The implementation of the India-UK Free Trade Agreement (FTA), which reduces customs duties on UK-origin spirits from 150 per cent down to 75 per cent, with an eventual roadmap toward 40 per cent, has brought critical discussions on tax structures, global competitiveness, and market access to the forefront of India’s alcoholic beverage (alcobev) industry.

Evaluating the trade deal's impact, Abhishek Modi, MD, Modi Illva India Pvt. Ltd. and Board Member of the Confederation of Indian Alcoholic Beverage Companies (CIABC), emphasised that while international competition is positive, domestic manufacturers require a level playing field to compete fairly.

"When duties on imported spirits are reduced, international labels receive a direct cost advantage in the Indian market. Indian manufacturers, meanwhile, continue to carry their existing domestic tax and excise burden, with no corresponding respite," said Modi while adding that the objective must not be to restrict Scotch or imports, but to ensure that Indian brands have a level playing field on which they can compete, innovate, and establish themselves on merit.

Modi pointed out that state-level excise structures can inadvertently place homegrown products at a cost disparity compared to imported labels. He highlighted that imported spirits often benefit from lower state taxes and levies than comparable Indian-made products, creating an uneven competitive environment as domestic and international brands increasingly compete at similar price points. He called on state governments to align their excise structures to ensure that Indian manufacturers are not disadvantaged by the tax framework and that domestic brands receive equitable treatment.

Alongside state-level tax reforms, Modi advocated introducing a Minimum Import Price (MIP) for imported spirits to address the risk of under-pricing. He proposed that imports priced below a prescribed threshold should continue to attract the existing 150 per cent customs duty, while products priced above that threshold could benefit from the reduced rates under the FTA.

 Drawing a parallel with anti-dumping measures in other industries, he argued that such a mechanism could help prevent low-priced imports from undermining domestic manufacturers and ensure that competition is driven by product quality and craftsmanship rather than pricing advantages.

The tariff adjustments arrive at a crucial juncture as India's domestic alcobev sector undergoes a rapid structural transformation. According to industry metrics, the sector is expanding at an 8–10 per cent trajectory for FY26 following a 13 percent Compound Annual Growth Rate (CAGR) over the preceding three fiscal years. Market volumes have scaled from roughly 300 million cases 15 years ago to approximately 450 million cases currently.

This growth is increasingly value-led. While whisky maintains a dominant 65 per cent market share, categories like vodka are growing at over 100 per cent annually, driven by younger demographics seeking flavour-forward profiles. Furthermore, the demand for premium Indian single malts, craft spirits, and aged whiskies is expanding swiftly across Tier-II and Tier-III cities.

Addressing production dynamics, Modi highlighted that Indian whiskies face unique economic conditions due to tropical climates. While warmer temperatures accelerate maturation, they result in a significantly higher 'angel's share’, the liquid lost to evaporation during aging, which elevates the production cost of aged domestic spirits compared to traditional Scotch.

Looking ahead, industry leaders view international expansion as a vital opportunity for homegrown brands, provided future trade agreements address non-tariff barriers, regulatory certifications, and overseas distribution networks.

"FTAs should not only bring global products into India but also serve as an opportunity to make Indian manufacturing and Indian brands globally competitive," Modi concluded.