FONTERRA is investigating setting up dairy farms in India, the world's second-most populous country.

The dairy giant's ambitions are highlighted in a report by New Zealand parliament's Foreign Affairs, Defence and Trade committee that recommends a push beyond major cities in India by both the New Zealand government and private sector.

Dairying stands out as the big area of opportunity because India's protected dairy industry may struggle to supply a market that is already the largest consumer of dairy products and is forecast to double over the next 15 years.

"We were told that the Indian dairy market has multi-billion-dollar potential for New Zealand, but only if tariff and regulatory barriers are removed," the report said.

New Zealand exported $136.9 million worth of dairy products to India in the year to March 2011. India's tariffs on dairy products range between 20 and 60 per cent.

Fonterra, which is investigating the feasibility of dairy farming in India, submitted that New Zealand will need to make the running to advance its relationship with India.

"Fonterra is prepared to contribute resources for this purpose alongside the government," the report said.

Last year, Fonterra entered into a memorandum of understanding with Indian Farmers Fertiliser Cooperative and Global Dairy Health to look at a pilot farm in India. That came several months after Indian farmers protested the importation of New Zealand dairy products, resulting in an attack on a milk tanker.

During the next 10 to 15 years India's middle class is predicted to rise to about 400 million people or 40 per cent of its population, increasing the appetite for imported food and consumer products.