Measured Pour: Navigating the India–UK Trade Deal with Balance and Caution

India–UK trade deal cuts duties on whisky and cars, but safeguards protect key domestic sectors like automobiles and electric vehicles.

As India and the United Kingdom near the finalization of a historic free trade agreement (FTA), the fine print reveals a calculated balancing act. With legal scrubbing currently in progress and a three-month timeline for release of the official text, both countries are preparing for a landmark trade alignment that could reshape key sectors, particularly automobiles and alcoholic beverages. However, amid optimism, the deal reveals India’s cautious yet strategic approach to opening its markets.

One of the most talked-about elements of the FTA is the phased reduction in import duties on UK alcoholic beverages, notably whisky and gin. Currently taxed at 150%, these duties will drop to 75% initially and ultimately to 40% over a decade. This represents a major win for British exporters but has triggered concerns within India’s domestic liquor industry. Local producers had lobbied for the inclusion of a Minimum Import Price (MIP) to protect against dumping and under-invoicing—tactics that could undercut Indian brands. The government’s decision not to include an MIP indicates a bet on long-term competitiveness rather than short-term protectionism.

The automobile sector presents an even more complex picture. Recognized as a strategically sensitive industry, it has been treated with extensive caution in the agreement. Import duties on petrol and diesel vehicles will be reduced gradually over a 10 to 15-year span. However, the scope of these concessions is carefully capped. For instance, cars eligible for concessional rates must fall within specific engine capacity parameters. This approach ensures that luxury and niche vehicles are targeted, rather than mass-market segments that could threaten domestic manufacturers.

Electric vehicles (EVs), often seen as the future of mobility, are subject to even more selective concessions. Only a small, predefined number of British EVs will qualify for reduced duties, and those must meet specific price thresholds. This signals India’s resolve to protect its nascent but rapidly growing EV industry, which is a core component of its green transition. Notably, there is no duty reduction for EVs outside the designated quota, reflecting India’s commitment to supporting domestic innovation and manufacturing capacity in the green economy.

These safeguards, Indian officials argue, are essential. The country’s car industry is poised to reach a production milestone of 5 million units and could potentially double within the timeline of the trade deal. By stretching out the reduction of duties, India gives its industries the necessary time to scale up, modernize, and withstand international competition.

Despite the protective measures, some sectors remain discontent. The Indian alcoholic beverage industry, for instance, remains vocally opposed to the lack of MIP provisions. They fear that without such guardrails, UK producers could exploit pricing loopholes to gain an unfair advantage. While the government maintains that the sector can adapt and innovate, industry stakeholders believe this might compromise local employment and market share.

In essence, the India–UK FTA exemplifies a nuanced model of trade liberalization. It opens new avenues for cooperation and growth while embedding regulatory buffers to guard domestic interests. For India, the message is clear: global integration will not come at the cost of strategic autonomy. As both nations move towards ratification, the real challenge lies in translating policy into performance—ensuring that the benefits of freer trade are not only promised but widely shared.