The historic Free Trade Agreement (FTA) between India and the United Kingdom, signed on Thursday, has placed Scotch whisky at the heart of a broader tariff-reduction strategy aimed at deepening trade ties. The deal is poised to halve import duties on UK-produced whisky and gin from the current 150% to 75% in the first phase, with a further phased reduction to 40% over the next decade.
The landmark agreement arrives at a time when India’s alcoholic beverage market is emerging as one of the fastest-growing globally. Estimated at $52.4 billion, the sector is projected to expand at a compound annual growth rate (CAGR) of 7.7% between 2025 and 2032, driven by rising disposable incomes, evolving consumer tastes, and the increasing appeal of premium labels. India is already the world’s third-largest alcoholic beverage market and ranks second globally in spirits consumption.
Scotch Duty Slash
Scotch, however, currently occupies only a sliver, 2.5%, of the Indian whisky market, which is dominated by country liquor and India-made foreign liquor (IMFL). But this modest share belies its aspirational pull. According to the Scotch Whisky Association (SWA), India overtook France in 2024 to become the largest export destination for Scotch whisky by volume, with 192 million bottles shipped, up from 167 million the previous year.
While the FTA is expected to improve access to premium UK spirits for Indian consumers, its rollout will be staggered. A senior government official confirmed that the customs duty concessions will be implemented over a 10-year window to allow domestic producers time to recalibrate.
Industry players are already gearing up for the implications. Pernod Ricard India, which markets leading brands such as Chivas Regal and The Glenlivet, said the duty reduction will translate into lower retail prices across most states. “The FTA is expected to improve access to premium Scotch whiskies by making them more competitively priced,” a company spokesperson said, adding that Indian Made Foreign Liquor will remain at significantly lower price points.
An estimated 20–22% reduction in consumer prices is likely once the revised tariffs take effect, although the actual impact will vary based on state taxes and retail markups. Customs duties currently account for about a fifth of the final shelf price of imported whisky, with state-level levies and compliance costs comprising the rest.
Analysts remain cautiously optimistic. “There’s a potential for a 30% drop in on-shelf prices for bottled-in-origin Scotch, but realistically, a 10% saving is more likely, at least in the short term,” said Jason Holway, Senior Research Consultant at IWSR, a global alcoholic beverages market intelligence firm, told ET. He added that while the FTA lowers import tariffs, it does not address the bureaucratic hurdles associated with the Indian alcohol trade, including annual label registration and state-wise licensing.
Premium Spirits Boom
The agreement may, however, benefit Indian distillers who use imported Scotch as a base for their premium blends. For these players, a reduction in the cost of bulk Scotch could enhance margins and make premium offerings more accessible to a larger customer base. United Spirits, the country’s largest spirits company and part of Diageo’s global network, could emerge as a major gainer. Roughly 32% of its sales already come from premium and luxury segments, including imported Scotches bottled at origin.
Yet, the new competitive dynamics may not be uniformly favourable. Domestic producers operating in the premium and super-premium categories may find themselves squeezed as imported brands become more affordable. Several companies fear a potential erosion of market share as Scotch-based offerings challenge homegrown labels.
India’s status as a priority market for global spirits firms is further reinforced by demographics. Over the next five years, nearly 100 million Indians are expected to reach the legal drinking age, creating a vast new pool of potential consumers. Both Diageo and Pernod Ricard already count India among their top three global markets by volume.
The India-UK pact follows a series of similar tariff recalibrations in recent years. In February, New Delhi reduced import duty on American bourbon from 150% to 50%, ahead of high-level talks with the United States. An earlier interim agreement with Australia saw duties on wines priced above $5 reduced from 150% to 100%, with a pathway to 50% over 10 years.
As India continues to liberalise access to its fast-expanding spirits market, trade partners are raising a toast, not just to exports, but to a rising generation of Indian consumers with a taste for the top shelf.
(With inputs from agencies)