Indian dairy sector has shown tremendous growth in terms of milk production, from 17 million tonnes (1950-51) to 112 million tonnes (2009-10). This transition from deficiency to sufficiency has been achieved by a series of policy interventions by the government. It has been found that in the first phase of ‘Operation Flood’, growth rate of value-added products was 0.93 per cent per annum, but in the third phase, it became 9.10 per cent per annum. Milk processing in India is around 35 per cent, of which the organized dairy industry accounts for only 13 per cent of the milk produced, the remaining 22 per cent is processed in the unorganized sector. To explore the diversity and market exploration for enhancing the value in milk, the study has identified the untapped demand of different dairy and dairy products in ethnically diversified rural urban groups. The paper has highlighted certain dairy development policies to encourage growth of the dairy sector. While value addition in milk is unavoidable if one has to enhance sector profitability, the same does not seem feasible unless the organized sector improves its penetration. Because, it is the involvement of the organized sector that will drive the growth by resorting to value addition in basic product and harnessing the consumer market. The mechanics of the organized sector penetration could be agency-specific as also area-specific.