Is India becoming the land of luxury?

Last week, I came across a news article that stopped me in my tracks.  Apparently, the world's fastest car – the Bugatti Veyron 16.4 Grand Sport, for the uninitiated – is all set to hit Indian roads on October 28th. While I appreciate the need for speed in the dynamic economy that is India, what really took me aback was the price tag – an eye-watering `120 million (i.e. approximately US$2.7 million). (That one can probably count on one hand the number of Indian roads where an owner will actually be able to test the car to its potential is a different matter and one that I will leave for another time.) 

The chosen date for the Bugatti India launch – October 28th – is an auspicious day.  No, I have not checked my crystal ball. Neither have I consulted an astrologer.  However, I am sure Mukesh Ambani and his family have.  It just so happens that October 28th is also the day that the elder Ambani and his family are having a house-warming party to celebrate their new, US$1 billion residence in Mumbai.  While the family is being as under-stated as you can be about a 27-floor house for a family of six, ‘Antilia’ (the mansion) is understandably attracting much attention.

So, are India’s rich simply getting richer and leaving their brethren behind?  Apparently not.

 

1. India has the fastest-growing population of millionaires in the world, according to Forbes.
2. India's wealth has tripled to US$3.5 trillion in the last decade, according to Credit Suisse. Their analysis highlights that by 2015, India's wealth could double to around $6.4 trillion. The report notes that, contrary to popular belief, India's wealth distribution is skewed towards the lower end of the wealth pyramid.
3. Wealth held by individuals in India is said to be growing at a 26 per cent compounded rate, more than four times the global average.

The implications for the luxury market are obvious in terms of potential, though not so obvious in terms of strategy.  In fact, study after study has shown that in order to succeed in India, luxury brands need to localise their marketing strategies. 

This begets the question, is Indian wealth becoming typified by the motto ‘if you’ve got it, flaunt it’?  Not necessarily. 

Technology czar Shiv Nadar has committed to put aside well over 10% of his wealth for philanthropic ventures. Soap-to-software magnate Azim Premji has recently announced that he will personally be setting up a US$1 billion education endowment fund.  Ratan Tata has announced a US$ 50 million donation to Harvard Business School, while Anand Mahindra has announced US$10 million to the same alma mater.

Yes, wealth is coming out of the Indian closet.  Is this unique to India? No.  According to a recent study by the Asian Development Bank, by 2030, Asia’s consumers will spend US$32 trillion, accounting for 43% of global consumption.

Perhaps M/s Bugatti’s parent, Volkswagen, hopes to realise its literal translation - ‘the people’s car’ - in the world’s most populous continent.

If you would like to understand more about how to increase the growth for your organisation by deepening its engagement with India, do write in at ratika.jain@whiteowladvisory.com.

FDI in Indian Retail : One step forward . . .

                                 Image via Wikipedia

As Delhi put its proverbial foot to the accelerator to gear up for the Commonwealth Games over the past week, the Indian economy at large was not delinked from the spirit of sport. Indeed, the Olympic motto of ‘faster, higher, stronger’ is easily apt for the some of the economic indicators and signals that were revealed.

1. The Bombay Sensex reached a 33-month high.
2. India now home to as many as 69 dollar billionaires, compared to 52 last year (Forbes).
3. 127,000 High Net Worth Individuals[1], whose cumulative wealth stands at US$477 billion resident in India (2010 Asia-Pacific Wealth Report, compiled jointly by Cap Gemini and Merrill Lynch Global Wealth Management).
4. India’s growth is likely to outpace China’s (cover story of the latest Economist).

Ostensibly sensing the mood, the Government of India decided to give greater steer to the economy. It announced an easing of the norms for foreign direct investment (FDI) for a few sectors including wholesale cash-and-carry trading.

The Indian retail sector is arguably the most watched and contentious sector on India’s economic horizon. With growth trends and forecasts being what they are (see earlier blog post), this is not surprising. The policy amendment removes the restriction for internal use by the foreign wholesale cash-and-carry segment. It, however, retains the ceiling, mandating that such companies could sell only up to 25 per cent of their turnover to group companies. The move has implications for several retailers such as Bharti-Walmart, Carrefour and Metro Cash and Carry.

This relaxation comes at a time when much debate is underway regarding opening up of the retail sector to foreign investment. Since 2006, FDI up to 51 per cent has been permitted in single-brand retailing in India. 100 per cent FDI has been allowed under the automatic route in the cash and carry wholesale business. A few months ago, the Indian Ministry of Commerce had released a discussion paper on the issue of multi-brand retail, soliciting opinions. While Commerce is in favour of easing norms with some restrictions, the Ministry of Finance is said to be in favour of a more cautious approach.

Some innovative players are not letting these current restrictions be a bottleneck. Instead, they are crafting innovative solutions within the defined goal posts while the patiently nudge the public policy eco-system.

Interestingly, the organised, domestic retail sector is keen to see opening up. Indeed, there are strong and vociferous proponents on both sides of the fence. At what pace the situation evolves and its implications for the economy only time will tell. Perhaps it will be a case of catching the tiger by its (re)tail.

If you would like to increase the growth of your organisation by deepening its engagement with India, do write in at ratika.jain@whiteowladvisory.com .

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[1] Has “investible assets of $1 million or more, excluding primary residence, collectibles, consumables and consumer durables”.