When Hong Kong scrapped all taxation on alcohol sales more than a decade ago, it was as though Guy Fawkes had returned to the fold. And dare I say, successfully. It sent the fine wine market out of this stratosphere.
India is now set to have a similar experience, as the cut in fine wine prices are teetering on the precipice. There is currently a 150% import tariff with a 4% duty on wine. This is even before any additional tax charges are imposed by its various states, which can range anywhere between 30% to 100%. Sadly, making it an unappealing prospect to invest in.
But that’s about to change. A new trade agreement could see tax on fine wine slashed to around 73%, unleashing a new wave of consumers and investors.
India’s population
It’s the second most populated country in the world, literally accounting for a fifth of the world’s population currently standing at almost 1.4 billion and growing. India’s population is expected to surpass China by 2024. With 23.6 million people, the Indian middle class holds almost a quarter of the country’s wealth. Breaking records, it’s set to be the first political entity in history to be home to more than 1.5 billion people. With the median age of India at 27 years old, younger people are moving more and more to consuming wine, foregoing the habits of their parents and an older generation who had more of a preference for whisky, rum, gin and beer. Interestingly wine and whisky are beverages that people spend more on as they get older and their disposable income increases. Wine is far more likely to be the first alcohol to touch one’s lips before whisky and, thus far, more likely to encourage habitual and preferential loyalty.
The Indian economy
India is the seventh largest economy in the world and the third largest by purchasing power parity. It remains the fastest growing economy in 2019-2020 according to UN reports. India’s GDP growth is expected to accelerate to 7.6 % in 2019-2020 from an estimated 7.4% in the current fiscal ending March 2019. India’s growth is underpinned by robust private consumption, as well as an expansionary fiscal stance and benefits from previous political reforms.
Cultural Aspirations
The financial reach and purchasing power of the middle class in India is showing no signs of abating. Many are purchasing high-end branded products and goods across the spectrum, as a way of shouting a new-found identity. Fine wines will not be excluded from the list. There is a clear shift in demographics, with a visible increase in double income families. Giles Turner, Private Client Sales Director at BWC MANAGENT a London based Wine Merchant, says: “I think this trade deal will be a good thing for the fine wine market on the whole. The aspirations of the monied and well-heeled are no different from our own. The wine drinking culture in India is becoming more sophisticated, as seen in other non-European countries such as China, and so it’s only natural to see an increase in trade and consumption. Taking into account fine wine has a limited finite production, I can see the potential of some of the most sought-after wines doing well from an investment stand point as demand increases.“
The emerging trade deal with India and the fine wine market will have a significant impact on all collectables ranging from Bordeaux, Burgundy, Rhone and a host of other small wine producers. While these negotiations are taking place let us do a toast to an expectant friend to the market. Turner concludes by saying, “as one of my clients once told me, it’s a comforting feeling to have something that everyone wants, and you are one of a few that has it. We have been trading in wine since 2002 and vast experience in the market, on the whole I’m very confident about the fine wine market for 2019 and think this will be an exceptional year for us at BWC MANAGEMENT.” I guess only time will tell, so as many investors look to new markets, India’s trade deal may turn out to be a good case for wine investment.
