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The general practice of selection of dairy animals concentrating high milk production has unwanted consequences like occurrence of health problems and fertility issues. Functional traits, including health and fertility, have significant genetic association with production and reproduction performance traits. Functionally superior dairy cows are healthy and sustained producers of healthful food for calves and human consumption. Improvement in functional traits rises the economy of dairy farmers by reducing the cost of input. These facts emphasised the inclusion of functional traits along with other economically important traits in selection criteria for the improvement of dairy animals. Hence, most of the dairy advanced countries have included genetic evaluation of functional traits as a routine practice in their dairy cattle selection programmes. In India, comparatively limited works have been carried out on functional traits and it suggested exploring more on this area for further development of the dairy sector. This review details the importance of inclusion of functional traits in genetic evaluation of dairy cattle for overall development of the dairy industry. [ABSTRACT FROM AUTHOR]