Mumbai: Luxury marketers are shying away from investing in India as regulatory issues and lack of infrastructure make India a difficult market to operate in. According to a study done by Boston Consulting Group, the Indian luxury market is estimated at $14 billion, yet luxury product makers say they will approach the market cautiously.

“There are 17 Italian luxury brands in India now and that number has remained unchanged since 2005," said Armando Branchini, vice-chairman of the Altagamma foundation, a conglomerate of several high-end Italian companies with brands that are internationally renowned.

He doesn’t expect any new Italian retailers coming to India unless the environment changes.

According to Branchini, India has among the highest customs duties in the Asia-Pacific region at 38%. In China it is 17%, and there is no custom duty in Hong Kong and Singapore.

Also, “There are four different taxes, and it is very complex. While it may be good for the economy, it is a barrier for trade," said Charlotte Keesing, director at Walpole British Luxury, a consortium of British luxury retailers like Jimmy Choo, Harrods and Burberry.

Moreover, while India allows 100% foreign direct investment (FDI) in single-brand retail, it requires such retailers to source 30% of their manufacturing requirement from India—another impediment for luxury product manufacturers.

Eight years ago India and China both were on the long-term radar of luxury product marketers. Today, China has become one of the biggest growth drivers for such products, but India is still to take off. “There are only 18 of 90 British luxury retailers present in India today and less than a dozen looking at entering the market in the next two years," said Keesing.

“India is extremely high on the list of tomorrow and so is Vietnam," said Pierre Mallevays, managing partner, Savigny Partners Llp, a corporate finance advisory firm focusing on the retail and luxury goods industry, “However companies are still mindful about the lack of infrastructure, bureaucracy, and other issues like regulatory issues."

According to Mallevays, the country needs to make it easy for businesses to operate. “It took me two weeks and a lot of sweat to get a visa to come for the Mint Luxury Conference," he said.

Other markets may not be as large as India, but were easier to access, he said.

Keesing agreed. “Many British brands are fairly medium companies with limited resources and they put their efforts in to other markets, which are higher on their priority list like China and Middle East because of the ease of doing business there," she said.

India’s ranking slipped two places to 142nd place in the World Bank’s latest Ease of Doing Business report for 2015. The report ranks 189 nations and found that even though India’s scores had improved on various parameters, other nations performed even better.

“There are opportunities and constraints in the Indian market. The consumer and the business model has to evolve in order to go behind far more disruptive and scaled up growth in luxury," said Abanti Sankaranarayanan, managing director, Diageo India Pvt. Ltd, the local unit of the maker of Johnnie Walker whisky and Smirnoff Vodka.

Close