Could India Become the New Hong Kong For Wine?

The Telegraph has news of an interesting development concerning the new FTA (trade deal) between the EU and India which could lead to India finally being opened up to the wine investment market, with a consequent leap in demand. Written by Garry White the report ‘Tax deal to uncork India for wine investors’ likens the FTA to Hong Kong’s move back in 2008 when it cut taxes on wine and became the wine hub of the East, opening up the Chinese market to Bordeaux fine wines:

The current trade negotiations between the EU and the Indian government have been going on for four long years but – finally – a deal looks about to be struck in the coming months. This could have a dramatic impact on the global wine industry.

Any deal would see India slash tariffs on imported alcohol in return for an opening-up of the European market to India.

Imported wines currently face a 150% tariff in India as well as an “extra additional duty” of 4%. This is before any additional taxes imposed by India’s individual states. These range from 30% to more than 100% and have made investing in wines relatively unattractive.

The new agreement could see import duties slashed to just 40%, boosting the sale of investment-grade wine.”

Peter Shakeshaft, chief executive and founder of wine investment company Vin-X, told the Telegraph that he believed that the impact of the agreement will be more gradual:

“The changes will be big for investors, but we would not expect the market to explode like it did with Hong Kong.” He does concede that any drop in import duty will have a beneficial effect for the fine wine investment market.

“Wine also has a rich history in India and the country has a real affinity with certain labels of Bordeaux such as Chateau Cos d’Estournel. As a result we are able to predict individual labels which will benefit from the changes and advise investors accordingly,” he added.

Wine imports have doubled to £17.8m over the last two years and India’s consumer markets expected to quadruple over the next two decades. However India’s own wine industry have a strong domestic lobby and feel that imported wine is a threat. The other is issue is that India’s individual States can impose their own taxes so that even if duty was cut to 40% some States could simply increase their levy of taxation on wine.

As I wrote earlier this year (India and wine – New Developments) there are a lot of predictions concerning a potential wine boom in India should the FTA go ahead. We won’t see anything like Hong Kong’s blossoming into the gateway to China but we might see a slow, steady increase in wine investment in India. If India is to become a new gateway to the Orient for wine it will at a snail’s pace.

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