Scotch whisky producer, Highland Distillers, has said it expects the Scotch whisky market in India to grow at a compound annual rate of up to 25% until 2004 as a result of the government's decision to cut duty on liquor imports.

"With the duty cuts announced in the 2002/03 budget, the market for Scotch whisky in India should go up significantly," said Highland's managing director in India, Dinesh Jain. "Our belief is that this segment will grow at a compounded annual rate of 20% to 25% 'til 2004." Scotch whisky sales currently stand at around 837,000 9-litre cases per year.

Nevertheless, imports still represent less than 1% of India's 75m-litre spirits market. The 2002/03 budget reduced effective import duties on spirits to a lower rate of 340% and a higher rate of 413%, depending on the price. Previously there had been three ad valorem spirits duty rates of 464%, 545% and 706%.

However, with the industry estimating that almost 90% of Scotch whisky consumed in India still comes through illegal channels, Jain said further reductions in duties are still necessary. "Even after the cuts announced earlier this year, tax will still account for a very large percentage of the price of a bottle of Scotch whisky, which makes it more expensive for the Indian consumer," he said. "Unless the duty is brought down further, illegal imports will always continue to thrive."