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".

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

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