You can hardly blame the Scotch whisky industry for all the kerfuffle surrounding the announcement of the India-UK free trade agreement (FTA), and specifically the halving of import tariffs from 150% to 75%, with a further cut to 40% within the next decade.
One article talked of the FTA idea having been floated around “since the premiership of Boris Johnson”. Well, it’s true that there was some excited (but premature) chatter of a deal at the time – largely, I’d argue, to distract attention from the shambles of Brexit – but I reckon I first wrote about the prospects of tariff cuts for Scotch in India at least 20 years ago. So it’s taken a while.
Scotch Whisky Association (SWA) chief executive Mark Kent labelled the deal “transformational”, repeating the organisation’s projections that it has the potential to increase Scotch whisky exports to India by £1bn ($1.34bn) over the next five years, creating 1,200 jobs in the UK.
Kent also suggested the move would give “discerning consumers in a highly educated whisky market far greater choice from SME Scotch whisky producers, who will now have the opportunity to enter the market”.
I haven’t seen the SWA’s workings and I’ve no reason to doubt the good faith of those figures but meeting that value forecast entails increasing shipments fivefold versus the total of just under £250m recorded in 2024 (HMRC data). For a trade organisation often characterised as conservative and cautious, that’s pretty bullish.
As for SME Scotch whisky producers, I’m sure that many of them will want to enter India and I’m equally sure that they’re under no illusion about the challenges they face. India is a huge and incredibly complex market in which to operate – and that doesn’t change just because the tariffs have been halved.
Even Indian brand owners complain about tax levels and the “bureaucratic hurdles” that they say sometimes make it easier for an international brand to establish itself than one made in a neighbouring state. Many have tried – and failed – to push up retail sales prices to counteract rising costs.
India can be chaotic. Just look at Delhi: in November 2021, the city privatised its previously state-owned liquor retail network, aiming to eliminate corruption and open up investment in the ramshackle network of stores in the city. Within months, the shiny new system was in pieces, corruption had if anything worsened and a race to the bottom on pricing was driving stores out of business.
The tariff cut is also good news for Indian companies
By July 2022, the city had reverted to the old model but the reverberations continue: Pernod Ricard is still locked out of the market, refused a licence because of allegations that it broke the rules governing relationships with retailers during the brief privatisation experiment (allegations which the company strongly denies).
Whatever the rights and wrongs of that case, it illustrates the complications of operating in a drinks market that is highly regulated and heavily politicised. Outside GST (Goods & Service Tax), alcohol is the biggest revenue provider to the state. Each individual state has its own political agenda and its own regulations, meaning companies will have to register their products in each one. If the US is said to be 50 markets, rather than one, India is 28.
Then there is the competitive landscape. The tariff cut is also good news for Indian companies, which import vast amounts of bulk Scotch for their huge IMFL brands. The largest such importer, Radico Khaitan, reckons it will ship in Rs2.5bn (US$29m) of Scotch in the 2025-26 fiscal year alone.
India’s distillers will reap the tariff dividend, too and their increasingly high-quality premium-and-above brands – the likes of Rampur, Royal Ranthambore and Paul John – are capturing the attention of a local clientele only too happy to take pride in drinking their own whiskies (something encouraged by Prime Minister Narendra Modi’s ‘made in India’ mantra).
We also shouldn’t expect this FTA to be the last that India ratifies in the near future. Deals with the US and the EU are expected, raising the prospect of tariff reductions for American and Irish whiskey. Sazerac’s relationship with John Distilleries (the US company acquired a stake in the business in 2017) is not just about finding export markets for Paul John single malt.
UK Chancellor of the Exchequer Rachel Reeves bottles whisky during a visit to the Glenkinchie Whisky Distillery on 7 May 2025 in Tranent, Scotland, to mark the UK-India trade deal. Credit: Andrew Milligan / WPA Pool/Getty Images
In other words, the situation – while still highly positive for Scotch – is more complicated than it might first appear. And that’s before we get to the acid test: what will be the concrete effect on pricing for Scotch in India and how will that impact sales?
It was intriguing to hear Diageo CFO Nik Jhangiani’s take on this during the company’s Q3 analyst call this week, when he said: “If you look at that reduction for about 150% down to the 75% initially, that will enable probably a high single-digit decrease in consumer price and we believe that should drive a similar high single-digit percentage increase in volumes.”
Great but hardly “transformational” and there’s a bit of devilry lurking in the detail, too. All single malts must be bottled in Scotland but some of Diageo’s blends are BII (bottled in India) and others BIO (bottled in origin). The latter will reap the full benefits of the tariff reduction, whereas the former will get this only on the liquid itself, with bottling and packaging costs unaffected.
Most interestingly, Jhangiani said that “we do intend to pass that through to consumer pricing fully”. Given that companies commonly invest a bit of margin to keep prices down in a high-potential market like India, the clear temptation (especially at times like these) would be to use the tariff benefit to cut prices but also to beef up the bottom line at the same time.
Will others follow Diageo’s lead? Given challenging trends in other markets, might some be tempted to slash prices to chase volume, triggering a price war? That would be hugely counter-productive to Scotch’s long-term efforts to build its aspirational image among the world’s most whisky-crazy population but we can’t rule it out – particularly as, according to local reports, the deal does not include any MIP (minimum import price) arrangements that would prevent this.
There’s no doubt the UK-India FTA is a landmark deal that could and should give a much-needed boost to Scotch whisky exports both in the short and long term. But questions remain, especially with regard to non-tariff barriers on both sides of the equation.
Is there the political will for India to ease some of the state-level and regulatory barriers not just for Scotch but for other imported (and domestic) spirits? For Indian whisky, will key export destinations countenance relaxing some of their own rules, particularly around minimum maturation periods? There’s an argument to say that a whisky aged for two years in the heat of India can appear more ‘mature’ than one that has spent three years in a chilly warehouse in Scotland.
There’s much to celebrate in this FTA but I suspect that we are only at the beginning of a much longer and more involved conversation about India and whisky that will be played out in the years ahead. And those SWA projections of an extra £1bn? They still look pretty ambitious to me – but the truth is that, at this stage, nobody really knows the size of the prize for Scotch in India.
“As Scotch whisky industry cheers UK-India FTA, questions remain” was originally created and published by Just Drinks, a GlobalData owned brand.
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