Budget 2011 has been a dampener of sorts for the Indian luxury market. The biggest grouse is that there has been no easing of customs duty on luxury products.
“Customs duty for different luxury products varies anywhere between 20% and 40% and because of this reason, prices on luxury products are high,” said Kalyani Saha Chawla, vice-president, marketing and communications, Christian Dior Couture, India.
Though the Indian luxury market, pegged at Rs6,700 crore, is poised to grow 21% by 2015, according to Luxury in India, a CII-AT Kearney 2010 report, many in the industry say the government needs to take the sector far more seriously.
According to Peter Raj Kapoor, director of Luxury Hues, an Indian consulting firm focused exclusively on luxury products, there are 220,000 households of high net-worth individuals in India. In Kapoor’s view, this is the affluent class that travels a lot and is forced to buy high-end products abroad given that the added duties in India make it impossible for them to shop in the country.
“A high-end branded watch, for instance, will cost 30-40% more in India because of the high duty and tariff structure,” Kapoor said.
What experts like Chawla and Kapoor had also sought from the budget was not just easing of the duty structure but also permission for companies with multiple brands to have foreign direct investment (FDI), something which isn’t allowed in the current regime. Kapoor added that the concept of multi-brand retail in luxury products will be particularly beneficial for the high-end watches segment given that a standalone branded watch store “cannot work because of the poor off-take and high cost of economics that’s involved in India”.
And though brands such as Hermes, Louis Vuitton, Christian Dior, Versace and Zara, to name a few, are already present in India, those in the luxury business sector insist that expansion plans will depend on how seriously the government takes the sector. Tikka Shatrujit Singh, adviser, Louis Vuitton, India, said: “The government should encourage single-brand, international companies of repute to enter India through 100% FDI. The participation of these premium brands is a must, given that the Indian consumer has grown to accommodate international brands.”