Livestock Value Chains: Prospects, Challenges and Policy Implications for Eastern India

20 Pages Posted: 15 Mar 2012

See all articles by Krishna M. Singh

Krishna M. Singh

Dr. Rajendra Prasad Central Agricultural University

M. Meena

Indian Council of Agricultural Research (ICAR)

R. Singh

Dr Rajendra Prasad Central Agricultural University

Date Written: March 13, 2012


India has one of the largest livestock sectors in the world and the largest livestock population with 520.6 million head. Of the world’s livestock population, cattle contribute 12.7%, Buffalo 56.7%, goats, 14.5% and sheep 5.9 % (FAOSTAT, 2008). Livestock constitutes a natural asset for the poor that can be liquidated when required. Hence, it is a store of wealth and an insurance substitute during times of crisis. India’s economy has not only grown but transformed. In the agriculture‐based economy, the agriculture sector’s share in total gross domestic product (GDP) declined. In 1980, the share of agriculture sector in total GDP was at 34 percent. It came down to only 16 percent in 2007‐08 (GOI, 2008). Between 1991 and 2008, the country’s total population increased by 1.6 percent annually, but the urban population grew at a faster rate of 2.4 percent. Real per capita income also rose by 4.8 percent annually. Throughout India’s economic transformation, the livestock sector consistently contributed to about five percent of total economic output (Figure-1). Between 1981 and 2006, the livestock sector grew at the rate of 3.9 percent annually much faster than crop sector growth of 2.8 percent. Both contributed to a growth rate of about three percent annually for agricultural value added during the same period (national accounts statistics). In 2007‐08, the livestock sector contributed to 26.5 percent of agriculture GDP increasing from 14 percent in 1980‐81 (GOI, 2008). During 2009-10 the contribution of livestock sector in agricultural GDP was 29.64% (GoI, 2010). There has been uneven growth in the livestock sector in India, leading to an unequal distribution of benefits and the need to differentiate approaches to further development. For example Operation Flood-revolutionized smallholder dairy development in the country, and overtime laid the ground for private sector participation in the dairy industry. However, most of the investments, and consequently the impacts, occurred in only few states.

In XIth Five Year Plan (2007-12), Govt. of India emphasized that large quantities of animal products now being produced, research on process technologies, value addition, packaging, storage, transportation, and marketing should receive high priority. Indian markets for livestock products are by and large unorganized, traditional and fragmented, except for components of organized milk, meat and by‐products sectors. About 60 percent of the milk produced is marketed with only one-fourth of the marketed milk handled by the organized sector. The rest is sold through unorganized informal chains where the compliance with safety standards is usually limited, and risks of contamination may be higher. As livestock products are highly perishable and require immediate processing, storage and preservation, to move them from production areas to demand centers. Processing and market linkages are therefore prerequisites for value creation and addition. Dairy development has followed a well-established organizational model producing a product for which local demand continues to grow. Successful adoption of the Anand model and the support from the National Dairy Development Board (NDDB), in training and capacity building have led to increased milk production and procurement. It has also contributed to increase outreach to the poorest sections of the population. In general dairy cooperatives have developed an integrated supply chain for liquid milk and other dairy products, provided support services, and increased income for their members. However the success was not widespread. Milk marketing through liberalizing, provide the opportunities for increased private sector participation in milk procurement and processing. This has led to improved competition which helped coops to accept challenges and address some problems that had previously contributed to their inefficiency.

The private sector has not however shown the same interest in the lagging states (with the exception of few individual initiatives) for various reasons, including poor infrastructure, weak producers’ organizations, law and order issues, and other governance concerns. Contract farming has become the dominant mode of production in the broiler industry, while independent enterprises remain dominant in the layer industry. There has been significant scaling up of production units in both broiler and layer industries, including contract production units. However, the higher degree of specialization and the increased economies of scale and size in poultry production, in addition to the concentration of both the dairy and poultry industries in few states have seriously limited the opportunities for creating wider geographical impact through participation of a larger number of smallholders, especially from the lagging states in the newly developed value chains. Regional inequality in development can stifle the overall development potential of the sector. The dairy value chains can be popularizes though the SHG approaches. Improving supply chains and operations will enable stakeholders in India to enhance competitiveness and successfully deploy growth initiatives. The need is especially acute for small and resource-poor farmers as well as entrepreneurs because of their small operational bases and greater vulnerability to unforeseen shocks. Since this dairying activity is profitable and the demand for milk and milk products is growing rapidly, there is enough scope to upscale milk production activities. The up-scaling would substantially help to enhance the household income of the milk-producing households. Further, the constraints which have been preventing the expansion and intensification of dairying in spite of its profitability need to be identified and ameliorated.

Meat processing in India is confined to slaughter and dressing of carcasses for fresh meat output, used for direct consumption, and slaughter and dressing are often carried out in the open air under highly unhygienic conditions. There are many slaughter houses throughout the country, owned by the local self-governments, most of them dirty and dilapidated, just for rendering fresh meat. Value addition in meat is limited and includes small quantities of meat meant for export, poultry products and to a much lesser extent, pork products. Export is still a minor activity but has good potential. Export can be an alternative route to increase off‐take rates to improve productivity and solve feed problems, but achievement of that will require investment to improve quality of output. The hides and skin industry benefited from low wage and lax environmental regulations and enforcement in the country. There are opportunities for expansion in this industry subject to addressing the environmental impacts. There is a perceived increase in the demand for quality, safety, variety and convenience along with increases in quantity demanded. But overall, quality and safety standards in all value chains – dairy, poultry, ruminant meat, hides and skins‐ are in need of improvement, though these issues have been receiving more attention in leading states and within private sector operations. The marketing of livestock products through unorganized channels tends to increase the products’ safety risks and reduces its quality. Quality and safety standards in domestic and export value chains are managed through a number regulations and implementing authorities with little coordination amongst themselves.

Keywords: value chains, livestock, Eastern India

JEL Classification: O18, Q13, Q18

Suggested Citation

Singh, Krishna M. and Meena, M. and Singh, R., Livestock Value Chains: Prospects, Challenges and Policy Implications for Eastern India (March 13, 2012). Available at SSRN: or

Krishna M. Singh (Contact Author)

Dr. Rajendra Prasad Central Agricultural University ( email )

Pusa-Samastipur, Bihar, Bihar 848125
+91-9431060157 (Phone)
+91-6274-240251 (Fax)


M. Meena

Indian Council of Agricultural Research (ICAR) ( email )

Krishi Bhavan
Dr. Rajendra Prasad Road

R. Singh

Dr Rajendra Prasad Central Agricultural University ( email )

Samastipur, Pusa
Bihar, Bihar 848125

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