India is ready to cut import duties on luxury goods from overseas, but also wants to guard local manufacturers from unfair competition and boost the use of Indian materials by global brands, said commerce and industry minister Kamal Nath.
“We don’t want China to do to us what they did to you,” he joked with Christine Lagarde, France’s minister for foreign trade. Nath spoke at the second annual HT Mint Luxury Conference here, addressing around 400 delegates, including the heads of some of France’s legendary luxury goods companies, such as Louis Vuitton, Chanel, Estee Lauder, Jean Paul Gaultier and Salvatore Ferragamo.
Nath suggested that in luxury goods, many of which carry import duty ranging from 35% to over 100% making it sometimes cheaper for Indians to buy the same products abroad, the country could follow the principle being adopted to tax wines, in which the costlier labels attract lower duties.
Nath, locked in a friendly duel with Lagarde to boost bilateral trade on the one hand but defend and protect Indian interests on the other, noted that while there were two million Indian households with an annual income of more than $100,000 (Rs44 lakh) and were growing at 14% annually, the country also had 300 million people surviving on less than $1 a day.
Saying he was looking for a way out of this “great paradox,” Nath said India offered strong intellectual property protection and a 25 million- strong domestic market to foreign firms, which must, in turn, step up sourcing of materials and products in India, including leather and handlooms.
“There is enough compost to create luxury goods markets in both countries,” Lagarde later told a joint news conference.
Luxury companies from Estee Lauder to Jean Paul Gaultier are planning to bring their products to India. An Estee Lauder official said they plan to launch their brands including Aramis, Clinique and Donna Karan here. Paul Deneve, chairman and CEO of Jeanne Lanvin, said his company was looking to enter India in the next 18 months.
The focus of this year’s conference, hosted by HT Media Ltd., the publisher of Mint, is on French luxury houses, many of whom members of Comite Colbert, France’s 68-member elite club of luxury goods makers. The first conference, which was held in Mumbai, focused on luxury brands from Italy, many of them members of Altagamma, their trade association.
Armando Branchini, Altagamma managing director, said what was holding back luxury houses from expanding more rapidly in India was the pace at which new businesses can be set up. He said in the time it takes to open four retail stores in India, his member-companies can open a dozen stores in a place such as Mexico.
Both Branchini and Elisabeth Ponsolle des Portes, president and chief executive of Comite Colbert, said India’s practice of adding countervailing duties on the maximum retail price of products was a significant handicap for luxury retailers.
Responding to the comments, Ajay Dua, secretary, ministry of commerce, noted that it was getting a lot easier to open new businesses in India just in the past few years and also pointed out that duties are steadily coming down on all products.