Luxury market to grow tenfold: Amitabh Kant
India’s luxury market is likely to grow nearly tenfold over the next 10 years, said Amitabh Kant, chief executive officer of NITI Aayog. The luxury market has the potential to grow from $18.5 billion currently to $50 billion by 2020 and to $180 billion by 2025, Kant said at the Mint Luxury conference in Mumbai on Friday.
A rising middle class, youthful population and growing urbanization will drive growth in India’s luxury market, he said. Changing demographics will boost demand for luxury goods, he said, adding that demand for luxury goods always comes from baby boomers, giving Europe as an example, where baby boomers sought the best cars, perfumes and products. While the population in Europe and America is now ageing, “the population in India is getting younger and younger and will keep getting younger till 2040”, said Kant, adding that this young population is going to ask for a lot of new fashionable products, new cuisine, new cars and gadgets.
Another key trend is urbanization. “Urbanization has ended in Europe and America. It is in the last stage in China. Whereas in India it has just begun,” said Kant, adding that in the next 30 years, 350 million people will get added to the urbanization process in India. There are studies that estimate that as many as 700 million people will join the urbanization process, he said.
To be sure, urbanization will be a challenge for India given the scarcity of resources, he said. When places like America and Europe urbanized, land, water and gas were cheaply available. In India, the challenge is to set up new compact cities or smart cities that will be enabled with technology and which will recycle water and waste.
India’s consumption story will also be fuelled by the growing middle class. By 2022-23, almost 48% of India’s GDP will come from the urban middle class, which will comprise 50% of the population, and as it grows, the agenda will move from caste and religion to growth, housing and infrastructure, said Kant.
As such, a faster GDP growth means more money in the hands of the people, which will lead to more disposable income. India’s per capita income is currently $1,580 per annum, and at a 7% GDP growth rate this will grow to $4,000 by 2032. However, at a higher growth rate of about 10% per capita income will be $6,988 per annum by 2032. Besides there will be more millionaires and billionaires in the country aiding the growth of the luxury market, said Kant. Kant went on to identify what the country needs to do to be able to accelerate the pace of growth—open up the economy, improve the ease of doing business, invest more in infrastructure, and maintain consistency and predictability in matters of policy.
The government has been walking the talk since it came to power in May 2014. In the past 15 months, foreign direct investment in India has grown 48%, said Kant. In comparison, globally, foreign investments declined by 16%. The government is also in the process of creating and identifying 100 smart cities that will aid India’s urbanization.
Even as India opens its doors to global luxury retailers, there is a need to take the country’s own heritage of luxury to global markets, said Kant. India is not new to the concept, given its rich heritage of luxury in perfumes and textiles, he said, stressing that India needs to remain true to its roots in the pursuit of everything luxurious.