Global luxury CEOs to invest in India after reforms

A majority of global luxury brands consider wholly owned

subsidiaries or joint ventures as their preferred medium to enter India after the government relaxed foreign investment norms early this year. This was revealed in a study titled ‘India Luxury Top Management Survey 2012’. One-fourth of the 300 luxury brand CEOs who participated in the survey by Yes Bank and Assocham said they would prefer full control of their operations in India to protect proprietary knowledge and skills, while one-third of the respondents said they prefer joint ventures with Indian partners given their expertise and knowledge about the local market.

Before the government increased foreign investment limit in single-brand retail from 51 per cent to 100 per cent, a majority of luxury brands considered the franchisee route and distribution deals as their best option to enter the country. Global luxury giants are clearly keen to invest in a country where the market is booming. According to the survey, India’s luxury market is expected to reach $14.73 billion (Rs 81,633 crores) by 2015 from an estimated $8.21 billion (Rs 45,499 crores) this year.

Despite the inclination to have full control of their businesses in India, several brands do not anticipate immediate benefits of 100 per cent FDI in single brand retail due to sourcing clauses and other regulatory hurdles. One in four CEOs believe that the biggest hurdle facing the 30 per cent mandatory sourcing criteria is that they cannot achieve the same product quality by outsourcing a part of their production to India.