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Right Brain, Left Brain | Will India Fulfill Its Luxury Potential?

Back from a whirlwind trip to Mumbai, India, BoF's editor-in-chief, Imran Amed reflects on the development of the local economy and the luxury goods and fashion market.
Hermès Flagship on Horniman Circle, Mumbai | Source: skyscrapercity.com
By
  • Imran Amed

MUMBAI, India — It's always nice to be back in Bombay to see the ongoing development of the economy — and local luxury goods and fashion industry. This time was no exception.

One might have thought it was fashion week, as there was a slew of fashion events taking place each evening during my stay. Tod's held an opening at the Piramal Gallery for a new exhibition by acclaimed photographer Maimouna Guerresi. Self-described 'concept store' Le Mill held a celebratory event for Saloni Lodha, a BoF Spotlight alumna whose business is flourishing in India and abroad. Manish Arora held an opening party of his own for a new store featuring his diffusion line, "Indian, by Manish Arora," which targets India's burgeoning middle classes. And Hyderabad-based Anand Kabra and Calcutta native Kallol Datta, two promising young fashion talents looking to follow in Mr Arora's footsteps, held back-to-back off-piste, off-schedule presentations that attracted the city's fashion media doyennes, art crowd and the always-present socialites.

But beneath the frothy surface of non-stop events and parties, the Indian economy is stalling. Indeed, many business leaders and professionals from the luxury and fashion industry seemed despondent, saying the country has simply not been fulfilling its economic potential. For a few years — even amidst the throes of the global financial crisis — India's economy was growing at 8 to 9 percent annually. But just yesterday came the announcement that growth of India's GDP had slumped to 4.5 percent in the last quarter of 2012, the slowest growth registered in the past 15 quarters.

It's no wonder, then, that everybody seems to have their eyes on the upcoming national elections in 2014, which are expected to pit Rahul Gandhi, of the dynastic Indian family and ruling Congress Party, against Narendra Modi, the controversial chief minister of Gujarat, who is known for his role in the 2002 Hindu-Muslim riots in which over 1000 people were killed. Mr Modi is said by some to have condoned the violence against Muslims, who suffered the brunt of the attacks, but has also been credited with the rising economic fortunes of his home state. Gujarat's economy continues to grow at more than 8 percent annually, far above the national average.

Indeed, while the ruling Congress party continues to be dogged by charges of corruption, inefficiency and other scandals, many business people in India are looking to Mr Modi as a potential saviour of the country's economy. Gujarat has attracted investment from many of India's most powerful industrial families, who are also backing Mr Modi for election. And importantly, while he is certainly not a widely loved political figure, and still refuses to acknowledge or apologise for his role in the devastating riots, Mr Modi remains untainted by corruption.

This is not a minor point in a country where everything seems to grind to a halt unless you know how to grease the wheels. So endemic and long-standing is corruption in India that a U.S. Embassy cable from 1976, recently released by Wikileaks, said that "it is impossible in any single message to give a description of the extent and modalities of corruption in India. Entire books have been written on this subject and there is little doubt but that these only dealt with the tip of the iceberg," adding that it is a "cultural/political/economic fact of life."

It seems not much has changed in the past 35 years. Even a brand new institution like the hugely-popular Indian Premier League, or IPL, which has only been around since 2008, has been ravaged by controversies around money laundering and spot betting. If doing business in India remains so complicated, and getting things done continues to require being able to navigate the labyrinthine corridors of corruption, India may indeed be held back.

But all is not lost, the underlying economic fundamentals remain strong and the march of the luxury goods sector in India continues. With a growing population that has a voracious appetite for luxury brands and products, the luxury goods sector in India is said to be expanding at more than 20 percent per year.

At the Sabyasachi boutique in south Bombay, would-be brides (and their entire families) were trying on (and arguing over) $20,000 wedding lenghas while industry insiders were whispering about the arrival of even more major international luxury brands to the unfortunately-named, but beautiful Horniman Circle, where Christian Louboutin opened a flagship store just a few weeks ago, following in the footsteps of Hermès, which has helped to spark interest in this historical part of Bombay, known for its Victorian architecture.

If the rumours are true and Tiffany, Cartier and Tod's are the next international luxury brands looking to set up shop on the street, Horniman Circle may emerge as the definitive conglomeration of street-level luxury in India — and the antidote to the formulaic upmarket shopping malls and five-star hotel lobbies which currently dominate the luxury retail landscape.

But getting customers into these stores may be another matter altogether. On a quick trip to the boutiques on Horniman Circle one weekday afternoon, all was quiet. There was not one customer at the Louboutin store and Hermès had far more salespeople than clients. We'll be watching closely to see how things evolve.

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