NEW DELHI (AFP) - India's nascent luxury market is set to accelerate next year, crossing the US$10-billion (S$12.4 billion) mark, boosted by a new breed of wealthy "closet" consumers whose spending power is increasing, a report released Tuesday said.
Luxury sales will climb by an annual 17 per cent in 2014 to top the US$10-billion mark, up from estimated 14 per cent growth in 2013, market researchers IMRB and the Confederation of Indian Industry projected.
India's consumer base has been enlarged by "a substantial new class of wealthy" who have joined the ranks of the traditionally rich, said the report, released at a luxury conference in New Delhi.
India's sharp economic slowdown has impacted the luxury market where global labels from Chanel, Louis Vuitton, Cartier to Dior have been jostling to make their mark.
But by mid-2014, the luxury market is expected to gather steam as the economy picks up and as new luxury consumers - ranging from first-generation entrepreneurs to corporate executives, doctors and professionals - reach into their pockets.
The report identified this new brand of customer as "closet consumers" who it said were specially demanding as they have an "inner conflict" between parental middle-class values and "conspicuous consumption".
The luxury industry will have to provide value to this customer base as they purchase high-end handbags, jewellery, electronics and cars to expensive wines, the report said.
"India's newly rich, be it the corporate professionals, entrepreneurs or the farmers are yet to gain that degree of comfort with spending money on luxury," as "old money", the report noted.
The Indian market still represents a fraction of the US$318-billion global market but the country with its increasingly affluent population of 1.2 billion has "tremendous potential", the report said.
Still, speakers at the conference spoke of multiple challenges holding back the sector including high import taxes, the array of goods on sale and restrictive curbs on foreign retailers such as a requirement for 30 per cent local sourcing.
"The import taxes are far too high," said Mr Sanjay Kapoor, an ex-investment banker who has partnered with some of the biggest Western luxury firms such as Giorgio Armani, Burberry and Jimmy Choo and brought them to India.
Also with many hundreds of millions living in poverty, the number of people with enough money to spend on luxury goods still is restrained.
The Indian government is conscious it cannot "kill the goose that lays the golden egg" and is looking at creating an easier landscape for luxury players, India's additional finance secretary K.P. Krishnan told the audience.