New Delhi, Jul 27 (UNI) A FICCI-Yes Bank report today said India has the potential to become a manafucturing hub for global luxury brands in the next four to five years, as a consequence of cost advantages and growing number of high networth individuals.
The manufacturing of luxury items in the country has the potential to grow to 500 million dollars in not too distant a future, the report said. Global brands like Louis Vuitton and Frette are looking at India as a manufacturing base for their products, while others are sourcing their requirements from India.
''This manufacturing capability if harnessed properly can propel India as one of the leading destinations for manufacture of luxury goods. The cost advantage, particularly in labour intensive sectors like leather and accessories add to the advantage that is India,'' the report said.
The France-based luxury brand - Louis Vuitton has already embarked on an initiative to expand its presence to various cities apart from Mumbai and Bangalore given its soaring sales figures in the cities it is already present.
An interesting fact brought out by the report is that India is the fastest growing population of the High Networth Individuals (HNI) which stood at 1,23,000.
The report says income level of consumers is expected to triple by 2025, thanks to the high GDP growth of 8.5 per cent per annum.
In order to expedite the creation of a hub for the manufacture of global luxury brands, the report suggests that the government and private players consider forming partnerships with international fashion and luxury councils or associations. This would encourage and facilitate cooperation in the high-end luxury market.
For propelling luxury goods segment, it includes corporatisation.
This will lead to large investments, employment creation and generation of additional revenue streams.
Forming a standardisation and branding and packaging organisation which will provide a seal of approval for all the luxury goods produced in the country has also been suggested by FICCI.
The report favours further easing foreign direct investment norms in the sector for facilitating the development of the retail sector.
The constant vacilitation of policy acts as a dampner for luxury goods brands.
The Indian tariff structure needs to be streamlined, it says and adds that India has one of the highest duties on imported luxury goods. This drives the grey market and duty free purchases as the stringent regulatory environment impedes investment by foreign brands.
''The need of the hour is to open up the opaque structure which has been put in place. Transparency at all levels needs to be provided for duties and taxes. Government rules and regulations need a thorough revision with due consideration to the sensitivities of the sector,'' it said.
The report mentions that the luxury sector needs to be treated in isolation with other retail sectors as the dynamics governing it are significantly different in nature.
It notes that the Indian retail sector requires significant capital, technology and best practices to bridge the existing productivity gap and achieve scale in operations, which are critical to the sector's success.
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