New Delhi: Import duties on luxury products may go down, if commerce minister Kamal Nath has his way.

The commerce ministry has finally woken up to the revenue losses arising out of luxury brands purchased by Indians travelling abroad, and the potential that can be tapped by increasing foreign direct investment in single-brand retailing. Nath also said that he felt foreign luxury brands would not impact local businesses in any way. The government is okay with up to 51 per cent foreign direct investment in single-brand retailing and wholesale marketing.

Speaking at a conference in New Delhi, the commerce minister said, ''India has high tariffs and we recognise that if you go abroad and buy, then the country loses revenues. Therefore, we are working on both duties and countervailing duties.'' He said that the commerce ministry had forwarded proposals asking for for duty cuts to the finance ministry, while cautioning that given the need to differentiate between high-end and low-end products, his ministry is unwilling to reduce tariffs on low-cost imports that could hit domestic industry.

Given India's demographics, foreign luxury brands are marketed with the approximate 100,000 millionaires, and the burgeoning upper middle class.

Quoting from the report of Global Consulting firm A T Kearney, Kamal Nath informed participants at the conference that the report recently placed India at the top of a list of emerging markets for global retailers in its 2007 Global Retail Development Index.

''Indeed, if India was just a test market, such a high powered list of speakers would never have come for this conference! Many factors have contributed to this growth in demand for luxury goods. High salaries of employees in the corporate sector, emergence of new cities, a growing middle class, increasing number of working women, and rise of a new breed of self-employed entrepreneurs in a whole range of business sectors. Yes, we are proud of our new wealth. But let me also stress at this forum that India is a developing country with significant development challenges. The business of luxury cannot exist in a vacuum and must be seen from the overall context of equity and inclusiveness. I think it was Francis Bacon who once remarked: Money is like manure; it's not worth a thing unless it's spread around,'' he added.

Explaining about the contribution to luxury industry from an Indian Perspective, the commerce minister told the conference that Mumbai's 'Dharavi', which is supposed to be Asia's largest slum cluster, also doubles up as a giant manufacturing cluster. Over the years, migrants have moved to 'Dharavi' and have set up one-room factories, which have gone on to become extremely successful businesses. He said that migrants from Gujarat have established a potters' colony, and tanners from Tamil Nadu have migrated to Dharavi and set up a flourishing leather tanning industry. Other artisans, like the embroidery workers from Uttar Pradesh, started the ready-made garments trade.

He said that the 15,000 odd one-room factories at Dharavi manufacture products worth nearly $500 million annually, a large proportion of which are exported.

''My simple point of showcasing Dharavi is this: the skills of these artisans, and millions of others living in different pockets all over the country – can, and should be, effectively used by the global luxury players to develop their own low cost manufacturing bases. To be sure, quality could be an issue in the short term. But I am sure with the right environment and training, Indian artisans can work with European companies and develop world-class products for customers all over the world,'' he added.

29 March 2008

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