Rising milk prices could water down fight against inflation ahead of Lok Sabha polls

Onion prices are known to make ruling governments cry during election season, as spending on food accounts for a bulk of household budgets. But the BJP regime in Karnataka is currently facing flak after Amul's entry into the state home to Nandini, soured relationships between the cooperatives.

Concerns about the dairy sector could also spill over into the battle for the 2024 Lok Sabha polls, as rising milk prices threaten the fight against inflation.

Production costs driven by cattle feed prices

Dairy firms are likely to face stress, as price of procurement of milk is set to increase, largely driven by higher costs of cattle feed including rice bran and cereals.

The situation isn't getting any better with erratic rains damaging crops further, and reports of milk imports rising since India's livestock is hit by a disease.

Another factor is the drop in demand for dairy during the pandemic leaving farmers unable to feed their cattle sufficiently.

As the demand bounced back after the pandemic, India exported more milk products, but prices are expected to rise during summer and months after that.

Summer and festivals to add pressure

The peak demand will be driven by a need for ice creams among other products and will continue to grow during festivals.

India's consumer inflation has dropped below RBI's tolerance level for March thanks to easing vegetable prices, but cereals continued to be costly.

In addition to that, Milk prices remain another pressure point, as the rates directly affect consumption and voter sentiment as well.