Forget China, this is the next big luxury market

Inside an Hermes store in New Delhi, India
Sanjit Das | Bloomberg | Getty Images

India is the fastest-growing emerging market for luxury goods, according to some experts, but whether it can surpass China as the world's top luxury consumer is open for debate.

The country's luxury market will grow 86 percent in constant value terms between 2013 and 2018, according to a report from Euromonitor International earlier this year. Luxury markets in China, Malaysia and Indonesia are expected to grow 74, 62 and 59 percent, respectively, over the period.

Meanwhile, the total retail value of luxury goods in India is expected to increase 63 percent over the next four years compared with a 59 percent in China.

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"India's luxury goods market has been growing by more than $255 million a year in absolute terms, considerably stronger than Singapore and Australia," said Fflur Roberts, head of luxury goods at Euromonitor.

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A burgeoning urban middle class and an increase in the pool of high net worth individuals (HNWIs) are expected to underpin spending. The country ranks sixth globally in terms of billionaires, according to the Wealth-X and UBS Billionaire Census 2014.

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But while India may be the fastest growing market presently, it won't significantly change the luxury landscape over the next decade, Erwan Rambourg, author of 'The Bling Dynasty: Why the Reign of Chinese Luxury Shoppers Has Only Just Begun,' told CNBC.

Rambourg believes China will remain the world's biggest luxury player despite dwindling sales due to higher prices and a crackdown on corruption. He forecasts Chinese consumption to constitute 35 percent of global luxury sales next year and 50 percent in 10 years' time.

India's high-income population is also relatively weak in comparison to China. Average annual spending for India's HNWIs is $650,000, versus $1.1 million for their Chinese counterparts, according to Wealth-X.

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Deloitte believes India's luxury market peaked in 2012 and is now on a lower growth trajectory.

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"[Recent astronomical growth] has led to bottlenecks that created inflation, plus the growth was financed by an accumulation of external debt that cannot be sustained," it said in its 'Global powers of Luxury Goods 2014' report.

In addition, Indian consumers possess a different mentality that isn't necessarily conducive to luxury spending, said Rambourg.

"When I was working in Cartier in Paris, a wealthy Indian couple wearing gold jewelry entered the store and after looking at a few items, declared that no way were these goods worth thousands of euros. The view of many wealthy Indian individuals is that raw material counts a lot whereas in luxury brands, what counts are design, logo and general wow impact," he said.

This mindset could limit luxury sales in India, he said.

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Chinese consumers, on the other hand, are seen as more willing to purchase brand-name products to display their wealth.

Finally, international brands face a number of hurdles in India. A study by KPMG and the Associated Chambers of Commerce and Industry of India outlined concerns such as the lack of high-quality shopping environments, high custom duties on imported goods, a booming counterfeit market and the lack of well-trained staff.