The Legal Structure and Framework of Luxury Goods Market in India: Competitive or Restrictive Growth?
Sinha, Piyush Kumar
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It has been evident from our long human history that luxury has been present in one or other form of consumption practices and that the luxury goods have existed for ages, dating back to Roman times, where luxuries such as silks were consumed for status, respect, and pleasure to the reformation in Europe (during the 1600s), where luxuries were consumed secretly, since their extravagant nature seriously compromised consumers‟ modesty and equality, important values at the time. Since the early 1990s, the luxury goods sector has been growing at an unprecedented pace. The Indian market for luxury goods has proved to be a very lucrative market and the rate of growth has outpaced that of other consumer goods categories. According to the ASSOCHAM-KPMG study, the Indian luxury market growth is estimated at 30 per cent and projected to reach $14 billion by 2016. This rate of growth has been triggered by accelerating influence of the affluent class, high net worth individuals with an appetite for luxury good consumption, ever growing middle class population, sophisticated consumers with a desire for exclusive products and several other related factors. But, still it is in a nascent stage of development in India and presently estimated to have just one-two per cent share in the overall share of the global luxury market. While the Indian market for luxury goods depicts business opportunities, it is also accompanied with a lot challenges which necessitates formulation of a strong legal structure and framework of intellectual property protection. A key dilemma here in this scenario is that unless one understands the Indian Luxury market from various perspectives like key supply side/demand side trends, international product segmentation policies and overall market drifts; it is hard to evaluate the present legal structures and economic policies. Possible explanations for restrictive growth of Indian Luxury market would be (1) Constraints pertaining to Luxury Infrastructure, (2) Lack of policy support for Maximum Retail Price, (3) Not being viewed as policy/regulatory friendly by Luxury retailers, (4) High Import duties, (5) FDI policy of 30% sourcing tough for International luxury players (6) policies regarding Intellectual property rights, (7) Measures taken for the presence of counterfeit luxury goods and (8) Emergence of channels- Online and Grey. The explicit premises on which our research intends to concentrate would be the following aspects: 1) Would the infrastructure of international standards encourage the luxury brands from setting outlets in the Indian market? 2) Would the revisiting of few policies related to luxury market be conducive enough for thriving of Luxury retailers? 3) Would reforms in the taxation environment put us on the road ahead in the luxury sector? 4) Would high import duties encourage affluent class to go to abroad destination to shop? 5) Would the recent modification in the FDI rules pertaining to single brand and multi-brand retailers facilitate the stakeholders in the luxury market? 6) Would internet retailing prove as a key distribution channel in the luxury retailing sector? 7) What would be the impact of the emergence of channels - “Online and Grey” for the luxury goods market in India? 8) Would the business environment masked by pervasive corruption and red-tapism affect the luxury investment? This paper will firstly pinpoint the overall luxury market in India; secondly it would highlight the challenges faced by the luxury players in today‟s legal as well as economic environment and finally emphasize the zone of attention. The authors through this paper do not aim at offering definite solutions to any of above questions but would improve understanding by delivering an encompassing outlook over the opportunities and issues highlighted in the Indian luxury market.
- Working Papers