Raising a Glass: How the New UK-India Trade Deal is Shaking Up Scotch Whisky Exports

For the first time in decades, Scotch whisky producers are eyeing India as a major opportunity as new trade agreements cut tariffs significantly. Previously locked behind a 150% tariff, Scotch exports to India were heavily restricted, but recent trade negotiations have halved these tariffs, with plans to reduce it to 40% over the next ten years. This trade deal reflects India’s evolving economic landscape, moving from a strategy of self-reliance towards greater global competition. The growing middle class in India, now numbering in the hundreds of millions, has increased consumer demand for luxury goods like Scotch, typically seen as a symbol of sophistication and affluence.

The backdrop of this trade shift is Diageo, which produces about 40% of Scotch whisky. By acquiring major local producers, it has solidified its position as both a leading exporter and a domestic distiller. With the reduction of tariffs, Diageo stands to gain significantly from selling more premium brands in India. However, the Indian government remains cautious, focusing on non-tariff barriers that could impede Scotch sales, such as labeling challenges and customs delays.

The UK-India trade deal, which includes provisions for labour mobility, will also encourage Indian IT and engineering firms to deploy employees in the UK, though the government maintains that this will not lead to increased immigration. Additionally, the deal aims to enhance food and clothing import flows, anticipating reduced costs for consumers.

The UK government projects that the deal could contribute £6 billion in additional investment and stimulate the creation of over 2200 jobs in the UK within 15 years. For Scotland, the Scotch industry anticipates a £190 million boost, with the overall economic impact of the deal expected to raise UK exports by more than £15 billion.

Despite the optimism surrounding the India deal, concerns linger about potential barriers in the US market, particularly with looming tariffs that could add further costs to Scotch exports. As industry leaders push for protections, the future of Scotch whisky in both these markets hangs in the balance, but one thing is clear: the industry is keen to capitalize on newfound opportunities as trade barriers fall.