The
entry, into a country, of brands such as Aigner, Valentino, Boss,
Zegna, Lamborghini, Bentley, Tag Heuer, Chanel, and Bang and Olufsen
is actually a lag indicator of a certain economic phenomenon.
Much like the arrival of the sourcing arms of shoe firms like
Nike and the manufacturing divisions of gigantic electronic manufacturing
services (think contract manufacturing with a twist) firms is
a lead indicator of another, the emergence of the country as a
manufacturing base. The luxury brands signal the growing prosperity
of a country, the transition of a significant number of people
from merely well-to-do to really rich. In theory, the lead indicators,
as their names suggest, come before the lag indicators, like they
did in China. In practice, and in an economy as heterogeneous
as India's, they come together, and are, along with other indicators
such as visible urban renewal, sign that an economic boom is underway.
Some Indians have always bought these brands.
Every Indian city has, and has always had, several customers who
have patronised the stores (of course, they travelled abroad)
of Bulgari, not the local jeweller, B&O, not BPL, and Tag
Heuer, not Titan. By entering the country through what all India
calls 'official channels' and by opening large and luxurious stores
in the metropolitan cities, these brands are essentially recognising
the growing importance of the domestic market, of people who do
not travel abroad, of people who travel abroad, but prefer to
shop at home, and of people who buy luxury brands because they
have been told they are luxury brands, and they are available
at 'the new outlet' at the 'neighbourhood' five-star. "Aside
from increasing disposable income, Indians are travelling overseas
more and are acutely aware of the latest fashion trends,"
says Denise Seegal, President (Sportswear), VF Corp., which recently
launched its Nautica range of apparel and accessories in association
with Arvind Brands. In truth, this is more about the disposable
income than it is about travel or fashion sense.
And
it isn't actually about the products at all, but the lifestyle
the brands imply. "Lifestyle is not something people look
at as an investment," says Raghavendra Rathore, a fashion
designer who has sported a Bulgari watch for years now. It isn't,
and thanks to growing prosperity, more people are looking at it
now. "Over the past nine years, I have seen a 15-20 per cent
growth in the luxury market across the country for branded products,"
says Anthony Rodriguez, Director (India Operations), Euro Traditions,
the company that markets and distributes Christian Dior, Givenchy,
and Versace in India, quoting from a recent report on the local
market for luxury goods that claims that 1.6 million Indian households
spend Rs 5,00,000 a year on luxury products. In math, that would
translate into a Rs 80,000-crore market. "Luxury was earlier
the preserve of only rich business families," adds Manishi
Sanwal, Brand Manager, Tag Heuer India, which has increased its
retail presence from four outlets, in December 2002, to 70, across
20 cities today. "In the past few years, Indian salaries
have grown tremendously and the hitherto untapped salaried class
can now start buying luxury products." The 'feminist' economy
is doing its bit to accelerate the trend. "The working woman
is contributing very substantially to this luxury market,"
explains Harish Bijoor, who runs an eponymous marketing consultancy,
and who puts the number of rich households in the country at six
million by 2007.
Marketers of a range of products have been
quick to catch on. 'Exclusive', 'by-invitation-only' luxury apartments
are available for sale in most large cities. Bangalore's Mantri
Developers actually selected the 12 individuals who would occupy
its 5,515 sq. ft apartments (price: Rs 3-5 crore). And strictly
middle-of-the-rung brand Levi Strauss has found that there is
a market for its Vintage Classic Wear (they start at Rs 9,000
and could cost up to Rs 11,000). It would be difficult for vendors
of other luxury products to ignore India now, says Shumone Jaya
Chatterjee, Levi's India head. That it would.
-Rahul Sachitanand, Ahona Ghosh
and Shivangi Misra
INSTAN
TIP
The fortnight's burning question.
Will racial profiling and heightened
security concerns hurt India's export prospects, either as a non-tariff
barrier or a simple logistical issue?
No. S.N. Menon,
Commerce Secretary, Government of India
The issue of exports is related primarily
to trade and measures such as racial profiling will not have any
adverse impact on India's export prospects.
No. T.S.
Vishwanath. Head, International Trade Policy, CII
Security is a sensitive issue and countries
have a right to adopt measures to secure themselves. Till date,
there is no evidence of any large-scale exporter having been affected
by racial profiling measures. Having said that, it is important
to put measures and procedures in place so that business does
not suffer.
No. Deepak
Puri, Chairman, Moser Baer
Given the global issue of terrorism, these things
will happen and what is important is to understand the cultural
issues, the rule of the land and take this in our stride. We might
have done the same if 9-11 had happened here.
-Compiled by Aman Malik
Q&A
Made In India
Columbia
Tristar will produce Sanjay Leela Bhansali's Saawariya, scheduled
to be released in early 2007. Gareth
Wigan, the company's Vice Chairman, speaks to Shivani
Lath and Krishna Gopalan on
the India imperative.
Why the decision now to produce Indian
films?
Eight years ago, we developed a programme
to make films in languages other than English and countries other
than America. We are now making films in 12 countries.
What interests you most about the Indian
film industry?
The fundamental criterion for local language
for us is that there needs to be a large audience. In certain
cases, films that have been successful in their own countries
can be marketed in others.
You have started off with production.
What next? A studio?
No. Our primary business is distributing movies.
The reason we make movies is so that we have movies to distribute.
What are the things that you look for
in a film proposal?
The film will have to be popular and should
be able to attract an audience. Our job is to entertain, not teach.
Would you look at other Indian languages?
The essence is to make a movie that is profitable
in a territory. I am not aware of any other language beyond Tamil
with which that will be possible.
Political
Football
Politics behind reversal of residual stake
sale in Balco.
The
government's decision to return the payment of Rs 1,098 crore
made by Sterlite Industries for its residual 49 per cent stake
in Bharat Aluminium Company (balco) has shattered its pro-reforms
image. The procedure for the sale of the government's stake-and
the valuation process-were outlined in the shareholders agreement
signed between Sterlite and the government in 2001, when the latter
sold a 51 per cent stake in the company to the former. The agreement
also had a clause on resolving disputes through arbitration. The
deal was vetted by Parliament in March 2001. Later, in December
that year, the Supreme Court in its judgment on a public interest
litigation challenging the deal said, "...Unless any illegality
is committed in the execution of the policy or the same is contrary
to law or mala fide, a decision bringing about change cannot per
se be interfered with by the Court".
TIMELINE |
March 1, 2001: Balco sale approved
by Parliament
March 2, 2001: Sterlite buys 51 per cent for Rs 551.50
crore
December 10, 2001: SC rejects PIL challenging sale
March 4, 2004: Sterlite exercises call option for 49
per cent residual government stake in Balco (deal was to be
done in 60 days)
May 2004 onwards: Government seeks 9 extensions to
complete the sale of residual shares
November 2005: Govt appoints valuers for 49 per cent
stake
January 2006: Valuation report submitted
July 2006: CAG questions legality of deal
August 31, 2006: Govt decides to cancel sale of residual
stake |
To reopen the case now, after five years,
hence, reeks of arbitrariness. The issue arises from comments
of the Comptroller and Auditor General (CAG) that the call and
put options, on the basis of which the residual stake was to be
sold, are ultra vires of the Companies Act. Corporate lawyer Somshekhar
Sundresan of JSA Associates, who has been involved in many disinvestment
deals, however, disputes this: "Call and put options are
not in conflict with the Companies Act." CAG further says
the valuation is low given that aluminium prices have risen over
the past two years. Says former disinvestment minister Arun Shourie,
during whose tenure the BALCO sale took place: "There has
to be finality to the contracts that the government enters into."
The same issue of contractual obligation
comes up in case of Paradeep Phosphates also. The company, which
was losing money (a lot of it), was sold to the Zuari-Maroc combine
in 2002. The new owners are now demanding refunds for misrepresentation
of facts at the time of the sale. Legal experts believe that the
demands must be examined and, if justified, should be settled
by the government.
How the drama unfolds remains to be seen,
but for now, it does seem as if political undercurrents, rather
than commercial considerations, are setting the agenda on the
issue.
-Shalini S. Dagar
PUNJAB
INDIA'S TOP STATE
![](grfx/18a.jpg) |
Consolidation: That's the buzz in the
outdoor ad world |
The
fourth annual India Today ranking of states is out, and, on the
face of it, shows little change from the rankings last year. Punjab,
Kerala, Himachal Pradesh (HP), Tamil Nadu and Haryana maintain
their positions at the top of the table on Overall Best Performance.
Andhra Pradesh, at #10, swaps places with 11th ranked Jammu &
Kashmir. This is the only change in the Top 10 list.
But the real story lies elsewhere. Madhya
Pradesh, Uttar Pradesh and Orissa, which still rank quite low
in the overall list (at #14, #17 and #18, respectively), show
the maximum acceleration, which means they are developing faster
than their higher-ranked counterparts. Another surprise: Jammu
& Kashmir is the fastest mover when it comes to wooing investments.
A Chief Ministers Conclave 2006 was held
in Delhi to mark the occasion. Representatives of HP, Tamil Nadu,
Maharashtra, Punjab, Uttaranchal, Andhra Pradesh, Orissa, Madhya
Pradesh, Haryana, Uttar Pradesh, Chhatisgarh, Kerala, Goa and
Delhi took part in the panel discussion on Centre-state relations.
President A.P.J. Abdul Kalam gave away awards and mementos, based
on these rankings, to the Chief Ministers of various states on
September 1.
-Pallavi Srivastava
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