Background India is the largest milk producer globally, with the largest proportion of cattle milk production coming from smallholder farms with an average herd size of less than two milking cows. These cows are mainly undefined multi-generation crosses between exotic dairy breeds and indigenous Indian cattle, with no performance or pedigree recording. Therefore, implementing genetic improvement based on genetic evaluation has not yet been possible. We present the first results from a large smallholder performance recording program in India, using single nucleotide polymorphism (SNP) genotypes to estimate genetic parameters for monthly test-day (TD) milk records and to obtain and validate genomic estimated breeding values (GEBV). Results The average TD milk yield under the high, medium, and low production environments were 9.64, 6.88, and 4.61 kg, respectively. In the high production environment, the usual profile of a lactation curve was evident, whereas it was less evident in low and medium production environments. There was a clear trend of an increasing milk yield with an increasing Holstein Friesian (HF) proportion in the high production environment, but no increase above intermediate grades in the medium and low production environments. Trends for Jersey were small but yield estimates had a higher standard error than HF. Heritability estimates for TD yield across the lactation ranged from 0.193 to 0.250, with an average of 0.230. The additive genetic correlations between TD yield at different times in lactation were high, ranging from 0.846 to 0.998. The accuracy of phenotypic validation of GEBV from the method that is believed to be the least biased was 0.420, which was very similar to the accuracy obtained from the average prediction error variance of the GEBV. Conclusions The results indicate strong potential for genomic selection to improve milk production of smallholder crossbred cows in India. The performance of cows with different breed compositions can be determined in different Indian environments, which makes it possible to provide better advice to smallholder farmers on optimum breed composition for their environment.