Indian Wine Soon To See Some Real Competition

Indian wine connoisseurs and producers alike are awaiting a statement due today from the European Union’s trade commissioner, Peter Mandelson, after his visit to see the Indian Commerce and Industry Minister, Kamal Nath, this weekend. The expectation is that Mandelson will announce the launch of a formal complaint -- via the World Trade Organisation -- against India due to taxes and duties on EU wine and spirit imports.

Saturday’s Financial Times quoted Mandelson as saying:

Their [India’s] regime is not compatible with WTO rules. There are trade barriers that are a clear breach of their international commitments.

The EU's executive Commission has long been calling for India to remove obstacles to imported wine and spirits. According to Reuters, a recent Commission report showed that Indian duties and taxes combined were as much as 550% on imported spirits and 264% on imported wines.

The wine market in India, however, is relatively young. A recent article by the Chicago Tribune’s Kim Barker revealed that explosive growth has taken place only in the past eight years, driven largely by the country’s expanding middle class, “the product of an economy growing almost 8 percent a year.”

Reading Barker’s article in the context of the impending EU complaint, however, it is clear that the high level of protectionism enforced by the Indian government and Indian states has helped nurture an emerging domestic industry. Barker again:

Last summer, the western state of Maharashtra announced a plan to train local farmers in winemaking. In the state's fertile Nashik Valley, the wine capital of India, at least 25 wineries now operate, as opposed to the early 1990s, when none did. A wine institute opened there in July, offering a diploma in fruit processing and wine technology and claiming to be the first wine technology college in Asia. As of October, supermarkets in Mumbai have been permitted to sell wine.

The results:

Indian wines, which once tasted vaguely like old socks, also have matured. New labels compete internationally and even export to other countries. Sula Vineyards, largely judged to be the best winery in India, started shipping to Chicago six months ago. Sula was the first winery in Nashik Valley, planting its first vines about 10 years ago.

Currently in India, Barker reports, a bottle of locally-produced Sula chenin blanc from 2005 costs $9.75, while a 2004 Ernest & Julio Gallo Turning Leaf chardonnay will set the consumer back $20.

It’s clearly time to let foreign wines compete on a par with Indian wines. But, while the EU may have been demanding free market access for years, it seems that the Indian authorities have been prudent to put it off, biding time to develop a wine industry that will have a fighting chance when the real competition begins.