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Mint
an hour ago
- Mint
Maharashtra's expensive alcohol—following its first duty hike in 14 years—will still find takers. Here's why
On Tuesday, the Maharashtra cabinet approved several revenue-enhancing measures in the excise department, including an increase in liquor duty—its first such hike in 14 years. This would make domestic premium liquors 60% costlier in Maharashtra. However, the tax hangover of the Maharashtra government's excise duty hike on key alcohol products might be short-lived as the underlying trend of India's alcohol consumption remains strong, particularly aided by demand for premium liquors, said experts. 'Young consumers are mainly driving this premiumisation," Naman Shah, an independent consumer sector analyst, told Mint. 'The growing popularity of cocktail culture and demand for curated experiences have made them less sensitive to price hikes. Alcohol is not a sin anymore. People want to taste luxury." The Maharashtra government seems to be capitalising on this trend by hiking excise duty on premium liquors. Indian-made foreign liquors like whiskey, rum and spirits will attract duties 4.5 times their manufacturing costs, up from the current rate of three times, according to the committee tasked with boosting the state's liquor revenue. Alcohol excise duty contributed about 6% of the state's total tax receipts in 2024-25, according to unaudited provisional figures from Comptroller and Auditor General of India. The state government plans to increase that to 10% in FY26. While excise duties on beer and wine have not been increased, country and imported premium liquors will face relatively smaller hikes. This will increase their retail prices by 14% and over 25% respectively. The industry impact The increased liquor levies would support Maharasthra's strained exchequer and help fund populist schemes such as Ladki Bahin Yojana (to provide financial assistance to women in low-income families), as well as benefits for farmers and other communities, said experts. Regarding the potential impact on volumes, Shah believes demand won't be dented in the long term as consumers are willing to pay. Moreover, 'majority of Indian consumers still fall under the 'mass" segment where the proposed hike on excise duty is only 3-4%. So, there should not be much of a volume impact, overall," the consumer sector analyst said. But the market panicked and heavily penalised distilleries with significant exposure to the state. United Spirits Ltd, India's largest alcohol producer and owner of brands like McDowell's No.1, Royal Challenge, and Signature, has a sizable 25-30% exposure to Maharashtra. As a result, its stock corrected by almost 7% on Wednesday. 'Distilleries with significant exposure to Maharashtra might see a big volume dip in Q2 (the second quarter, July-September) following the price hike," another consumer sector analyst said, requesting anonymity. 'From Q3 onwards, as the festive season kicks in and new prices are absorbed, volumes should recover again." Among major distilleries, shares of Allied Blenders and Distillers Ltd, the maker of medium-ranged Sterling Reserve and Officer's Choice whiskies, declined 5%. The market anticipates major volume hits on the lower to mid-ranged products, despite the proposal of a limited tax hike on them, according to experts. 'There might be some impact on the country, lower-end and mid-premium segments. But I don't see any significant impact on the premium or luxury end," the unnamed consumer sector analyst said. A 'premium' explosion Alcohol companies have been riding a formidable wave of premiumisation post-covid as they have seen an explosion in demand in the 'prestige and above' (P&A) segment, which places an emphasis on brands with quality, reputation, and higher profit margins. United Spirits's P&A volume grew at a faster pace—9% year-on-year—than its overall volume growth of 7% during the fourth quarter of FY25, mainly driven by resilient consumer demand in the luxury and premium segments, Nuvama Institutional Equities said in a recent report. This resulted in a 40% on-year surge in Q4 Ebitda. Similarly, while United Breweries Ltd saw an overall 5% on-year volume growth, its premium-end products clocked 24% yearly growth and Ebitda rose 31%, according to the report. Radico Khaitan Ltd, best known for its Magic Moments vodka brand, has also aggressively expanded its P&A portfolio with premium offerings like Jaisalmer Gin, Rampur Indian Single Malt Whisky, and Royal Ranthambore. Radico has an 8% share in the P&A segment and plans to widen its portfolio further in this segment. This would expand its target user base and improve its confidence on execution, as there is demand for innovative premium products in the market, Motilal Oswal Financial Services said in a note. Moreover, Radico has only 7-8% exposure to Maharashtra. Hence, its stock price was broadly resilient on Wednesday akin to its beer and wine manufacturing peers'. Since beer and wine were spared of any excise duty hikes, shares of Sula Vineyards Ltd rose almost 8%, while those of Maharashtra-based GM Breweries Ltd rose 10%. GM Breweries, which primarily produces country liquor, already receives excise duty concession from the Maharashtra government. 'Now it will also manufacture Maharashtra Made Liquor (MML) for the government. Hence its stock went up" said Shah, the independent consumer sector analyst quoted earlier. MML, which the Maharashtra government introduced along with its excise duty hikes on premium liquors, is a new category of grain-based foreign liquor to be produced exclusively by local manufacturers. It would be priced higher than country liquor, but lower than the cheapest Indian-made foreign liquor.
Mint
10 hours ago
- Mint
Trump-induced slowdown: Can it be reversed?
The World Bank has lowered global economic growth to 2.3% for 2025. This is 40 basis points less than its January estimate. Mint looks at the factors causing the slowdown, corrective measures that need to be taken and chances of implementing them to accelerate growth. Also read: Donald Trump open to mending ties with Elon Musk: 'No hard feelings,' but 'a little disappointed' How sharp is the slowdown? In 2024, the global economy grew at 2.8%. In January, the World Bank projected 2025 growth at 2.7%. But that looks very distant now. On Tuesday, in its latest economic outlook, it sharply downgraded the growth projection for 2025 to 2.3%. The slowdown has been all-pervasive with 70% of all economies seeing a reduction in growth. Also, the projected growth rate will be the slowest in the last 17 years, if outright global recession is not considered. Between 2020 and 2027, the World Bank said that global economic growth will average 2.5%—the slowest pace since the 1960s. What is causing the slowdown? Escalating trade tensions and policy uncertainty are the two major factors behind the projected economic slowdown. US President Donald Trump's tariff measures have upended the global trading system. Since the start of his second term as President in January this year, he has been imposing significant tariffs hikes on US trade partners in a bid to reduce America's trade deficit and protect the local industry. Though his `liberation day' tariffs have been kept in abeyance, the average tariff rates of the US are still high. His policy flip-flops have added to the policy uncertainty and hurt investment. Also read: Elon Musk regrets some posts about Donald Trump, says 'went too far…' What is the outlook for India? India is expected to grow at 6.3% in 2025-26. This is 40 basis points lower than the 6.7% growth the World Bank estimated in January. Though India is much better placed than other countries and will remain the fastest growing large economy, the slower growth is on account of weaker activity among key trading partners and rising trade barriers for Indian exports. How to accelerate global growth? The Bank warned that the forces that once drove economic convergence and lifted billions out of poverty are in retreat. Globally, it wants a predictable, transparent and rules-based approach to resolving trade tensions. Even a 50% cut from May '25 tariffs will add 0.2 percentage points to global growth, the report said. At the national level, it wants countries, especially developing ones, to rebuild trade relations by lowering tariffs and striking trade deals; restoring fiscal order and accelerating job creation. Also read: How rich would you be now if you had invested $100 in Trump's Crypto in January? Are trade deals still being signed? After Trump put the reciprocal tariffs in abeyance for 90 days, he claimed that countries were lining up to strike trade deals. But the US has been able to finalize a deal only with the UK. Talks with India and other nations are still on. The US and China, the two largest economies, have had two rounds of discussions. Some progress has been made regarding critical minerals but distrust remains. It is not clear what Trump would do when the tariff pause ends next month—will he extend it or re-impose tariffs?
Mint
a day ago
- Mint
US puts hard terms on table, presents a take-it-or-leave-it offer; demands access to agriculture, dairy, pharma
The final stretch of India-US trade talks is centred around sensitive sectors such as dairy, agriculture, digital and medical services, three people aware of the matter said, with Washington keen to open them up while New Delhi is pushing back with demand for a balanced agreement that safeguards vital sectors. A US team led by Brendan Lynch, Assistant US Trade Representative for South and Central Asia, was in New Delhi for the face-to-face bilateral talks from 4 June to 10 June. While half of the team has returned, the rest in New Delhi have sought definitive commitments on market access in sensitive areas, the people cited above said on the condition of anonymity. The talks will continue virtually to seal the deal. Also read | Mint Exclusive: India-US trade deal before 8 July India has traditionally resisted opening these areas due to concerns over unregulated competition and social sensitivities. Indian negotiators now navigate political and economic complexities related to sectors vital to rural livelihoods and food security, amid the hardened US stance. 'The negotiations are not progressing as expected. The talks were meant to be two-way, as agreed. However, the US team's insistence on opening certain critical sectors comes across as a take-it-or-leave-it offer," said the first among the three people cited above. Queries emailed to the spokespersons of US Secretary of Commerce, USTR and US Embassy in New Delhi, along with spokespersons of ministries of commerce and external affairs remained unanswered. Two-way road Mint reported on 21 April that Indian negotiators have made it clear that unless the US changes its animal feeding practices—specifically the use of non-vegetarian feed for cattle—or adopts India's vegetarian certification process, US dairy products such as cheese and butter won't be allowed in. At the same time, India has conveyed its willingness to consider tariff concessions on certain nuts and fruits. Tying up a Bilateral Trade Agreement (BTA) by 9 July is critical to stop the 10% universal tariff and the additional 16% country-specific US tariffs. According to the second person cited above, the Indian side views the US insistence as a breach of the 13 February joint statement issued by both leaderships to negotiate a mutually beneficial BTA by fall 2025. Also read | 'Talks are moving, things on track': India-US interim trade deal by June 25? The US wants India to significantly reduce duties on American agricultural goods, dairy products, and shrimp, as well as to remove non-tariff barriers that currently restrict US dairy exports, all without offering substantial market access to Indian goods in return, the officials cited above said. India still sees hope, with about a month remaining before the 90-day pause on Trump's reciprocal tariff ends on 8 July, to finalize the first tranche of the deal. 'It's not that it can't be done—it's possible, as both countries are in favour of it. In fact, India was the first country to be offered a trade agreement. We are trying our best to make it happen and keep the trade dialogue on track," said the third person. However, this person denied that changing geopolitical situations were affecting the ongoing BTA talks, citing recent developments where the US successfully concluded trade agreements with the UK and China as evidence. For an open market A Niti Aayog working paper last month suggested that India open its market to a broad range of US agricultural products, including rice, pepper, soybean oil, shrimp, tea, coffee, dairy and poultry under the BTA. However, these recommendations ignore risks to India's 700 million farm-dependent citizens, according to the Global Trade Research Initiative (GTRI), a thinktank. Co-founder Ajay Srivastava has called for a broader public consultation on these recommendations. Meanwhile, Indian negotiators have raised concerns over stringent US sanitary and phytosanitary norms, drug regulations, and provisions such as the destruction of entire consignments of fruits if even a few units fail to meet prescribed standards. These are viewed as excessively harsh and trade-restrictive. Also read | India-US trade deal announcement soon: Scott Bessent At present, India imposes a basic customs duty of ₹35 per kg on shelled almonds, ₹100 per kg on in-shell almonds, along with a 10% Agriculture Infrastructure Development Cess. Walnuts—both in-shell and shelled—attract a 100% duty when imported from the US, while pistachios face a 10% duty calculated on the cost, insurance, and freight (CIF) value. In 2024, US exports of agricultural and allied products to India stood at nearly $2 billion, including $452 million worth of alcoholic beverages and $1.3 billion worth of fruits and vegetables. In comparison, India's total agricultural exports to the US in FY24 were valued at $2.12 billion. Sharp asymmetry Tariff comparisons show a sharp asymmetry. India imposes an average tariff of 37.66% on US agriculture, meat, while US tariffs on Indian goods in the same category stand at just 5.29%. In the chemicals and pharmaceuticals sector, US goods face a 9.68% duty in India, whereas Indian products are subject to only 1.06% in the US. Dairy products from the US attract a high duty of 28.42% in India, while Indian dairy exports to the US face a minimal 0.59% tariff. Similarly, US processed food, sugar, cocoa, and related preparations are subject to a 29.66% duty in India, compared to just 4.67% for Indian goods of the same categories in the US. Also read | India, US aim to finalize first tranche of trade deal by autumn: FM On cereals, vegetables, fruits, and spices, US exports to India are taxed at an average rate of 8.82%, while Indian products in these categories face only 3.1% in the US. For pharmaceuticals, US exports to India face a 10.91% duty, whereas Indian pharma products exported to the US attract a negligible 0.01% tariff. After UK's industries faced American tariffs of 25% on all aluminium, steel and derivatives (announced on 12 March), 25% tariff on passenger vehicles (announced on 3 April ), 25% tariff on automobile parts (beginning 3 May ), and a 10% baseline tariff on all imports (from 5 April) – the UK and the US on 8 May announced an economic prosperity deal (EPD). The mini deal secured some concessions for the UK, but the 10% baseline tariff continued.
