The Minister of State for Commerce and Industry, Jitin Prasada has said in the Lok Sabha that the United States under the Trump administration has not yet imposed reciprocal tariffs and that both countries were planning to negotiate a trade agreement, focussing on increased market access, reduction of import duties and removing non-tariff barriers.
In a written reply to the Lok Sabha, the Minister said, “Both countries plan to negotiate a mutually beneficial, multi-sector Bilateral Trade Agreement. Both countries would focus on increasing market access, reducing tariff and non-tariff barriers, and enhancing supply chain integration.”
Confirming the same, the Commerce Secretary Sunil Barthwal informed the Parliamentary Standing Committee on External Affairs that negotiations between the two nations are still on and no agreement on trade tariffs has been reached so far. Barthwal briefed the committee, headed by Congress MP Shashi Tharoor, and said that bilateral trade agreement talks between the two nations are still on.
When members of the committee asked why India was not raising its voice against tariffs, as done by Canada and Mexico, he said the two were not comparable as the US had security concerns and border immigration issues with them.
It is reported that the Commerce Secretary assured the committee that India will sign a “mutually beneficial agreement”. He said India will protect any industry which is crucial to its domestic economy, saying that developing countries cannot lower their tariffs on everything.
It must be mentioned here that soon after Donald Trump took charge as President of the US, the US government issued Memorandum on Reciprocal Trade and Tariffs, wherein the Secretary of Commerce and United States Trade Representative were to take necessary actions to investigate harm to America from any non-reciprocal trade arrangements adopted by trading partners and provide a report with detailed proposed remedies for each trading partner.
Prasada also said that India continues to engage with the US to achieve enhancement and broadening of bilateral trade ties in a mutually beneficial and fair manner. “This is an ongoing exercise and Indian exporters are working towards diversifying trade baskets and export destinations.”
In 2023-24, India exported engineering goods worth USD 17.62 billion. The other major goods included electronics (USD 10 billion), gems and jewellery (USD 9.9 billion), petroleum products (USD 5.83 billion), textiles (USD 4.7 billion), marine products (USD 2.5 billion). During 2021-24, America was India’s largest trading partner. The US is one of the few countries with which India has a trade surplus. Trump had said, “India charges us massive tariffs, massive you can’t even sell anything in India. It’s almost… it is restrictive. You know, we do very little business inside. They have agreed, by the way. They want to cut their tariffs way down now because somebody’s finally exposing them for what they have done.”
On December 3, the second India-UK 2+2 Foreign and Defence Dialogue was convened in New Delhi. The Indian delegation was led by Piyush Srivastava, Joint Secretary, Europe West, Ministry of External Affairs, and Vishwesh Negi, Joint Secretary, International Cooperation, Ministry of Defence. The UK delegation was led by Ben Mellor, India Director, Indian Ocean Directorate, Foreign, Commonwealth & Development Office and Shimon Fhima, Director Strategic Programmes, Ministry of Defence.
Both sides discussed the entire gamut of India-UK comprehensive Strategic Partnership and emphasised the importance of sustained high-level engagement to advance the dynamic partnership between the two countries. The delegations reviewed progress under the India-UK Roadmap 2030 and agreed on the need to revitalise the partnership by identifying new focus areas of collaboration and work towards a refreshed roadmap.
The discussions covered key priorities including strengthening economic and trade ties with focus on early conclusion of mutually beneficial FTA, bolstering defence and security ties including in areas of cyber and counter terrorism, fostering innovation in critical and emerging technologies, deepening cooperation in clean and green energy and technology, health and enhancing cultural, educational and people to people linkages.
It was agreed that the third edition of the dialogue will be held in the UK at a mutually convenient date in 2025. The two sides unveiled the 10-year roadmap in 2021 to expand ties in the key areas of trade and economy, defence and security, climate change and people-to-people connections among others.
Narendra Modi, Prime Minister of India
It may be mentioned here that during the recent G20 summit in Rio de Janeiro, Prime Minister, Narendra Modi and the British Prime Minister Keir Starmer, the latter had stated that the negotiations for the FTA would be relaunched in 2025. The FTA talks had been paused because of elections in both the countries.
Keir Starmer, Prime Minister of the United Kingdom
The India-UK talks for the proposed FTA began in January 2022. The two sides have held 14 rounds of negotiations on it so far. Both countries aim to strengthen their existing £42 billion (US$52.05 billion – ₹4.48 trillion) annual trade partnership.
Keir Starmer had said, “Boosting economic growth is key to improving living standards for working people. A new trade deal with India will support jobs and prosperity in the UK – and represent a step forward in our mission to deliver growth and opportunity across our country.” Welcoming the statement, India’s Minister of Commerce and Industry, Piyush Goyal hoped that the FTA would be a win-win for both.
UK-India trade
As per reports, the trade between India and the UK was USD21.34 billion as of 2023-24 with UK exports to India accounting for a substantial chunk of that at USD16.6 billion. India, in turn, aims to expand its exports to the UK, targetting USD30 billion by 2030. Mineral fuels, machinery, precious stones, pharmaceuticals, apparel, iron and steel, and chemicals form the bulk of India’s exports to the UK, contributing 68.72% of the total export value.
Britain is aiming to touch USD36 billion by 2035. The UK has been wanting an agreement that includes cutting tariffs on exports of British-made cars and Scotch whisky.
According to Volza’s India Import data, India imported 7,922 shipments of Scotch whisky during March 2023 to February 2024. These imports were supplied by 169 foreign exporters to 159 Indian buyers, marking a growth rate of 3% compared to the preceding twelve months. Within this period, in Feb 2024 alone, India imported 489 Scotch whisky shipments. This marks a year-on-year growth of -16% compared to Feb 2023, and a -9% sequential increase from Jan 2024. India imports most of its Scotch whisky from the United Kingdom, Singapore and the United Arab Emirates.
India leads in Scotch Whisky imports
Globally, the top three importers of Scotch whisky are India, United States and Peru. India leads the world in Scotch whisky imports with 77,806 shipments, followed by United States with 13,417 shipments, and Peru taking the third spot with 2,489 shipments.
It is important to understand how the FTA would impact both the countries. Firstly, it would lead to tariff reductions on Scotch whisky and other products coming from the UK, while India is seeking better access to its goods and professionals. The UK has been negotiating for reduced import duty on Scotch whisky from 150% to 75% immediately when signing the FTA and thereafter to 30% over a period of three years. While Indian whisky makers are open to a reduction, they are opposed to the scale proposed by the UK negotiators.
SWA bats for reduced tariffs
The Scotch Whisky Association has stated that Scotch whisky is the world’s number one internationally traded spirit with exports worth over £5.6bn in 2023. 43 bottles of Scotch Whisky are shipped every second to around 168 global markets, totalling the equivalent of 1.35bn bottles (70cl @40% ABV).
As in 2022, Asia-Pacific continued to dominate as Scotch whisky’s largest regional market by value in 2023, supported record value exports to China, a market up 165% on 2019, and value uplifts Singapore (19%) and Taiwan (8%). Premiumisation of Scotch whisky remains a driver in these key markets: single malt Scotch whisky continued to rise in popularity among a growing cohort of consumers, with double digit growth in China and Singapore on 2022.
The Association cited 2023 exports to India which fell in volume and value compared to 2022, the fall coming against a backdrop of ongoing UK-India FTA talks and the Scotch whisky industry’s calls for a trade agreement which lowers the 150% tariff on Scotch imports into India, which would lead to significant export growth to the market.
Mark Kent, The Association Chief Executive, The Scotch Whisky Association
India is Scotch whisky’s second largest export market by volume, with the equivalent of more than 219 million bottles exported there in 2022. The volume of Scotch whisky exports to India have grown by more than 200% in the past decade alone, and whisky is hugely popular in India. In fact, India is the largest whisky market in the world. But while many Indian consumers are keen to add a bottle of Scotch to their shelves, bars and collections, Scotch whisky has just a 2% share of the Indian whisky market. There is huge potential for that to grow.
The Association Chief Executive, Mark Kent said, “The negotiations offer new hope for reducing the longstanding 150% tariff on Scotch Whisky in India. The UK/India trade talks are a golden opportunity to reach an ambitious tariff reduction in an early harvest deal that could grow Scotch whisky exports to India by £1 billion over five years. Tackling the tariff and State level regulatory issues would open the market up to smaller producers who are effectively locked out by the substantial barriers to trade. Improved market access for Scotch would enable an increasing number of Indian consumers to enjoy our premium product. It would also be good for our industry and Indian government tax revenues – a win-win for all.”
Barriers to export success
The Association added that Scotch Whisky is popular among Indian consumers, but a 150% tariff on imports of Scotch Whisky into India mean that it’s significantly more expensive to buy Scotch over Indian whiskies. As a result, India sees many ‘fake’ Scotch whiskies on the market, produced cheaply and traded on the reputation of Scotch whisky as a premium product. This unfair competition, alongside the 150% tariff and combined with the complexity of exporting whiskies into India, mean that many Scotch whisky producers are unable to enter this important market. Breaking down these barriers to trade in India would open up huge opportunities for Scotch whisky exports.
Potential for USD1.3 billion over next five years
The Association added that a UK-India trade deal has the potential to increase Scotch whisky exports to the country by £1bn over the next five years. “Reducing the 150% tariff on Scotch Whisky would make it more affordable in India, while still remaining a high-end, premium product. If the tariff were liberalised, Scotch whisky’s market share could treble to 6%, giving greater access to Scotch whisky products for Indian consumers, but still allowing Indian whiskies and other spirits to retain the dominant share of the market.”
Good for Scotland and the UK
Many more Scotch whisky companies – including smaller and independent producers – would gain access to the Indian market to sell their whiskies. If the tariff were reduced and exports were to rise, India would overtake France as Scotch Whisky’s second largest market by value worldwide, second only to the United States.
Boosting access to the Indian market would secure jobs and investment in the Scotch whisky industry across Scotland into the future. The industry’s contribution to the economy would rise by more than £300 million to nearly £6bn. Higher exports mean higher production – there would be a significant impact into the supply chain in Scotland and across the UK, also growing jobs and investment.
Good for India
The Association mentioned that “bringing down the 150% tariff on Scotch whisky would increase Indian government tax revenue at federal and state level by £3.4 billion annually through an increase in sales. Scotch whisky would be able to compete fairly alongside Indian whiskies, which will continue to dominate the Indian whisky market.
Because a lot of the whisky exported to India is sent in bulk (some for bottling as Scotch whisky, most for use in Indian whisky) bringing down the tariffs would also support domestic producers, reducing their costs and boosting employment in the Indian industry.” However, the Indian whisky manufacturers are opposed to the scale of reduction and are ok with tariffs reduced progressively to 50% over the next 10 years. The negotiations are going to be tough and it remains to be seen who will stand to benefit.
