Some big news for whisky this week.
Slashed tariffs, a billion-pound boost, and a foot firmly in the world’s biggest whisky market. Are things finally looking up?
India and UK reach landmark deal
In news revealed this afternoon, the UK has signed a free trade agreement with India that has wide-reaching consequences for a range of products from cars and cosmetics to gin and Scotch whisky.
Here’s the headlines:
- Tariffs on whisky exports are set to be halved from a punishing 150% to 75%.
- They are then going to be reduced to 40% over the next decade
Still high, but a far cry from the tariff wall that’s kept British spirits at arm’s length for decades. It means the world’s biggest whisky market and Scotch whisky’s biggest market by volume is about to become more accessible for UK producers.
Of course, while Scotch takes the headlines, Welsh and English whisky producers will surely be celebrating the impact as well.
SWA chief executive Mark Kent
The numbers broken down
The Scotch Whisky Association says this deal could increase Scotch whisky exports to India by £1 billion over the next five years and that it will support up to 1,200 jobs across the UK.
The removal of trade friction means better margins, stronger competitiveness, and more visibility in one of the most complex but potentially lucrative spirits markets on Earth.
With a 150% tariff wall coming down, producers in the UK have spoken of getting a competitive edge over rivals in the US, Europe, and beyond, particularly as India is forecast to become the world’s third-largest economy within three years.
“The UK-India free trade agreement is a once-in-a-generation deal and a landmark moment for Scotch Whisky exports to the world’s largest whisky market. It shows that the UK government is making significant progress towards achieving its growth mission, and the Scotch Whisky industry looks forward to working with the UK and Indian governments in the months ahead to implement the deal, which would be a big boost to two major global economies during turbulent times,” says Mark Kent, chief executive of the Scotch Whisky Association.
“The reduction of the current 150% tariff on Scotch Whisky will be transformational for the industry, and has the potential to increase Scotch Whisky exports to India by £1bn over the next 5 years, creating 1,200 jobs across the UK. It will also give discerning consumers in India far greater choice of brands, as more SME Scotch Whisky producers have the opportunity to enter the market.”
This is very good news for Scotch whisky producers and beyond
The implications
Despite the tariffs, India has become the largest Scotch whisky market by volume, overtaking France. Much of the growth came through bulk imports for blending, but the appetite for branded single malts is climbing rapidly. Single malt fans in Mumbai and Delhi now face fewer barriers to accessing bottles they’d previously only see on airport shelves. Yet the biggest beneficiary is still likely to be mass market blends.
It’s not quite an economic knockout on further examination, more a step in a more positive direction. The 150% tariff is being halved, but 75% is still steep by global standards, and the full reduction to 40% will take ten years. Many of India’s barriers to trade aren’t just about tax, too. Bureaucratic customs processes, inconsistent enforcement of regulations, strict labelling requirements, and opaque legal procedures… these all still pose serious challenges to exporters.
The deal includes smoother access for Indian firms to place workers in the UK on temporary visas, which has also proved controversial. While the government insists this won’t increase immigration figures or lead to permanent stays, critics worry it may still undercut British workers, particularly in tech and consulting. Others argue it’s a backdoor immigration deal that wasn’t debated transparently.
We also have to be mindful of the environmental impact here, too; more trade between two countries this distance apart is going to mean increased emissions.
The Diageo of it all
It’s also key to note Diageo’s impact in all of this. With roughly 40% of global Scotch production, it’s a heavyweight that already has reach into India’s middle class. In 2015, it took control of United Spirits, India’s largest domestic distiller and previously part of Vijay Mallya’s crumbling empire, which made Diageo both the biggest foreign exporter and the biggest domestic player in India.
It also softened local resistance to cutting tariffs. After all, when the same company stands to benefit on both sides of the border, objections start to lose steam.
A level playing field for all sizes?
It’s good news for the industry giants, but it can make a difference to smaller distillers too.
Lower tariffs and faster customs clearance should make it easier for smaller and independent distilleries to enter India, many for the first time. Those distilleries now face fewer administrative hoops, clearer procedures in English, and stronger digital infrastructure to help ease entry into the market.
That means greater choice for India’s whisky drinkers and a new revenue stream for British producers.
India deal: biggest since Brexit?
It’s being touted as the most economically significant trade deal the UK has signed since leaving the EU. With projected gains of £4.8 billion to UK GDP and £2.2 billion to wages annually in the long term, the benefits stretch far beyond whisky.
Information provided by the UK government reveals India is home to the world’s largest whisky-drinking population. It also reports that there are 1.9 million people of Indian heritage living in the UK, demonstrating how deep the cultural ties run. The growing Indian middle class is increasingly looking beyond mass-market blends, seeking premium experiences, and Scotch fits the bill.
It’s certainly big news, and it will provide some relief. We’ll take what we can get right now.
