India-UK FTA: Lower Import Duties On Scotch Whisky To Have Minimal Impact On Domestic Market, Says Report
The phased reduction of import duties on Scotch whisky under the India-UK free trade agreement is expected to have minimal impact on India's domestic liquor industry, according to a senior government official.
The agreement outlines a gradual decrease in customs duty on Scotch whisky and gin, from the current 150 per cent to 75 per cent initially, followed by a further reduction to 40 per cent by the tenth year of implementation, reported PTI.
Despite this tariff relaxation, officials say there will be no immediate or drastic change in market dynamics. "The incremental increase in imports of Scotch whisky, therefore, would not significantly affect the domestic market. The tariff reduction on imports is over a longer period of time (10 years) and even after that it will attract significant customs duty (40 per cent)," the official noted.
With duties still remaining high by international standards, the competitive pressure on domestic brands is expected to remain low over the medium term.
India Remains Key Market for Scotch, But Domestic Industry Still Dominates
India reclaimed its position as the largest export market for Scotch whisky by volume in 2024, overtaking France, according to data from the Scotch Whisky Association (SWA).
India's exports rose to 192 million bottles in 2024, up from 167 million bottles in 2023. The growth highlights India’s importance in the global alcoholic beverages market, which is currently valued at $52.4 billion and projected to expand at a compound annual growth rate of 7.7 per cent between 2025 and 2032.
However, Scotch whisky still occupies only a small share in the Indian whisky landscape—just 2.5 per cent—compared to the overwhelming dominance of country-made liquor (88 per cent) and India-made foreign liquor (9.5 per cent). This suggests that even with duty cuts, Scotch is unlikely to disrupt local consumption patterns in a major way.
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Opportunities for Investment and Concerns for the Future
The official also acknowledged that high import duties have historically discouraged foreign direct investment (FDI) in India's liquor sector. Easing these tariffs, they said, could pave the way for greater UK participation in the Indian market. “Liberalisation of duties would invite UK's expertise in terms of spirit/wine making, quality control, marketing and consumer awareness,” the news agency reported citing the official.
They added that this could also bolster FDI in the India-made foreign liquor (IMFL) segment, as Indian producers gain access to advanced technologies and better quality inputs.
Additionally, lowering the basic customs duty is projected to improve tax compliance, raise revenue collections, eliminate grey market activity, reduce counterfeiting, and boost the quality of exports.
However, concerns have been raised by industry stakeholders about extending such concessions in future trade negotiations. “We fear that if the same template of duty reduction is followed for the trade deals with the EU, the US and other nations which produce spirits and wines, then the Indian Alcobev industry, including the wine sector, could get adversely impacted,” said Anant S Iyer, Director General of the Confederation of Indian Alcoholic Beverage Companies (CIABC). He also urged the central government to advise states such as Maharashtra, Kerala, Odisha, Rajasthan, and Madhya Pradesh—which currently offer excise duty concessions to imported liquor—to re-evaluate these policies in light of the new FTA.
India aims to achieve $1 billion in alcoholic beverage exports by 2030. However, Iyer warned that this target may be difficult to meet unless comprehensive market access is secured in key regions such as the UK, EU, and Australia. “Without ensuring proper market access, especially to the UK, EU, Australia, it will be difficult to meet this export target,” he added.
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