India-UK FTA will give a spirited boost to domestic scotch and alcobev industry

The Indian industry is looking for increased opportunities for its skilled professionals from sectors like IT and healthcare to enter the UK market and also desire market access for various goods with no customs duties. Conversely, the UK is aiming to reduce import duties substantially on products like scotch whiskey, automobiles and services into Indian markets in segments like telecommunications, legal and financial services like banking

The India-UK FTA is being watched closely especially the alcobev industry. The UK is looking to reduce scotch import duties significantly. On the other hand, India is a huge market for scotch and is one of the dynamic, fast-growing economies the bilateral trading relationship is already significant, amounting to £23.3 billion in 2019, an FTA could strengthen it further as UK exports could increase by up to £16.7 billion by 2035.

Securing an agreement, which enhances our trade relationship, will give the UK access to a market that promises both short and long-term benefits.

India sees an FTA with the UK as crucial with the hope of becoming a bigger exporter, while the UK would obtain wider access for its whisky, premium cars and legal services. For India, an FTA with the UK would be its first with a developed country after it signed an interim trade pact with Australia last year.

The Indian industry is looking for increased opportunities for its skilled professionals from sectors like IT and healthcare to enter the UK market and also desire market access for various goods with no customs duties. Conversely, the UK is aiming to reduce import duties substantially on products like scotch whiskey, automobiles and services into Indian markets in segments like telecommunications, legal and financial services like banking.

The bilateral trade between India and the UK increased to $ 20.36 billion in 2022-23 from $ 17.5 billion in 2021-22. In 2022-23, India received $ 1.74 billion in foreign direct investment from the UK as against $ one billion in 2021-22. On May 4, 2021, the prime ministers of the two nations expressed their shared aim in increasing trade by 2030 and lowering trade barriers in important areas. On January 13, 2022, discussions for a Free Trade Agreement began after an Enhanced Trade Partnership was established. Earlier, Union Minister Piyush Goyal said that the India-UK FTA will contribute in integrating value chains and help augment our mutual efforts to strengthen the resilience of supply chains. He said that the two nations were looking forward to a mutually beneficial trade deal with balanced concessions and market access packages in a wide range of sectors.

The largest export destinations for scotch whisky (defined by volume, 70cl bottles equivalent) during H1 2023 were: France: 88m bottles -12.6% (101m bottles in H1 2022) India: 72m bottles -31.4% (106m bottles in H1 2022) USA: 59m bottles -14.9% (70m bottles in H1 2022).

The United States remains scotch whisky’s biggest export market by value, while France reclaimed its longstanding position as the largest export destination by volume. India remains a high-volume export market for scotch whisky, with the equivalent of 72m bottles exported in the first half of 2023. The Scotch Whisky Association continues to press the benefits to the industry of a UK-India FTA that addresses trade barriers, including a 150% tariff, the phased removal of which would benefit industries in both the UK and India, and could see the value of Scotch exports to this vital market grow to more than £ one billion within five years.

Currently, import duties for scotch whisky – both bottled and bulk – stand at 150% above the Minimum Import Price (MIP). Sources suggest that on conclusion of the FTA that could be cut to 100% for bottled scotch and halved to 75% for cask shipments.

Should the FTA talks deliver a substantial reduction in India’s 150 per cent tariff on scotch whisky, exports of scotch will undoubtedly be boosted and consumers will have more choice as smaller producers enter the market. But lower scotch prices could mean competition for premium IMFL spirits.

Market leaders opine that India-Made Foreign Liquor (IMFL) brands would benefit because of reduced import costs and would be a further boost for jobs and investment in the manufacture of bottled-in-India scotch and premium Indian whiskies for the domestic market that could then be sold in other markets as well.

For scotch whisky distillers, India is a unique market. Only 24 per cent of exports to India are bottled in Scotland. Most scotch whisky sold in India is bottled locally, while bulk scotch whisky is an important ingredient in Indian whisky. Imported scotch whisky poses very little direct competition to Indian whisky

The total Indian spirits market amounted to 367 million cases in 2022, with Indian whisky selling 234 million cases. Scotch whisky accounted for sales of 8.1 million cases in India, which is less than three per cent of the total whisky market.