You can hardly blame all kerfuffs in the Scotch whisky industry around the India-UK Free Trade Agreement (FTA), especially import tariffs have been reduced from 150% to 75%, further down to 40% over the next decade.
One article talks about the idea of a free trade agreement “since Boris Johnson’s Premier League”. Well, indeed, there was some excitement (but premature) chats in the deal at the time – largely to distract from the chaos of Brexit – but I think I wrote first about the prospect of cutting tariffs in India at least 20 years ago. So it took a while.
Mark Kent, CEO of Scotch Whisky Association (SWA), labeled the deal as “transformative”, repeating the group’s forecast that it is possible to increase Scotch whisky exports to India by 1 billion pounds ($1.34 billion) over the next five years, creating 1,200 jobs in the UK.
Kent also suggested that the move would give “the choice of SME Scotch whisky producers “are much bigger than the ones that SME Scotch whisky producers will now have the opportunity to enter the market”.
I haven't seen how SWA works, nor have any reason to doubt the sincerity of these numbers, but the projections that meet that value require a five-fold increase in the goods, with the total recorded in 2024 being less than £250 million (HMRC data). This is optimistic about a trade organization that is often considered conservative and cautious.
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As for SME Scotch whisky producers, I’m sure many of them want to enter India and I’m equally sure they have no fantasies about the challenges they face. India is a huge and incredibly complex market that operates here, and that is not changed because the tariffs have been cut in half.
Even Indian brand owners complain about tax levels and what they call “bureaucratic barriers” can sometimes make it easier for international brands to build themselves rather than in neighboring countries. Many people are trying to push up retail prices to offset the cost of rising costs.
India may be chaotic. Just look at Delhi: In November 2021, New York City privatized its previously state-owned liquor retail network to eliminate corruption and open investments within the city’s shaky stores. Within a few months, the shiny new system broke, if there was any deterioration, corruption would happen, and the price fell to its lowest point, leaving the store closed.
Cutting tariffs is also good news for Indian companies
By July 2022, New York City had restored the old model, but the reverb continued: Pernod Ricard was still locked in the market, denied the license because it alleged that it broke the rules of relationship with retailers in a brief privatization experiment (accusation the company strongly denied).
Regardless of the rights and errors in the case, it illustrates the complications of operating in a highly regulated and heavily politicized beverage market. In addition to GST (GST), alcohol is the state's largest revenue provider. Each state has its own political agenda and its own regulations, which means that companies will have to register their products in each product. If the United States is said to have 50 markets, not one market, then India has 28 markets.
Then there is the competitive landscape. It is also good news for Indian companies that have imported a large number of bulk scotch for their huge IMFL brand. Radico Khaitan, the largest importer, believes it will ship for Rs 250 crore ($29 million in scotch) in fiscal 2025-26 alone.
Indian brewers will also receive tariff dividends, with their increasingly high-quality brands – people like Rampur, Royal Ranthambore and Paul John – attracting the attention of local customers, which is just to be proud of drinking their own whiskey (Prime Minister made by Indian Prime Minister Modi'Mantra').
Nor should we expect this FTA to be the last time India has approved in the near future. Expectations to deal with the United States and the European Union, thus increasing the prospects for U.S. and Irish whiskey tariffs. Sazerac's relationship with John Distilleries (the U.S. company acquired a stake in the company in 2017) is not only to find an export market for Paul John Single Malt.
British Chancellor Rachel Reeves' bottle of whiskey whiskey whiskey is honoring the UK-India trade deal when visiting Glenkinchie whiskey distillery in Scotland on 7 May 2025. Credits: Andrew Milligan / WPA Pool / Getty Images
In other words, while still highly positive for Scotch, it is more complicated than what happened first. This is before we do the acid test: What will happen to the specific impact of Indian Scotch Scotch whiskey? How will this affect sales?
It was interesting to hear Diageo CFO Nik Jhangiani's view on this during the company's third-quarter analyst call this week, when he said: “If you drop to 75% at 150%, it will initially reduce this reduction, which may lead to lower prices for consumers, and we believe this should reduce the percentage of the height increase of similar units, which will drive Wall00's high growth.”
Great but hardly “transformative” and there are some devils in the details. All single malts must be bottled in Scotland, but some of the mixtures of Diageo are BII (bottled in India) and other creatures (bottled origin). The latter will get the full benefit of lowering tariffs, while the former will only get this on the liquid itself, with bottle and packaging costs not affected.
Most interestingly, Jhangiani said: “We do intend to pass it on to consumers to price comprehensively.” Given that companies often invest some profits to lower prices in high-potential markets like India, the obvious temptation (especially sometimes) will be to use tariff benefits to lower prices, but at the same time it can also raise the bottom line.
Will others follow Diageo's leadership? Given the challenging trends in other markets, maybe some people may be inclined to cut prices to chase volumes and trigger a price war? This would be very counterproductive to the long-term efforts of the Scots to build their ideal image among the world’s most ardent crowds, but we cannot rule out the world, especially according to local reports, the deal does not include any MIP (minimum import price) arrangements that could prevent this.
There is no doubt that the UK-India's FTA is a landmark deal that can and should provide much-needed boost to Scotch whisky exports in the short and long term. But the problem remains, especially with regard to non-TV barriers on both sides of the equation.
Is India politically willing to alleviate some national-level and regulatory barriers, not only Scotch but other imported (and domestic) spirits? For Indian whiskey, will key export destinations relax certain rules of their own, especially during the minimum maturity period? There is an argument that whiskey aged for two years in India's heat looks more “ripe” than whiskey that has spent three years in a cold warehouse in Scotland.
There is a lot to celebrate in this FTA, but I doubt we only have a longer and more involved conversation about India and whiskey that will begin in the next few years. Those SWAs predicted an additional £1 billion? They still look ambitious to me – but the truth is, at this stage, no one really knows the scale of the Indian Scots Awards.
“The Scotch whisky industry cheered the British Indian FTA, and the problem remains created and published by Just Frains, a brand owned by GlobalData.
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