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Could whiskey sour India-UK trade talks?
Summary
As India and the UK discuss a range of goods in talks on a free trade deal, proposals for whisky are proving hard to swallow for both sides. Mint takes a look at the bigger picture.
As India and the UK discuss a range of goods in talks on a free trade deal, proposals for whisky are proving hard to swallow for both sides. That’s because Indians are the world’s biggest consumers of Scotch and UK the biggest producer. Mint takes a look at the bigger picture.
Is India a key market for Scotch whisky?
India is among the most lucrative markets in the world and is catching the attention of the global whisky industry. Last year, India displaced France as the world’s largest buyer of Scotch whisky by volume despite imposing an eyewatering import duty as high as 150%. The UK, which is home to the largest scotch whisky producers, based in Scotland, is vigorously pushing for a reduction in duty to have a larger piece in the fast-growing Indian whisky market under the ongoing free trade agreement (FTA) negotiations. The whisky market in India is expected to cross a market size of $22 billion by 2027.
Is UK internal politics driving whisky talks?
Some Indian industry participants in the talks say Scotland’s long-held pro-independence demand may be a factor in the tough UK stand on whisky. The context of the Brexit referendum, where 62% of Scots voted to be in the EU, is also linked, they say. Although the Scots comprise only 8% of the British population, the region is rich in North Sea oil resources and breweries. The UK government, having rejected an independence referendum, wants the FTA to be seen to benefit Scotland’s whisky industry that employs 11,000 people in mostly rural areas of Scotland. Scotch whisky is also the biggest UK drink export.
What is the current status of negotiations on whisky?
India is prepared to offer bigger tariff concessions for bulk whisky imports compared to bottled whisky to help produce jobs in Indian bottling plants. India may offer a tariff cut on bulk whisky to 75% in the first year, going down to 25% in 10 years. The UK is pushing India to cut tariffs on bottled whisky imports to 30% in 3 years, starting with 75% in the first year.
Are there any other disagreements?
While the UK is seeking a sharp reduction in India’s tariff structure, it has dragged its feet on demands to relax its three-year maturation rule that is seen as a barrier by the Indian whisky makers gunning for access for Indian whisky in the UK. As per UK law, all whisky must be matured for a minimum of three years. The Indian industry argues that maturation in India is faster due to the hotter Indian climate and that the UK should therefore relax the three-year maturation rule if it wants better access for its products in India.
What worries Indian whisky makers?
A jump in imports despite high tariffs. Indian brewers are worried the FTA could cut further into their market as Scotch whisky — mostly consumed by high-income groups — has a dominant share in India’s total whisky imports. It comprises 96% of India’s whisky imports and has a share of over 80% of India’s premium whisky market, specially products above `1,000 per bottle of 750ml. Non-Scotch products in the same price range are tiny in volume and offer little growth opportunities compared to Scotch whisky.
