India and Luxury: Outlook 2018
May 2014 saw a regional controversial political figure walk into the power corridors of New Delhi with a never before witnessed sweeping victory. A grim & challenging economic condition coupled with several other crisis situations welcomed Mr Modi. Obviously, the Luxury Industry could not have been on top of the Government’s agenda?
However, some of the key developments that unfolded have directly or indirectly affected the industry positively or negatively:
Digitisation of financial services & Demonetisation:
The attempt at weeding out alternate economy from the system came as a big blow to various sectors. Luxury, however, was gainfully impacted during the initial window of relaxations. Cash transactions peaked for a few hours when accessories, jewellery, watches, real estate and other high-value goods ended up being replaced with stashed away cash. Posts this period, there are mixed reports with respect to positive or negative impact. Most brands feel that the initial slow down was replaced by a more balanced cashless transaction bringing in more controls and ease of doing business at storefront levels.
Unified national tax on Goods & Services:
The single most factor driving mixed emotions post demonetisation has been the implementation of GST. With multiple slabs, a plethora of paperwork and confusions galore, GST started with a resistant trade blockage in general. Luxury brands operating in malls found their overall costs coming down due to the inputs being credited for GST paid at imports and or rentals to real estate player. With a uniformity of taxes across stores in various states, the margins could be healthier too. Clearly, if implemented well, GST can give a boost to the luxury trade. The government’s endeavour to rationalise GST slabs is also a welcome move for sectors like fine dining and hospitality.