Continuous rise in food prices has been posing a serious policy challenge in India. Milk is a major contributor to the food price rise due to its high growth in demand in the domestic and international market with domestic supply not keeping pace.  Mere market price signal is inadequate for the milk production system to respond. This is due to supply constraints including increasing cost of production. This situation is expected to continue with lower growth in milk producing adult female animal population. Therefore, policy measures need to be relooked at to study and strengthen the entire production eco-system in terms of technology, access to information, credit availability, improvement in risk cover mechanisms and access to markets to enhance profitability and reduce risk, to incentivise dairy animal rearing and milk production.