UK strikes trade deal with India before Trump deal

United Kingdom | The UK Prime Minister beat US President Trump to the line in the race for a trade deal with India. It is not exactly the deepest and most comprehensive trade deal the UK has ever signed, but the timing (6 May) could not be more fortunate. Scotch whisky distillers were elated.

The agreement, which has been in the making for three years, will reduce tariffs on 90 percent of British goods currently attracting import taxes in India. Most importantly, the levies on British whisky and gin will be halved, from 150 percent to 75 percent, once the deal comes into force next year. By the 10th year of the deal, the tariff will be reduced to 40 percent.

Tariffs on cars will be cut from 100 percent to 10 percent in a quota system. The deal will also open important markets such as aerospace, salmon, lamb, medical devices, electrical machinery, soft drinks, chocolate and biscuits.

Whisky exports could shift from US to India

The Scotch Whisky Association (SWA) called it a “once-in-a-generation deal and a landmark moment”. It has the potential to increase Scotch whisky exports to India by GBP 1 billion (USD 1.33 billion) over the next five years and create 1200 jobs across the UK.

Figures from the SWA in February showed that the value of exports to India in 2024 totalled just under GBP 250 million (USD 332 million). Exports to the US, however, were valued at GBP 971 million (USD 1.2 billion). Total Scotch whisky exports stood at GBP 5.4 billion.

Drinks company Diageo, the maker of Johnnie Walker, was delighted. Its CEO Debra Crew called it a “huge achievement” that “will be transformational for Scotch and Scotland”.

Indian media said that the cut in tariff is expected to bring premium and mid-range Scotch whiskies closer to the average Indian consumer, slashing retail prices significantly. A bottle that currently retails for INR 5,000 (USD 59) could cost around INR 3500 to INR 4000 (USD 47) after the first reduction, and even less over the next few years, depending on local taxes and distributor margins.

But the deal will not significantly impact the domestic market, as the reductions will be implemented gradually over a ten-year period. Even then, Scotch whisky will still carry a 40 percent tariff.

Nearly one in two bottles of global whisky sold in India

India is the world’s biggest whisky market by volume. It is dominated by country-made liquor (88 percent) and India-made foreign liquor (9.5 percent). Scotch whisky constitutes only 2.5 percent of the total whisky market.

Last year, the trade between the UK and India totalled GBP 42 billion. The UK government has said this deal would boost that trade by an additional GBP 25.5 billion a year by 2040. This is a fraction of the near GBP 315 billion trade between the UK and the US, but it is seen as a good starting point rather than the finished product.

It is said that, over time, the India deal will boost the UK economy by GBP 4.8 billion. This is a tiny proportion of the UK economy which was worth GBP 2,851 billion last year. However, India is also forecast to become the world's third-largest economy in a few years. It is also home to 1.45 billion people - about 20 times the population of the UK, which is a lot of potential customers.