India-UK trade deal: Tariff on imported whisky halved, automotive duty cut to 10 percent under quota

PM Narendra Modi made the FTA announcement after a telephonic conversation with his British counterpart Keir Starmer.

India and the UK agreed on a trade deal on May 6 to boost economic ties between both nations, as part of which India's tariffs on imported whisky and gin will be halved from 150 percent to 75 percent, and subsequently be tapered to 40 percent by the tenth year of the deal.

Tariffs on automotive will fall from more than 100 percent to 10 percent, under a quota.

Lower tariffs are expected to benefit Britain's Scotch whiskies, which have a wide following in India, and the agreement will result in whiskies from UK to cost less in India, the world's largest whisky market. However, the deal will also mean higher competition for domestic liquor companies, who are increasingly chasing the premium end of the alcobev market in India.

Mark Kent, the CEO of Scotch Whisky Association, called the deal 'transformational' and said, "The UK-India free trade agreement is a once in a generation deal and a landmark moment for Scotch Whisky exports to the world’s largest whisky market."

Other goods which will are set to benefit from lower Indian tariffs include cosmetics, lamb, salmon, soft drinks, chocolate and biscuits, along with aerospace, medical devices, and electrical machinery.

UK PM on the Trade Deal 

Reacting to the trade deal, UK PM Keir Starmer said lower trade barriers with economies around the world will help 'stronger and more secure economy'.

Keir Starmer added, "...this is the biggest trade deal that we, the UK, have done since we left the EU. And it's the most ambitious trade deal that India has ever done. And this will be measured in billions of pounds into our economy, and jobs across the whole of the United Kingdom."

Read More: FTA with UK to benefit Indian textiles, leather, toys, gems and jewellery

"...it's been promised many times over the last eight years. Prime Minister Modi and I decided in Brazil last year that we would move at a pace in relation to these negotiations," PM Starmer added.

Boosting Trade Ties

The FTA has taken place in the backdrop of growing economic relations between India and the UK, and the bilateral trade of about $60 billion between both nations is projected to double by 2030, a government statement has said.

UK's Business and Trade Secretary Jonathan Reynolds said the trade deal with the fastest-growing economy in the world will help unlock growth "from advanced manufacturing in the North East to whisky distilleries in Scotland".

The deal between the world's fifth and sixth-largest economies was concluded after three years of prolonged negotiations and aims to raise bilateral trade by another GDP 25.5 billion ($34 billion) by 2040, along with greater market access and relaxed trade terms.

A statement by UK government said British shoppers can expect cheaper prices and more choice on products coming from India, including clothes, footwear, and food products, frozen prawns.

UK businesses are confident of an edge over international competitors when entering India’s enormous market which is set to grow even bigger to be the 3rd largest economy in three years.

The Tariff Backdrop

The deal comes at a time when major economies of the world are attempting to insulate themselves from tariffs imposed by US President Trump, which are being seen as a major disruptor to global trade. The deal will also be seen as India's trade potential, as New Delhi seeks to attract more manufacturing and capital shifting away from China.