - 55.9 58.1 60.2 62.5
WPI = Wholesale price index,. mmt = million metric tonnes
* Source: Patel, R.K. (1993)
The price index of milk with 1981-82 as the base year shows that the nominal
price of milk has increased at an annual compound rate of 8.5 per cent during
1981-82 to 1990-91. During the same period, the nominal prices of foodgrains
have increased at an annual compound rate of6.7 per cent. An annual increase
of6.9 per cent per annum in the prices of all commodities as a whole during the ..
same period indicates that while the relative price of milk has slightly increased,
the relative prices offoodgrains have actually declined. If the prices of milk and
foodgrains are adjusted for the overall inflation, one finds that while the real
price of milk has increased at an annual compound rate of 1.516 per cent during
the above period, the real prices of foodgrains have declined at an annual
13
compound rate of 0.215 per cent during the same period. These changes can be
incorporated into the projections of demand for milk by using the estimates of
own price and cross price elasticities.
As seen earlier, the price elasticity of demand for milk and milk products has
been estimated as -0.535 for urban areas and as -1.404 for rural areas. Using
the average per capita monthly expenses on milk and milk products in urban
and rural areas, and the proportion of urban population as 25.7 per cent, the
price elasticity of milk can be calculated at the all India level as -1.077. Similarly,
the rural and urban cross price elasticities of milk with respect to foodgrain
prices can be aggregated as -0.984 at the all India level. The net elasticity of
milk can be calculated as shown below by taking into account the changes in
milk prices, foodgrain prices and income with respective elasticities.
Net elasticity = (1.3 x 4) + (-1.077 x 1.516) + (-0.984 x -0.215)
= 3.78
The values of demand estimated by taking the annual compound growth rate as
3.78 per cent with base year as 1990-91 have been presented in Table-9. One
can see that the corrected projections of demand for milk for various years are
much closer to the actual production of milk in the same years. Using the same
rate of growth, the annual demand for milk can be projected at 64.9, 67.3,
69.9,72.5 and 75.3 million metrictonnes for the years 1995-96, 1996-97, 1997-
98, 1998-99 and 1999-2000, respectively. Such projections can be further
improved by sharpening the accuracy of various elasticities and changes in
various factors like prices, income, etc.
Summary and Conclusions
The demand for milk and milk products in India is largely in the form of liquid
milk and ghee as about 74 per cent of the total milk produced in the country is
consumed in the form of these two commodities. Other traditional milk products
like curd, butter and khoa use up another 19 per cent of the total milk production.
There is relatively much less demand for products like milk powders, cheese,
ice cream, etc. This is quite in contrast with the demand for milk and milk
products in the international market. It is cheese that dominates the international
market in milk and milk products. Various types of cheese constitute about 40
14
per cent of the total international market in milk and milk products in value
terms. Another 43 per cent or so of the international market in milk and milk
products is commanded by milk powders and butter in terms of value (FAO,
1993). Low domestic demand and high international demand for cheese makes
it a highly exportable milk product.
There is a clear regional dominance in terms of domestic demand for certain
milk products. While the markets for milk powders and milk foods are highly
concentrated in the eastern region of the country, the markets for ghee and
butter are highly concentrated in the northern region of the country. The western
and southern regions have modest shares in the markets for these products.
The market prices of milk and all milk products except baby food have risen
during the last decade and a half at a rate higher than the general inflation rate
in the economy. That is, milk and milk products have become costlier in relation
to other products in general.
Milk and milk products have an income elasticity of more than one at the all
India level. The share of milk and milk products in the consumer expenditure
on food items has, therefore, been rising over time with increasing consumer
income. However, as the consumer income grows, the income elasticity of
demand for milk and milk products is expected to decline. The value of income
elasticity for milk and milk products is higher in the rural areas due to the lower
consumer income in these areas as compared to urban areas. The demand for
milk and milk products is therefore expected to expand faster in rural areas as
compared to urban areas with the increasing consumer income. Among the
livestock products used for food, it is milk and eggs that have the highest income
elasticities in both urban and rural areas.
The demand for milk and milk products is quite sensitive to their prices and the
prices of cheaper food substitutes like cereals and pulses. Such sensitivity is .
higher in the case of lower income groups. An increase in the prices of 'milk
and milk products' and' cereals and pulses' has an adverse impact on demand
for milk and milk products.
15
It is expected that the demand for milk will grow at an annual compound
growth rate of about 3.78 per cent during the nineties. That is, the demand for
milk would exceed 75 million metric tonnes by the year 2000. However, the
actual market size is to be determined by both demand and supply forces. If the
production does not keep pace with this demand, the imbalance will result in a
higher increase in the prices of milk and milk products than what has been
assumed for demand projection. There is a need to update the estimates of
demand elasticities by pooling the time series and cross sectional data available
on consumer expenditure on one hand and by fitting the models that give variable
elasticity rather than constant elasticity on the other.
16
References
Centre for Monitoring Indian Economy (1994). "Trends in Inflation", Economic
Intelligence Service, April.
Centre for Monitoring Indian Economy (1995). "Production of milk", Economic
Intelligence Service, September.
Centre for Monitoring Indian Economy (1996). "India's industrial sector", Economic
Intelligence Service, January.
FAO (1993). FAO Yearbook: Trade. 1992.46. Food and Agriculture Organisation of
the United Nations, Rome;
Gandhi, V.P. & G. Mani (1995)."Are livestock products rising in importance? A study
of the growth and behaviour of their consumption in India", Indian Journal
of Agricultural Economics, July-September,283-93.
Government of India (1990-95). "Milk and milk products", Annual Renorts. 1989-90
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