Radico Khaitan Limited, originally known as Rampur Distillery, has been crafting alcoholic beverages for Indian consumers since 1943, even before India achieved Independence in 1947.
Protected by trade barriers—rules set by countries to limit foreign trade and protect local businesses, such as tariffs and quotas—initially set up by Britain and, later, upheld by Indian leaders to support small businesses, Radico Khaitan Limited began by producing bulk alcohol for local liquor makers and supplying spirits to the military.
According to Bloomberg, the company launched its ‘8 PM’ whisky in 1998, named after the popular drinking hour in India. In recent years, it has also started making high-quality malt whiskies for export. A heavy 150% tax on imported liquor has allowed the Uttar Pradesh-based company to grow in India, the world’s biggest whisky market, without much competition from American bourbons or Scottish single malts.
But now, Donald Trump’s tariffs are beginning to shake things up. The US President’s decision to introduce matching trade tariffs from April 2 has put pressure on New Delhi to respond. Indian officials are now working quickly to address US concerns and make trade fairer for American businesses.
This year, policymakers have reduced several tariffs, including lowering taxes on American bourbon to 100%. Many in the industry believe more tax cuts could be coming soon. Radico mixes imported Scotch with its locally bottled whisky. Lower tariffs will help cut costs for the company. Lowering tariffs in return could help Radico’s exports, such as its Rampur single-malt whisky, compete better in global markets.
Sanjeev Banga, head of international business at Radico, one of India’s biggest liquor companies, feels it is only a matter of time, according to Bloomberg. Instead of opposing the tax cuts, Banga fully supports free trade and globalization because competition helps the industry grow. According to him, consumers should have the freedom to choose from a range of similar products.
Economists are becoming more hopeful that Trump calling India the “tariff king” and his threats to impose similar taxes could push the country to make big changes to its long-standing trade policies. India imposes the highest tariffs among all major economies, significantly higher than those enforced by the US. This has made India a prime target for reciprocal tariffs during Trump’s Administration.
About $87.4 billion (approximately ₹7.5 lakh crore) worth of Indian goods, including pharmaceuticals and textiles, could be at risk. These are the products that India exported to the US in 2024. Besides lowering tariffs on bourbon last month, Prime Minister Narendra Modi’s government has also reduced taxes on large-engine motorcycles, electronic parts, chemicals and other products. More tariff cuts on a variety of goods are also being considered.
Indian officials are telling companies to get ready for changes in tariff rules that could make it harder to protect local businesses from foreign competition. Commerce minister Piyush Goyal recently urged exporters to stop relying on protectionist policies and, instead, build the confidence to compete in the global market. He stressed that being strong and self-reliant is the way forward.
But not everyone in the world’s most populous country is happy about the sudden removal of tariffs. The Confederation of Indian Alcoholic Beverage Companies has stated that it does not oppose reducing tariffs, but prefers that the cuts happen gradually over time instead of all at once.
In 2023, India had an average tariff rate of 17% on goods from World Trade Organization (WTO) member-countries it did not have a special trade agreement with. In comparison, China’s average tariff rate was 7.5%, Mexico’s 6.8% and the USA’s a much lower rate of just 3.3%.
India is likely to reduce tariffs through trade deals made directly with its key trading partners. The country is currently negotiating such agreements with the US, UK and European Union. Officials are optimistic that their cooperative approach and ongoing discussions will be considered when the US decides on any new tariffs.
Despite India’s efforts to reduce tariffs, Trump recently stated that the country would still face reciprocal tariffs. US officials are scheduled to arrive in India on Tuesday (April 1) for trade talks, where Indian officials are expected to request relief from the forthcoming tariff increase next week. The US embassy stated it was dedicated to strengthening trade relations with India and was focussed on having discussions that were positive, fair and geared toward the future.
According to a Bloomberg report, Alexander Slater, managing director at Capstone, a business strategy firm in Washington, said that, unlike Canada and Mexico, two of the USA’s biggest trading partners that have managed to push back against some of the White House’s trade policies, India does not have as many options to resist the Trump Administration’s actions.
Slater said the Trump Administration was determined to cut the trade deficit between the US and India and put an end to what it saw as an unfair trade relationship. India might be able to postpone new tariffs by lowering its own duties or increasing purchases of American energy and weapons, he said. However, using President Trump’s words, he noted that India had very limited options in this situation.
Beneficial Side-Effects
Economists believe that, if India lowers its tariffs across the board, there may be some short-term difficulties. However, in the long run, it could help the economy grow by reducing the cost of imports and encouraging more investment. Pranjul Bhandari, chief India economist at HSBC Holdings Plc, feels that India significantly reduced tariffs in the 2000s while maintaining an average annual GDP growth rate of 7.8%, says Bloomberg.
She explained that narrowing the gap between India’s tariffs and those in the US might slightly reduce India’s GDP growth by 0.3 percentage points in the short term. However, she believed that, from 2026 onwards, the impact could turn positive, adding that new opportunities and industries would emerge, production costs for many businesses would decrease and they would be able to export more.
Abhishek Anand, a former civil servant and visiting fellow at the Madras Institute of Development Studies, said India’s high tariffs had mostly benefited big companies while making it harder for smaller businesses to compete. He explained that, in the garment industry, high tariffs had benefited such large companies as Reliance Industries Limited and the Aditya Birla Group. These companies procure their own raw materials and control the entire production process. Because of high tariffs, smaller garment companies have to buy materials from big local firms. Reducing these tariffs could create a fairer playing field.
US distillers are looking forward to gaining from India’s lower trade barriers. Rob Marin, a senior vice-president at the Distilled Spirits Council of the US, said American whisky currently has little presence in the Indian market. He called the tariff cuts “a great step in the right direction”.
(Girish Linganna is a Defence and Aerospace Analyst based out of Bengaluru. He is also the Director of ADD Engineering Components, India, Pvt. Ltd, a subsidiary of ADD Engineering GmbH, Germany. The views expressed in this article are of the author only.)
