The recently signed India-UK Free Trade Agreement (FTA) has generated considerable buzz, particularly regarding its potential impact on Scotch whisky prices in India. While the deal has been finalized, significant price reductions for consumers are unlikely to materialize immediately and a substantial drop is not expected until 2035.
The agreement stipulates that India will reduce its import tariffs on Scotch whisky from 150% to 75% upon ratification, with a further reduction to 40% over the next decade. This phased reduction is intended to provide a more competitive environment for UK whisky producers in the Indian market, which is the world's largest whisky market by volume.
However, several factors will prevent an immediate and drastic decrease in retail prices. Firstly, the agreement still requires ratification by the UK Parliament, which is expected to occur by the middle of next year. Until then, the existing tariffs remain in place. Secondly, even after the initial tariff cut to 75%, the impact on consumer prices will be limited. Industry experts estimate that the actual reduction in consumer prices will likely be in the range of 8-10%. This is because customs duty accounts for only 15-20% of the total shelf price, with the remaining portion comprising state government taxes and distribution margins.
For example, in the premium segment, brands like Johnnie Walker Black Label and Chivas Regal could see a price decrease of ₹200-₹300 per bottle. For more standard brands like Black Dog and 100 Pipers, the drop may be closer to ₹100-₹150.
Despite the modest initial impact, the long-term implications of the FTA are significant. The gradual reduction in tariffs to 40% over the next decade will steadily increase the competitiveness of Scotch whisky in the Indian market. This could lead to greater market access for UK producers, increased investment in distilleries and bottling plants, and the creation of jobs in both Scotland and India. Jean-Etienne Gourgues, CEO at Chivas Brothers, hailed the agreement as a "significant step forward" for the Scotch whisky industry, predicting substantial growth in both countries.
The FTA is expected to benefit both international and Indian spirits makers. Indian companies that source Scottish spirits for blending into their local brands will also experience reduced costs. However, some domestic players have expressed concerns about potential dumping of Scotch whisky at low prices, which could harm the growth of premium and luxury Indian brands.
The agreement also eliminates tariffs on Indian exports of beverages, spirits, and vinegar. The India-UK FTA is projected to boost bilateral trade by $34 billion annually. Besides Scotch whisky, the deal encompasses a wide range of products and sectors, including electric vehicles, textiles, cosmetics, chocolates, engineering goods, pharmaceuticals, and processed foods.
