An increase in the number of wealthy people and "revenge" spending is proving to be a boon for India's luxury industry. Sales of expensive goods from Swiss watches to upmarket homes are on the rise.
“Factors such as increased disposable income, rising internet penetration leading to increased awareness and exposure, the introduction of new brands in the country and the youth purchasing luxury products in new categories … are all contributing to the expansion of this industry,” says Gitanjali Saxena, business head, Tata CLiQ Luxury, an online platform, a part of Tata Group selling goods from high-end brands, including clothes and accessories.
India's luxury goods market is expected to grow by 42 per cent to $8.5 billion this year, up from $6bn in 2021, according to Euromonitor International.
“Post the pandemic, there has been a near revenge-like increase in spending on luxury living in India,” says Christopher Roberts, founder and managing director of consulting firm Engaged Strategy, which has its head office in Australia and an office in Bangalore.
“From experiential luxury via high-priced holiday travels, big fat weddings and fine dining experiences to purchases of sprawling residences, to name a few, the luxury goods market has witnessed a bounce back over the last two years.”
Ultra-high-net-worth-individuals — people with net assets of $30 million or more — rose by 11 per cent in 2021, according to property consultancy Knight Frank.
This was the highest percentage growth of any country in the Asia Pacific region, with Knight Frank citing “equity markets and digital adoption as factors driving growth in the super rich category of India”.
The uptick in the number of wealthy is a boon to the luxury industry and is unlikely to wane.
The number of ultra-high net worth individuals in India is forecast to increase 39 per cent between 2021 and 2026, with 19,006 people projected to have net assets of $30m or more by 2026, according to Knight Frank.
Meanwhile, the number of individuals with more than $1m is expected to surge by 77 per cent over the five-year period.
Sales of luxury brands are benefiting from this rising wealth. Yashasvi Saraf, owner and jewellery designer at Indian brand Yashasvi, says there has been a strong pick-up in demand for luxury jewellery, and this was boosted during the Diwali festival, which took place last week, a time when people typically splash out on expensive purchases.
“Diwali, along with the wedding season that follows it, is the most important time in any jeweller’s calendar, and the same holds true with us,” says Ms Saraf.
“Ever since the lockdown ended, we have seen a lot of revenge buying and witnessed an upward trend in sales. Also, post the pandemic, people are now inclined towards buying luxury that holds value and not something that you cannot redeem in times of need.”
Sahil Contractor, co-founder of Mumbai-based wealth management platform dezerv, says that he is also noticing that Indians are more willing to loosen their purse strings.
“Luxury brands like Rolex, Louis Vuitton, BMW, and even Porsche command long wait periods and premiums,” he says. “Indians have started shifting from saving more to spending more.”
Reflecting this appetite for expensive goods, high-end carmakers are saying that they expect this year to be a record year for sales in India.
India's largest luxury carmaker Mercedes-Benz has sold more cars between the months of January to September this year than during the whole of 2021.
“The current market momentum gives us the confidence for striving to achieve our highest sales ever,” Martin Schwenk, managing director and chief executive of Mercedes-Benz India, said in a press release announcing the sales figures.
The luxury growth trend is expected to continue over the coming years, as brands try to tap this growing wealth.
“Name a global high-end brand and it is quite unlikely that you may not find it in India,” says Mr Roberts. “Indian business houses are actively investing in international brands in India.”
Upmarket foreign brands are increasingly focusing on India. He cites examples including Apple, the popularity of which is growing in India, and electric vehicle company Tesla, which is eyeing the market.
India's demographics, with a large, young population, is playing a role, as it is expected to overtake China next year to become the world's most populous country with 1.4 billion people, according to the UN.
India's expanding economy is another factor that is fuelling the rise of luxury.
While India's economic growth prospects have slowed because of the global environment, the International Monetary Fund (IMF) forecasts the country's output will expand by 6.8 per cent in the current financial year to the end of March, among the fastest in the world.
Experts said wealth is spreading across the country.
“The economic growth, demographic shift and heavy penetration of digital media across India has definitely opened the market wider for luxury brands,” says Mr Roberts.
“Luxury spends are no longer associated with metros alone — online shopping, access to luxury and semi-luxury malls and greater brand awareness, thanks to social media has found a strong customer base in [smaller] cities and larger towns as well.”
The growing demand for luxury comes despite the fact that India faces soaring inflation, with retail inflation hitting a five-month high of 7.41 per cent in September. This is prompting concerns that the divide between the rich and the poor is widening in India.
But at the same time, luxury purchases help boost India's economy, which is driven by consumer spending.
“In addition to generating enormous retail revenue and providing employment in the entire retail ecosystem, this trend is also helping Indian businesses who are bringing foreign brands to the country or are creating avenues for these brands to be distributed across channels, not to mention high tax revenue,” says Radhika Butala, founder and strategy lead of The Better Collective, a brand consultancy.
“The rise in luxury spending denotes the growing consumer confidence and optimism in the country's economy and India's place in the global economy,” she adds.
Anand Naiknavare, head of business process at Naiknavare Developers, a luxury property developer in the city of Pune in western India, says there is no doubt that luxury spending is on the rise.
“We are noticing a big trend of revenge spending by Indians, especially the urban affluent, triggered by a desire to improve quality of life,” he says. “They are splurging on opulent residences, lavish holidays and high end experiences including personal luxury goods. There’s a growing segment of wealthy Gen Z buyers and ultra-high-net-worth individuals who believe in spending more than saving.”
He says that Indians are seeking bigger and better properties.
“People have the purchasing power and are demanding customised high-end, spacious homes. Developers, too, are wooing customers with unmatched amenities and offerings,” says Mr Naiknavare.
Also targeting India's wealthy consumers, Tata Group's jewellery division is planning to triple its number of Zoya-branded luxury stores to 15 in the next five years, Bloomberg reports.
“There is a lot of latent demand for luxury from India and high net-worth individuals are going to explode,” Ajoy Chawla, chief executive of the jewellery division at Titan Co, the parent company of Zoya brand, told Bloomberg. “This is just the beginning for luxury.”
Executives of Tata's online platform Tata CLiQ Luxury also believe that the future is bright.
“Given the rising wealth trends among the Indian population … demand for luxury goods and experiences will continue to rise,” says Ms Saxena.