India’s rapid economic growth has paved the way for a flourishing middle class with rising disposable income that is craving foreign luxury goods.

Sensing the huge growth opportunity, many foreign luxury retailers are expanding their footprint in India.

Before the Indian government gave approval to foreign luxury brands to open fully owned stores in India in February 2013, luxury players were selling their products through large e-commerce sites and retail chains with presence in high-end malls in major metros. They were also following the franchise model to retail their products to a niche customer base.

However, with the change in government regulations, many luxury brands are looking to set up their flagship stores in malls with high footfall and good brand exposure. They are also looking to comply with the 30 per cent local sourcing by setting up their manufacturing units in the country.

With an abundant skilled labor force available in the country, many of the Indian manufacturing units of luxury brands are emerging as the global manufacturing hub for high-end luxury watches.

According to a 2012 study by the Associated Chambers of Commerce and Industry of India, India’s watch market, for example, was worth Rs 5000 crore (nearly $1 billion) in 2012, out of which organised retail accounted for 40 per cent.

The low-to-mid watches segment is crowded with many players and offerings, and the luxury segment is unaffordable to most middle class consumers. Hence, the huge gap between these two segments, which some foreign luxury watch makers are looking to bridge. This category of watches has a share of about 40 per cent in the organised market, which is estimated at Rs 2500 crore (around $500 million).