Time Wear Industry

C on t e n t s
Executive Summary Background Research Methodology Overview of Indian Timewear Industry Regulatory Environment Key Challenges & Bottlenecks Global Timewear Industry Recommendations of the Report About Technopak 01 03 04 06 15 17 21
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India Timewear Industry - 2010 |
Executive Summary
Timewear industry is one of the oldest industries in India and has a rich heritage to boast about. Despite this the Timewear industry has not been able to grow true to its full potential and currently the size of the market is very less as compared to other countries. Over the years the growth rate of the watch market has been modest and the penetration level at 27% is still very low. However the future prospects of the Timewear industry looks bright driven by favourable demographics and a gradual change from a functional or utilitarian product to a lifestyle one. Currently, around 60% of the market by value is controlled by organized players like Titan, Timex, Maxima, HMT and many Swiss, American and Japanese brands. Remaining 40% is where unorganized and grey market players operate. The structure of the market is that of a pyramid with mass segment having the largest contribution. However in the coming years, the market is expected to become like an inverted pyramid as the luxury and prestige watch segments are growing faster mirroring the trends in most international developed markets. Factors like growing economy, increasing consumerism, favorable demographics, 300 million strong middle class and more than a million high net worth individuals, hold a lot of promise for the Timewear industry in near future. The new age watch buyer is a young, aspiring individual with a high disposable income. The consumer does not see the watch merely as an instrument for keeping time; a watch is now considered a fashion accessory and the brand name a fashion & style statement, and a reflection of their personalities. Modern retail has also contributed to the growth of the time wear industry in many ways by giving the brands the visibility and reach. Indian Timewear industry is not devoid of bottlenecks and there are key challenges owing to the government policies and regulations. High duties and complex & varied taxation structure are proving to be key impediments to its growth. Under the current tax structure, goods and services are taxed at multiple points by multiple authorities. This has sometimes resulted in double taxation. Taxes such as VAT, Octroi fall under the jurisdiction of the state government and many of these states have imposed a different rate of tax. The current import duty structure is also impacting the operations and profitability of both Indian and international watch companies, posing a bottleneck in the growth of the Indian Timewear industry. Another big challenge for the industry is the packaging regulations as per the Weights and Measures Act. It has multiple implications on the watch industry including high incidence of taxation & operational difficulties. Organized retail in India is still in the nascent stage and watches needs a very high service led customer interface to close the transaction with the customer. High rentals and unavailability of skilled sales staff is a big challenge that the industry is facing. Also, FDI restrictions are not allowing the international brands to have complete control over retailing. Unorganized sector or grey market also poses a big challenge to the organized watch retailers. Counterfeiting is a major issue that brands in the mass market and economy watch segment face in the country. Watches as an instrument for time keeping device is facing threat from increasing penetration and use of mobile phones.
| India Timewear Industry - 2010
The Indian Timewear industry can learn a lot from their counterpart in some of the developed and developing nations. Be it Chinas manufacturing capabilities, Japans technological excellence or effective marketing by US and European countries. While, India is one of the few countries besides Switzerland, Japan US, Taiwan & China that has watch manufacturing capabilities; it has still a long way to establish itself as a world class manufacturer of watches or its components for some of the biggest international brands. The government will need to support the watch industry by rationalizing taxes, especially in sub ` Rs 1000 which is currently marred by counterfeits and cheap Chinese imports. This will incentivize companies to set up their assembling units in India and also attract component manufacturers to set up their plants to cater to the demand created by these assembling plants. Govt of India can also help HMT in its revival by creating favourable conditions, so that its infrastructure and the skilled manpower can be gainfully employed in manufacturing both its own brand and a third party component manufacturer. There is an opportunity to generate additional total employment of around 80,000 people and will support nearly the 3,60,000 people. The employment in watch retail can also witness similar growth and the total employment in watch retail (front-end) will increase to 215,000 people in the next 5 years. Government can also learn from other Indian sectors like mobile phone industry, auto components manufacturing and gems and jewellery industry, where reduction of duties has contributed significantly to the growth of these industries. Mobile industry has a lot of insights to offer in terms of growth, manufacturing capabilities and successful graduation from being a utility device to lifestyle accessory. While Chinese manufacturing is slowly losing its shine due to increasing wages, pressure on its currency due to high exchange reserves, it may be noted that this opportunity could be available for next few years, as most of the suppliers may shift to nearby favourable countries like Vietnam, Malaysia, Thailand etc and India may miss the bus as it has happened with the consumer electronics sectors. Technopak analysis estimates that if the duty and tax rates are rationalized, it would benefit the Government by increasing revenue up to 40% due to increased consumption, influx of more Indian and international players in the market and better tax compliance.
Background
Watches in India have seen a gradual transformation from a time keeping device to a fashion accessory. This evolution has been ushered by many factors such as changing consumer dynamics, increase in disposable income, growth of organized retail, entry of international brands, etc. However the industry has not been able to achieve the scale or size as per its true potential and is growing at a very modest 8-10% with the penetration levels of just 27%. The industry can grow at a much faster rate given the buoyant economy, increasing incomes and low penetration base. However the industry is facing challenges such as the inadequate retail infrastructure and unfavorable government regulations and policies. There is a serious need for bringing about a change and removing the impediments to the growth of this industry. This whitepaper is a step in this regards with the joint effort of The All India Federation of Horological Industries (AIFHI) and Technopak Advisors. AIFHI is the watch industrys apex organization in the country, comprising of leading Indian as well as global watch companies such as Titan, Timex, Maxima, Swatch, HMT, Citizen, Casio and LVMH. It identifies key opportunities and issues for the industry, and ensures that these are appropriately addressed at all quarters. It has worked with the Government and other apex industry associations to ensure that there is a robust framework for the industry. The federation has been active in addressing challenges posed by the unorganized sector. Technopak Advisors is a leading Management Consulting firm offering strategic advice, start up assistance, performance enhancement impetus, consumer insights and capital advisory, to leading Indian and International companies, operating in Retail, Consumer Products, Fashion (Textiles & Apparel), Healthcare, Hospitality & Leisure, Food Processing, Education, Entertainment and Real Estate sectors. The AIFHI has commissioned Technopak to prepare a white paper on the watch industry in India covering its current status, market size and structure, growth, key trends and all its current and future challenges. The purpose of the study is to provide a deeper understanding of the market to the government and other agencies and use it as a basis for putting forth industry grievances and initiate changes in the policy framework so as to promote legitimate and beneficial growth of the industry.
Research Methodology
Secondary research
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The objective of the secondary research was to gather market data on the sector, understand opportunities and challenges that face the sector and other issues which could be validated in the primary research We have extensively utilized Technopaks internal body of knowledge, various media reports and other reliable data sources.
Primary research
Technopak consulting team interviewed top/senior management of member companies, watch component manufacturers, retailers and other industry experts to gather information, to get their perspective on the industry and to understand their expectations from the government/policymakers. Technopak team has conducted 26 personal / telephonic interviews with individuals from member companies and industry experts to understand from them their views on: Size, growth, structure and segments of the sector Taxation policies & its implications Need gaps and pain areas in the industry Major deterrents for the growth of this sector Future prospects & trends Industry expectation from the government and policymakers
Exhibit 1
Sr. No.
Company
Name Corporates
Designation
Citizen Watches (India) Pvt. Ltd. 1 2 3 4 5 6 7 Citizen Watches (India) Pvt. Ltd. Citizen Watches (India) Pvt. Ltd. Classic Times Fossil India Private Limited Morellato India Pvt. Ltd HMT Watches Limited LVMH Watch & Jewelry India Pvt. Ltd P A Times Industries
Mr. Katsusuke Tokura Mr. Takeshi Okada Mr. Sandeep Hegde Mr. Abdul Rehman Shipra Mr. Vasant Nangia Mr. Santosh Kumar Mr. S Paulraj Mr. Manishi Sanwal Mr. Manjot Purewal
Managing Director GM Marketing Sr. Manager-Marketing Director Country Manager Vice President Managing Director General Manager Managing Director
Sr. No.
Company
Name Corporates
Designation
8 9 10
Priority Marketing Priority Marketing Raymond Weil Seiko Watch India Pvt. Ltd. Seiko Watch India Pvt. Ltd. Seiko Watch India Pvt. Ltd.
Mr. Sailesh Sangani Ms. Manisha Sangani Mr. Sebastian Lukose Mr. Tetsuji Ishimaru Mr. Niladri Mazumdar Mr. Vikramjit Bhattacharya Mr. Partha Dattagupta Mr. V.D. Wadhwa Mr. Harish Bhat Mr. S.D Gopalakrishnan Mr. Raghunath Manufacturers Mr. Sailesh Mr. Harsh V. Bhuwalka Mr. Ramesh Mr. Denish Publications/ Academicians Mr. Hemal Kharod Mr. Mihir Kharod Mr. Sunil Karer Mr. S Nagarajan Dr. Y.L.R Moorthy Retailers Mr. Ram Prasad Mr. Ramesh Mr. BK Singhania Mr. Sharjeel Khan Mr. Satish
Director Director VP Sales & Merchandising President VP- Sales & Marketing GM-Finance & Admin India Country Manager Managing Director Managing Director Commercial Head Chief Manufacturing Officer Owner Managing Director Director Owner Managing Director Editor Managing Director Managing Partner Prof.-Marketing Owner (Titan Franchisee) Owner (Titan Franchisee) Owner (Titan Redistributor) Director Store Manager
11 12 13
Swatch Timex Group India Limited Titan Industries Titan Industries Titan Industries
1 2 3 4 1 2 3 4 1 2 3 4 5
SK Times VBL Innovations Best & Young Engineers Pvt. Ltd. RK Industries Trade Post Trade Post WMR En theos IIM B Shree Maruthi Enterprise Titan Franchisee Arun Distributors Zimson The Time Factory
Overview of Indian Timewear Industry
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The total size of the Indian timewear industry is estimated at `4,000-4,200 Crore. The industry has witnessed a growth of 8-10% for the past few years. However as per the latest trends, the market is expected to grow faster rate of 12-15% in next few years. A large part of this growth is expected from youth and premium segment of consumers. By volume the market is estimated at ~460 Lakh pieces annually. At 27%, penetration of watches in India is amongst the lowest in the world and it is estimated that just 3.5% of the population own multiple watches.
Market Composition
The organized players in this sector control 40% of the volume of the industry while the unorganized market which consists of smuggled watches, cheap imported watches, watches assembled by small unorganized players, watch wholesalers and repairers contribute the rest. Mainly cheap components imported from China or other Asian countries are used to make Market Structure Exhibit 1 such watches. By Value around 60% of the market is controlled by organized players. The unorganised players usually operate in the sub ` 500 price range and distribute their goods through small watch retailer and repairers. Fake watches too form part of the unorganised market and are distributed through popular markets where imported goods are sold. Many organised players from India have introduced their own brands/sub-brands in low price segment to counter the challenges from the cheap watches in grey market.
Volume Value
Organized, 40% Unorganized, 60%
Organized, 40%
Unorganized, 60%
Source: Technopak Analysis
Market Segmentation
Segmentation of the timewear market is done mainly on the basis of price and gender. Price based segmentation The market is segmented into three key price bands namely, Mass, Mid and Premium. Figure 1.2 shows the various segments and watch brands alongside indicative price range, segment market sizes by value & volume and growth rates.
Exhibit 2
Market Segmentation by Price ` 4200 crore 460 lakh pieces 2.1 900 86.5 Segment 1600 370 1700 Mass Mid Premium Volume (lakh pieces) 370 86.5 2.1 Price Range (`) <1,000 1,001-10,000 >10,001 Value (` crore) 1700 1600 900 Growth Rates 5-7% 8-10% 15-20%
Value (in Rupee Crore)

Volume (in lakh pieces)
Mass Segment: This segment caters to the sub ` 1,000 range of watches. National players, Titan and PA Time Industries from the organised market with their brands Sonata and Maxima respectively cater to sub ` 500 watches within the mass segment. Few regional brands such as Rochee, V.I.P also operate in this segment. There is a huge presence of unorganized players in this segment. Mid Segment: Brands such as Titan, Timex and Citizen that used to cater to the mass segment have increased their offering in the higher price range and thus moved to the mid-segment. This segment also includes fashion watches in ` 3,000-8,000 range, which appeals to the customer more on the aesthetics and brand association front rather than technology advancement. Few fashion brands, designer labels that operate in this segment are Diesel, Esprit, Fossil, Giordano, Tommy Hilfiger, Guess, Kenneth Cole, Police etc. Premium Segment: The segment caters to consumers who want to get associated with a brand name that signifies growth and prosperity. These consumers consider watch brands as a reflection of their own personality. Many of these high end watches are often gold plated, diamond studded and used as left arm jewellery. Brands here, range from premium, affordable luxury to prestige price bands, examples are, Guess Collection, Seiko, Tissot, Xylys, Dior, Longines, Rado, Tag Heuer, Harry Winston, IWC, JLC, Patek Philippe, Ulysse Nardin, Breitling, Cartier, Montblanc, Omega, Rolex etc. Although this segment is largely driven by brands, it does have a significant grey market in the luxury and prestige segment. In next 5-10 years, the market is expected to move towards an inverted pyramid as the value share of premium segment will be the highest. This structure will mirror most international developed timewear markets Gender based segmentation The overall timewear market is split 60:40 amongst men and women. However there are brands that have more focus on only one of them. For example, Dior, Esprit & Guess have a large share of their range and sales from women whereas Tag Heuer has from men. The gender-wise split of sales in the fashion segment between men and women is estimated at 65:35
Exhibit 3
Gender Based Segmentation
Women 40% Men, 60%
Key growth Drivers

Growing Indian economy India is the eleventh largest economy in the world by nominal GDP and the fourth largest by purchasing power parity (PPP). Indian economy currently has a GDP of USD 1,370 billion, that grew at 7.2% in 2009, and is expected to touch almost USD 3,100 billion in the next 10 years in real GDP terms. India has witnessed unprecedented levels of economic expansion and is expected to overtake China as the fastest growing major economy by 2018. The GDP of India is poised to become larger than the GDP of countries like France, UK or Italy by 2020.
Exhibit 3
GDP Growth of India 9.7% 8.5% 5.6% 6.0% 6.0% 6.8% 6.5% 6.7% 7.2%
2001
Source: Economic Survey of India
2002
2003
2004
2005
2006
2007
2008
2009
Favourable Demographics India, today, is home to ~1.19 billion people, and it is expected to reach 1.5 billion by 2025. The population has almost tripled since the time of independence. Rapid urbanization is also taking place & by the year 2011 there will be around 65+ cities with million plus population. Young population: 51% of Indian population is less than 25 years old. More than 20% of the Indian population lies in the youth segment which is 15-24 years of age. There are ~ 20 million youth in the top 100 cities in India and 40% of these are in top 8 cities. They start earning early and have enough disposable income to spend on lifestyle products. They are brand conscious, have high aspirations, are attracted by western lifestyle and are well aware of the international brands. Growing middle class: The growing middle class in India is an important growth driver for the watch industry. The aspirations of middle class consumers are growing and they are willing to spend their disposable incomes on products to improve their lifestyle. The Indian middle class today stands at more than 500 million consumers (~270 million consumers in rural India and ~230 million consumers in urban India) off which ~80 million are in top 100 cities and ~30 million are in top 30 cities including metros and mini metros.
Exhibit 5
A Glance at the Indian Middle Class Inidan Middle Class Urban Middle Class
Rural 270m
Urban 230m 30m Top 30 Cities 80m Top 100 Cities
230m
All cities
High disposable incomes and more spending power High disposable incomes mainly amongst young middle class consumers have resulted in increased spend on lifestyle products like watches and mobiles. They are constantly looking at upgrading to bigger brands and higher price points. Growth in High Net Worth Individual population: The population of high net worth individuals (HNWIs those who hold at least USD 1 million in financial assets) has seen more that 50% growth in 2009. Currently there are there ~ 126,700 HNWIs in India. This has brought a sale upsurge of affordable luxury, luxury & prestige watches. HNWIs consider luxury and prestige segment timewear buying as a lifestyle investment. Change in the Indian consumer mindset Indian consumers have seen a major shift in their mindset and attitudes over the last few years. Shift from functional utility to fashion accessory and aspiration: Wristwatch has made the shift from mere timekeeping device/instrument to a fashion accessory. A watch is seen by its wearer as a reflection of his/ her personality, a style statement. Watches play an important role for men too equivalent to a jewellery item. New age consumers aspire to buy different brands and upgrade to higher price segments. From mere gifting occasions trend has shifted to self indulgence. Increased awareness and brand consciousness: Emergence of the IT sector in India has spearheaded a new revolution where Indians are getting high global exposure and aspire to adopt western culture. Todays new age consumers are well travelled and due to exposure to internet they have increased fashion consciousness and are more aware of branded products, be it Indian or international. Growing trend of multiple watch ownership and replacement: Earlier watches were bought or gifted only on festive occasions or certain milestones of life like graduation, birthdays, weddings etc. Today watches are no longer just a onetime buy and consumers are increasingly buying multiple watches to suit their lifestyle demands. Multiple ownership has been one of the key drivers for growth of watch industry in India. Replacement demand for watches is another growth driver and brands often use exchange schemes and discounts to promote the same. Increased investments in the timewear market Given the large opportunity, Indian market is attracting many Indian and big international brands. Influx of international brands is set to rise further when FDI rules are relaxed. Companies are increasing their promotional spends as well, to generate consumer awareness. Brands are also investing in quality retail stores which are further helping the industry grow. Introduction of new and innovative features: Technological advancement has resulted in addition of new features in an otherwise time keeping device is also a key driver in growth of this industry. This is also a key reason for multiple owner ship of watches. Growth of modern retail: The growth of modern retail has aided increased spend on lifestyle categories like timewear. Better store layouts, ambience and eye catching visual merchandising are few factors that prompt consumers to shop more and even impulsively at times. While timewear sales through stand alone EBOs provides the consumers with exclusivity, the MBOs provide them a great variety of options of both Indian and international brands all under one roof. The other prominent organized retail formats are kiosks in malls/airports targeted at on the go customers and shop in shops in malls/large format department stores promoting impulse purchase. Apart from being a large contributor to employment in the timewear industry, modern retail has also made a positive contribution to the overall experience of buying timewear, thus increasing penetration and accessibility of fashion & premium watches. Rise of premium retail: Advent of malls and retail stores has played a major role in growth of the premium segment of timewear market. These retail spaces allow the target segment to shop in the confines of exclusiveness and have even reduced their need to travel abroad for buying high end goods. Many international brands have also set shops in India are capitalizing on the growing Indian high net worth individual population.
Underpenetrated rural market Organized Timewear industry is yet to make successful inroads in rural India. With all India penetration levels as low as 27% the rural market seems to be relatively untouched. Given the growing consumerism, a large number of middle class consumers in rural India (270 million) and a significant number of high spenders, the rural market holds a lot of untapped opportunity for the timewear industry. The key challenge that companies face in rural markets is that of establishing an efficient distribution system with wide reach. Mobile, as time keeping devices also pose a major threat and are eating into the timewear share in the rural market. Few brands that have forayed in rural and semi urban markets are HMT, Titan (Sonata), Timex and Maxima. Most of these companies have low priced ranges which cater to the rural consumers.
Supply Chain Overview

Major watch companies around the world do not produce all the components required in the assembling / manufacture of a watch. They rely on a host of watch movement and component manufacturers. The companies usually have their own assembling unit but may also outsource the activity. HMT from India is one of the very few integrated watch companies in the world that manufactures all the components & movements and assembles the watches in-house. Once the watch is manufactured, the company may sell the watch either to the retailer or to a distributor depending on the target segment. The watch market supply chain is explained below. Movement Manufacturing There are very few companies in the world that manufacture movements for watches. Therefore it is common for the companies that produce movements to supply it to all the other watch manufacturing companies in the world. International companies that make movement in-house are Citizen, Seiko, Timex, Swatch Group, etc. Seiko and Citizen produce approximately 700 million movements annually out of the total world production of around 800-900 million movements. Swiss companies are the other main movement manufacturers in the world. However the Swiss do not produce movements in large numbers and the cost of Swiss movement is high. Tianjin Sea-Gull in China currently produces a quarter of the worlds mechanical watch movements. Out of twenty million movements produced in the world, five million come out of SeaGull factories. In terms of volume, they are the also largest producer of automatic movements in the world. Indian companies such as Titan and HMT have the know-how for producing movements. Component Manufacturing Besides movement, there are other components such as band, bezel, case, chronograph, clasp, crown, crystals, dial, hands, markings, sub-dials, tachymeter, etc used in the manufacturing of watches. Most of these components are manufactured in India. However China is the largest manufacturer of watch components and supplies many components to watch manufacturers in India and around the world. There are few key centres for manufacturing of watch components in India: Rajkot in Gujarat and Hosur & Tumkur in Karnataka. Assembling / Manufacturing Both the movement and the components are then put together in an assembling unit. Major watch manufacturer brands such as HMT, Maxima, Titan, Timex, Fossil group have their own assembling unit in India. Watch companies such as Swatch, Citizen, Casio and others carry out assembling or manufacturing of watches in other countries and import finished watches into India. The organised players have their assembling units in Hosur in Karnataka and Baddi and Solan districts in Himachal Pradesh. The Swiss companies cannot assemble watches in India as the laws governing the protection of brand names and the place of origin does not allow the use of Swiss Made on watches made outside Switzerland. Subsidiary / (Licensee / Distributor) Many international watch companies are operating in India either through a joint venture or a wholly owned subsidiary or a licensee or a distributor. The assembling / manufacturing of watches takes place in a
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foreign country and the licensee or the distributor imports completely finished watches into India. The parent company does not have any incentive (availability of infrastructure, skilled manpower & raw material and favourable tax structure for manufacturing in India) or large enough volumes to set-up assembling in India. Owing to the FDI regulations, an international company may open its wholly owned subsidiary and get a Cash & Carry License to operate in India. But the subsidiary company cannot invest in retail due to regulatory restrictions in India. However the company can invest in setting up a manufacturing or an assembling plant. If the international company only deals in a single brand, it may enter into a joint venture with an Indian company and own up to 51% share of the company. The company can also operate in India through a licensee or a distributor. Here the company either authorises the local company to manufacture watches under its brand name for the local market or directs the local company to import watches. The licensee / distributor represent the company in the country and looks after both the distribution and promotion of the brand. Watch companies such as Titan, Timex, HMT, Citizen, Maxima have appointed distributors for their business. It is because they have products that cater to the masses and require a wider network to reach to the customer. On the other hand, companies with brands in the premium segments have not appointed any distributors and manage the distribution on their own as the number of point of sales is limited and also to optimise on the low margins Retailer The last mile connectivity to the consumer is provided by the retailer. The mass-segment brands such as Titan, Timex, Maxima and regional players such as Rochee, Cizer together have the widest reach in the country covering over 2500 towns and are retailed in different organised and unorganised retail channels. The fashion segment brands are retailed through multi-brand watch retailers, department stores and exclusive outlets. The reach of the luxury brands is limited to the top 7-8 cities in India. These watches are sold through exclusive watch retailers selling multiple brands.
Indias Manufacturing Capabilities

India is one of the few countries besides Switzerland, Japan US, Taiwan & China that has watch manufacturing capabilities. However India has not been a major manufacturer of watches in the international market. It largely produces and sells to cater to the domestic demand. The domestic demand for watches is expected to grow many-folds and it is predicted that there will be a capacity shortfall of 30 million watches in India in 5 years time. At present, many international brands do not have an assembling unit in India as the domestic market has not matured enough to give sufficient volumes. Therefore, Indias potential as the manufacturing hub for the world has not yet been realized. However, post the recovery of international markets, market share of Indian component manufacturers is improving. Also there is a growing interest in India as a manufacturing base for watch components as a viable alternative to China as they are unable to meet the delivery requirements and are also under severe cost pressures. Movement Manufacturing Indian companies such as Titan and HMT have the know-how for producing movements. Movement manufacturing requires large investment in machinery and set up and also highly skilled labor. The expected return on investment from manufacturing and selling of movements to watch companies is also not very attractive because of excess supply in the current market. Titan currently producing around 7.7 million movements per year for internal consumption is not looking to increase its capacity as it will be cheaper to buy it from the international market.
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Component Manufacturing Most of the components are manufactured in India. However China is the largest manufacturer of watch components and supplies many components to watch manufacturers in India and around the world. There are few key centres for manufacturing of watch components in India: Rajkot in Gujarat and Hosur & Tumkur in Karnataka. Rajkot in Gujarat is an important watch manufacturing centre in India. It produces millions of units every year and provides employment to more than 20,000 people. Rajkot is known for low cost metal component manufacturing for watches, especially cases and bracelets. The quality and design of components manufactured in Rajkot do not confirm to international standards. It mainly produces components (90%) for the replacement market in Delhi or Mumbai or for the duplicate or counterfeit watch market. However over last 3-4 years, the quality of goods produced has shown a marked improvement. Key watch manufacturing companies in India have started sourcing from Rajkot. Hosur/ Tumkur in Karnataka cater mainly to the organized market as many watch manufacturers are based in Bangalore. The current players in this region are not expanding their capacities as there are limited numbers of big buyers in India (Titan, Maxima, and Timex). Many of the component manufacturing players have one of these players forming majority of their sale and this has led to over dependence on one buyer and an unreasonable bargaining power with the buyer. Case and Strap / Bracelet Manufacturing - Case and bracelet need to be manufactured in nearby locations as the design for both the components are interdependent and the manufacturing requires high level of co-ordination. Case manufacturing is segmented based on raw material used to manufacture the product. Any case made from stainless steel, brass or aluminum has a very complex manufacturing process and requires high investment in machinery and technology for manufacturing and testing purposes. On the other hand plastic cases are comparatively easy to produce and do not require high technology. In India, cases are also made from alloy which is largely used by the unorganized sector. Many of the existing players in India do not have all the capabilities to manufacture full cases in-house. They outsource certain activities for job-work. This affects the overall quality of the final product. Dial / Hands Manufacturing Dials and hands form 80% of the look of the watch and hence their quality manufacturing holds great significance. The skill required in watch making is aptly manifested in the dial and hands of a watch, often referred to as the face of the watch. The hands are either manufactured by machines or by hand. The average price and the quality produced for dials in India is very competitive and can therefore be developed as a low cost good quality dial manufacturing destination for the world. Watch Manufacturing / Assembling In an assembling unit, all the components of the watch are brought together to create the watch. In India, very few companies such as Titan, HMT, PA Time Industries, Timex and Fossil have their assembling plants. The combined capacity of all these brands put together will be around 14 million units per annum in India as compared to a total consumption of 45 million units in India. The organised players have their assembling units in Hosur in Karnataka and Baddi and Solan districts in Himachal Pradesh. There are regional brands such as Rochee, Cizer, Classic Times and others that also manufacture watches in India. Watch companies such as Swatch, Citizen, Casio and others carry out assembling or manufacturing of watches in other countries and import finished watches into India. The Swiss companies cannot assemble watches in India as the laws governing the protection of brand names and the place of origin does not allow the use of Swiss Made on watches made outside Switzerland.
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Indias Strength and Opportunities as a Manufacturing Hub

External Factors Increasing cost of manufacturing in China due to rising currency; increase in per unit electricity costs and better salaries for labor. Higher lead time required to cater to global needs from a single location. Need to diversify production risk amongst different locations. Internal Factors India is one of the few countries that have watch manufacturing capabilities. India has proven its capabilities to manufacture quality engineering products with the success in auto and chemical industries. Prices and quality of products is competitive. Availability of skilled manpower.
Indias Weakness and Threats as a Manufacturing Hub

External Factors Although labor wage in China is increasing, the component of wage in total cost of a watch being less, shifting of manufacturing from China to India will take time. India imports most of the raw material used in watch component manufacturing such as stainless steel, leather and synthetics. Internal Factors The capacity of the existing manufacturers is not enough even to cater to the requirement of existing watch companies such as Titan, Timex. It will require huge investments to ramp up capacities to cater to global demand The quality standards set by Titan and others are very difficult for current manufacturers to achieve with their current set-up. Many processes in the manufacturing are outsourced and therefore the quality suffers. None of the school of higher education imparts engineering skills and design skills catering to watch manufacturing. Manufacturing has traditionally moved to countries that develop capabilities and scale (Japan China Taiwan Vietnam, etc) at competitive prices. World over China has a clear dominance in the watch component manufacturing industry. Over 20% Swiss watches use components made in Asian countries, primarily China. 100% Chinese components are used by watch manufacturers in China and rest of the world. Taking into account key components like case, bracelet, dials, hands and movements, the market for Chinese components stands at ~ 1,700 Mn USD. However, India is way behind China and largely manufactures for domestic consumption barring few players who export to Swiss markets. The potential market for components in India is ~ ` 600 Crore, however almost bulk of watch consumption in India comes from the fashion to luxury segment which is largely imported. The companies catering to the mass and mid segments are most likely to make India as one of their
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assembling and manufacturing hubs. It will help them diversify their manufacturing risk across different countries. The Swiss brands will not consider making entire watch in India, owing to rigorous Swiss manufacturing, sales procedures and Swiss laws that prohibit the use of Swiss Made label for watches made outside of Switzerland. However, India has the capability to become a manufacturing hub for components, accessories, bags, boxes and other paraphernalia to these brands and for all brands across watch segments. Many Swiss high end brands are already sourcing components from Indian manufacturers like KDDL. KDDL has also set up a unit in Switzerland thus strengthening the Swiss Made, Swiss Origin requirements. The domestic demand in India is currently pegged at 46 million units and is projected to grow at a healthy rate in the coming years. If we take the necessary steps for promoting India as the watch manufacturing hub, there will be employment as well as revenue generation for the country.
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Regulatory Environment
Taxation policies, incentives & implementation
03
Regulatory Authority Central Government Central Government State Government Municipal Authority
Watches are subject to multiple taxes right from procurement of components to manufacturing to selling it to the end consumer. .
Exhibit 1
Current tax structure in India

When is it paid Levied and collected on the goods/ commodities manufactured in India (except goods produced/ manufactured in SEZ) Reduction in the excise duty. All taxes payable and traders margins are accounted for, while allowing such abatement Levy on inter-state sale of goods. Tax on entry of goods for use/consumption within areas of the local bodies. Basis of levy may vary from state to state or even between different local bodies within a state. Multi point sales tax levied as a proportion of valued added Current Rate 10% on MRP less abatement 30% on MRP for calculation of excise duty 2% In India, octroi is levied only in major cities in the state of Maharashtra. Mumbai 5.5%, Pune 8% Different across states; (Karnataka 13.5%), (Delhi 20%)
Duty / Tax / Incentives Excise Duty (Central Value Added Tax) Abatement Central Sales Tax (CST) Octroi
Value Added Tax

Source: Technopak Research
State Government
Excise Duty Classification relevant for the watch category

Assessment Value based on Transaction Value Section 4 of Central Excise Act has fixed the rate for products on per Kg or per quintal basis, or on a % of Transaction Value of goods. The Transaction Value means the price actually paid or payable for the goods, when sold. Assessment Value based on Retail Sale Price Section 4A of Central Excise Act empowers Central Government to specify goods on which duty will be payable based on Retail Sale Price fixed for the product. The provisions are as follows: The goods should be covered under provisions of Standards of Weights and Measures Act. If more than one retail sale price is printed on the same packing, the maximum of such retail price will be considered. The retail sale price should be the maximum price at which excisable goods in packaged forms are sold to ultimate consumer. It includes all expenses incurred during the course of business, taxes, and commission payable to dealers. Watches are regulated by the Weights and Measures Act and therefore fall under Section 4A of the Central Excise Act. The excise duty is therefore paid on the MRP of the product.
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Value Added Tax

Since VAT is under the jurisdiction of the State government, many states have adopted a different rate of tax. Example the rate of tax in Delhi is 20% for watches greater than ` 5,000/- and 12.5% for watches below ` 5,000/-whereas it is 13.5% flat for all watches in Karnataka. Different rate of taxes is against the fundamental principal with which VAT was introduced. Import duty structure & its implications Custom duties in India are administrated by Central Board of Excise and Customs under Ministry of Finance. The levy and the rate of customs duty in India are governed by the Customs Act 1962 and the Customs Tariff Act 1975. Goods imported into India attract various duties and cess.
Exhibit 2
Custom Duty Structure in India

Current Rate 10% 10% 30% 3% 3% Explanation BCD is calculated on import assessable value i.e. CIF value of imported goods (Cost+ Insurance + Freight + Handling Charges) CVD on watches is levied on MRP after deducting abatement (discount) allowed on MRP Government provides abatement to goods taxed on MRP Abatement takes into account traders . margin and all taxes payable on the goods Government imposes a 2% Education Cess + 1% Secondary and Higher Education on CVD Government imposes a 2% Education Cess + 1% Secondary and Higher Education on (BCD + CVD + Cess on CVD)
Duty Basic Custom Duty (BCD) Countervailing Duty (CVD) Abatement Cess on CVD Cess on Duty
Source: Technopak Research
Countervailing Duty (CVD): Since watches are governed under Weights & Measures Act and fall under Section 4A of CEA, CVD is levied on MRP less permissible abatement. Abatement: Government provides abatement to goods taxed on MRP Abatement takes into account . traders margin and all taxes payable on the goods In case a watch is imported as a completely built form, a typical import duty structure is given below. The incidence of custom duty ranges from 30% to 150% of the import assessable value
Exhibit 3
Cost and Margin Structure across Timewear Market in India
11 45 2 13 29 CIF/ Ex Factory
100
Excise/ Custom Duties
CST / C&F
Trade Margin
VAT
MRP
16
Key Challenges & Bottlenecks

Taxation policies
04
Under the current tax structure, goods and services are taxed at multiple points by multiple authorities. This has sometimes resulted in double taxation. Taxes such as VAT, Octroi fall under the jurisdiction of the state government and many of these states have imposed a different rate of tax. Few problems related to the taxation policy faced by the watch industry are given below. Variable tax rate Taxes such as VAT, Octroi are under the jurisdiction of the state and municipal bodies respectively. The states have changed the VAT rate on the products and therefore it is variable across different states. Similarly Octroi is only charged in the major cities in Maharashtra. However the MRP is fixed for the entire country and in these regions the company needs to absorb the additional burden of taxes. For example, Delhi has variable tax structure even within the watch product category. It charges VAT at 12.5% for watches under ` 5,000/- and 20% for watches over ` 5,000/-. On the other hand Karnataka charges VAT at 13.5% for all watches. Similarly Octroi is charged only in the state of Maharashtra. While it is charged at 4.5% Ad Valorem in Mumbai, it is between 7% and 8% in Pune. Low rate of abatement on taxes Abatement is a helpful measure used to reduce the amount of taxes or debt a party must pay. At present, the government includes retailer margin and all other taxes to calculate the rate of abatement. The rate of abatement fixed by the government on watches is 30% of the MRP However the taxes/duties and trade . margin is much higher and the abatement does not suffice for the same
Duty structures
The incidence of duties is much higher in India than in countries such as Singapore or Dubai. The key challenges and bottlenecks faced by the watch industry are given below. Higher landing price of watches Watches attract high import duty calculated on the declared MRP of the product. Also, customers do not find their shopping experience comparable to international destinations like London, Milan, Paris or Dubai due to limited range and the perception of high price products in India compared to other markets Lower margin for brands and retailers Brands try to maintain consistent price across international stores. However this results in lower margins for both the brands and the retailers in India as compared to their counterpart in Europe or any other locations. This is mainly done to absorb the high cost of duties and to remain competitive with the European and other markets where no or very insignificant duties are levied by the government. Higher financing cost Considerable inventory of watches needs to be maintained to offer variety to the customers. Import duty is paid when one gets watches imported into India. If the watches are not sold within a suitable period, they can be re-exported and thus qualify for a duty refund. However, the duty refund process may take as long
17
as six months. Thus the high import duties not only increase the cost of watch but also increase the cost of financing by blocking large amount of working capital. Value cap on DEPB benefit The Indian government has extended DEPB benefits of 7% of FOB value to the watch category. However it has capped such benefits at ` 600 across all price segments. The current maximum benefit as per the value cap is just ` 42, irrespective of the price segment. Only finished watches are under the purview of the DEPB scheme and not watch components. Indias price and cost competitiveness in international watch market is undermined and affects Indias position as a future hub for manufacturing, especially in the mid and mass segments in which products are at very competitive prices abroad. Additional Focus Scheme under Foreign Policy Watch is classified as high-technology product under the Foreign policy. It falls under Focus Product Category where it gets 2% benefit in addition to FOB benefits. However watches have not been included under Additional Focus Scheme group, which is entitled to an additional 2% benefit. (156 items other than watches such as handicrafts, handloom, silk carpets, leather and leather manufacturers, sports goods, toys and select bicycle parts have been classified under this scheme) Parallel trade and smuggling The high import duty structure has incentivised parallel trade and smuggling, especially in the premium and luxury watch segment. Government is also losing considerable amount of revenue on this account.
Counterfeiting
The Swiss watch industry estimates that 40 million counterfeit watches are produced globally. 70% come from Asia, mostly from China. The counterfeit watches not only hurt the companies financially due to the potential sales loss but also cause considerable harm to the brand as the market gets flooded with counterfeits. As a result the brand faces a dissonance from unsuspecting customers. In India counterfeits is a major problem for the mass market brands such as Titan, Timex & Maxima. Counterfeiters usually focus on the appearance rather than the technical parts of a watch as it is much easier to replicate and results in greater profits. Various forms of counterfeiting such as illicit reproduction of a brand, a falsified country-of-origin mark, copy of a design, and spurious hallmarks or a bogus classification are common. There are two types of counterfeit watches The first group of counterfeit watch borrows the name of the prestigious watch brand. However the design, functions and quality of the product in question is not comparable to the original. These products are priced very low as compared to the original brand and are therefore easily recognized. The second group of counterfeit watches resemble the original watch brand and are high priced. Since, they are produced with good quality material; it becomes difficult for the unsuspecting customer to identify a counterfeit product. Today, internet and new age distribution channels such as television and newspapers are used to sell counterfeits. However one can also find such watches with local watch retailers & unauthorized dealers.
Watches under Weights & Measures Act

Weights & Measures Act was constituted by Government on the foundation that it will be in the interest of the consumer. Watches are classified as packaged products and therefore fall under the jurisdiction of this Act. This Act is appropriate more for products where there can be loss of value if packaging not done.
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However in case of watches there can be no loss of value without packaging in watches as packaging only avoids damage during transportation. Taxation As watches are covered under this Act, the category is being viewed under section 4A of the Central Excise Act. Under Section 4A, the tax on products is levied on MRP . Operational Difficulty At any point of time a retailer has minimum of 100-200 pieces of watches. The retailer does not have the space to stock as many boxes. Also the retailer faces difficulty in locating the right box for the product sold.
Retail
Lack of quality retail space Scarcity of quality retail space for watch brands across segments is a large impediment for growth of the market in India. There are very few malls that have been designed and built by international standards and thus fail to attract large number of customers to the stores. The case is even stronger for high end segment retail. The ambience required to sell such products is very limited. Limited number of watch retail store network Given the potential for growth in the timewear industry there are still not enough retail stores that can provide the desired reach to the brands. Most of the retailers do not have a nationwide presence. India has a few department stores chains but these chains are not big enough when compared to their international counterparts and do not provide a wide distribution network. Limited reach of the retailers to the urban centres is one of the reasons why penetration of watches is so low in India. High rentals Limited quality retail locations has created demand-supply imbalance & resulted in high rentals. Service tax levied on rentals of retail properties adds to the overall cost burden of the retailer. Cost of rentals as a percentage of sales is higher in India as compared to international locations making it difficult for both retailer and brand to conduct profitable business. As high end retailers have access to limited quality retail space in India, the rentals for such locations are much higher. Retail Discounting Indian customers are value conscious by nature and expect discounts. The retailers are drawn in the game of up-man ship and provide higher discount to keep the customer. This practice has created a very unhealthy competition in the domestic retail market. Few unethical retailers sell smuggled products along with duty paid and make up for the lost margin. However it has made the survival of the genuine & organised retailers difficult. Lack of availability of skilled manpower and high attrition rates As the share of organised retail is low in India, skilled manpower required for sales and store management is also scarce. With growing opportunities in retail, companies also face high attrition levels. Luxury products require well groomed staff that understands the brand and the buying behaviour of its customers. However luxury retailing in India is still in its infancy and does not have people with the right skill sets. Unorganized sector or grey market This market poses a big challenge to the organized watch retailers. The grey market sells smuggled or fake watches. They use the large margins from this to lure the consumers with more discounts.
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Perceived threat from mobile phone industry Watches have a perceived threat as a time-keeping device, due to the increasing penetration and use of mobile phones that also displays time. Consumers have multiple choices of feature rich mobile phones available at very affordable prices today.
FDI restrictions in retail

FDI in retail is not permitted and therefore setting up a distribution channel is very difficult. FDI in retail sector is not allowed except for single brand retailing. International watch brands can enter India either through a joint venture or through a wholly owned subsidiary. In case of joint venture, the international company can invest up to 49% in the venture with the rest invested by the Indian partner. If the company enters the country through a wholly owned subsidiary, then it needs to get Cash & Carry license from the government which implied that the company can only operate in the wholesale market and cannot open and operate retail stores. Therefore it needs to rely on franchisees for expansion.
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Global Timewear Industry
05
The world watch production in 2009 was 865 million pieces. Owing to the world economic crisis there was a slump in demand which affected all markets and segments. There was decrease in production by 20% in relation to the year 2008.
World watch market segmentation by type

The world watch market is segmented into 3 types; Mechanical, Digital quartz and Analogue quartz. Mechanical watches have been the tradition since the 14th century while quartz watches were introduced in 1970s. The current watch market is dominated by quartz watches both in volume and value.
Exhibit 1
World Watch Production by Type Mechanical, 2%
Exhibit 2
Development of World Production by Type 20 200
Digital Quartz, 18%
21 179
22 183
23 180 19 151
Unit Million Pieces
1030
990
930
877
Analogue Quartz, 80
695
2005
2006
Analogue Quartz
2007
Digital Quartz
2008
Mechanical
2009
Source: JCWA (Japan Clock & Watch Association)
In terms of Swiss exports, in 2009, both mechanical and quartz watches were affected equally in value terms. Mechanical watches were down 22.1%, while quartz timepieces recorded a decline of 22.8%. The decline was more varied in terms of the number of timepieces. Quartz watches saw their volume fall by 17.8%, while mechanical timepieces were down 13.4%.
Exhibit 3
Swiss exports of Mechanical and Quartz watches

14 12 10 8 6 4 2 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
0 The introduction of the quartz watch in 1969 was a revolutionary improvement in watch technology. The Japanese made the first quartz watch to reach Mechanical watches Quartz watches the world market. Japan took the lead in worldwide watch production in 1978 and they excelled at Source: Technopak Analysis perfecting new technologies to be more appealing to consumers. Since the 1970s, quartz watches have taken over the mechanical watches, as the most used technology for keeping time. Quartz watches continue to be in demand owing to their relatively lesser price and higher accuracy than a mechanical watch.
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Though currently the world watch market is predominated by quartz watches, in the long run, the value share of mechanical watches is set to grow. Despite being expensive and requiring high maintenance, mechanical watches are valued for being true work of fine craftsmanship. There is an increasing trend of revival of mechanical watches especially in Swiss timewear industry. Mechanical watches mostly occupy the luxury segment and Switzerland holds a dominant market share in the global luxury watch market. Mechanical watches accounted for ~71% of the total value and ~17% by export volumes in 2009, in the Swiss market, thereby indicating the rising phenomenon of mechanical watches. In the near future mechanical watches are bound to make a comeback. There are many innovations that are being introduced to improve the accuracy of mechanical watches. Power reserve of mechanical watches is also being increased. Materials used in creating mechanical watches are also of much higher quality than before.
Key importing and exporting countries

Though Switzerland was the leading exporter of watch industry products in 2009 it faced a decline in exports by more than 20% due to the economic slowdown.
Exhibit 4
Main exporting countries of watches in 2009 (in USD billion) Direct exports
Exhibit 5
Main importing countries of watches in 2009 (in USD billion)
Switzerland
HongKong
China
Germany
France
HongKong
USA
Switzerland
Japan
France
The destination of most watch industry products was Hong Kong, where total imports were USD 5.1 billion in 2009, a significant proportion of which was re-exported.
Key Players in the World Timewear Industry

Swiss Timewear Industry The Swiss timewear industry has a rich cultural heritage and has established itself in the world as highest quality and precision watchmakers. One of the great strengths of the Swiss watch and clock industry, by comparison with its foreign competitors, is its ability to offer the consumer a genuinely comprehensive choice of products, in terms of technology, materials used or designs. Challenges faced by Swiss watch industry today With the ever increasing labor costs in the west, even the most sophisticated manufacturing industries are migrating to countries where labor is less expensive and so is the case with Swiss watch manufacturers. Many Swiss brands have outsourced component manufacturing of non-critical parts to Asian countries such as China and Japan.
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The Swiss Federal Council announced that it intended to tighten the legal definition of Swiss Made applicable to all products, including horological. Proposed legislation would raise the value threshold of Swiss components to 60 %. This is in response to the rising imports of horological components. Imports of all types of horology components to Switzerland rose 5.9% in 2008, to USD 2.34 billion with around 55% worth from Asia and around 45% worth from Europe. Imports of complete Asian-made movements more than doubled. There is not enough production capacity for components in Switzerland for the current size of the timewear industry. In order to comply with the intended regulation, many Swiss companies are getting their component suppliers to set-up manufacturing units in Switzerland. The other main challenge that Swiss watches face are of counterfeits in almost all markets in the world where they have presence. It is estimated that counterfeits account for more than 6% of Swiss watch exports every year. The recent economic slowdown resulted in a decline in Swiss exports to the world. Swiss watch manufacturers exported goods worth 13.2 billion francs in 2009.
Exhibit 6
Swiss watch exports (in CHF billion)
2004
Source: Federation of the Swiss Watch Industry
2005
2006
2007
2008
2009
Swiss watch market in India Swiss watch exports to India were ~USD 35.6 million in 2009. India is still seen as a small market for Swiss watches, in 2009 sales grew at an annualized rate of 25% valued at around USD 250 million. Analysts expect Indian market to grow to USD 1 billion market over the next 10 years. Chinese Timewear Industry China is currently the third largest consumer of luxury goods, and will rank first by 2015. The Chinese watch market is growing at around 35-40% year on year. Consumption wise China is a big market for Swiss luxury watches, more so with the increasing numbers of rich consumers in China and their constant need to upgrade aspirations and lifestyles. Chinas economic and social reforms have helped in bringing about a change in consumer attitude and have changed the way a watch is perceived. Multiple watch ownership is also increasing as consumers like to wear different watches for different occasions and day to day activities. The Chinese government has played a big role in the countrys industrial development. In the last few years the Swiss watch exports to China have increased fourfold. It is a country that has grown 10 times in a span of 7-8 years by reduction of duties, simplification of operating procedures etc. History of Chinese timewear industry Last 10-20 years have seen significant growth in the Chinese timewear industry, the lessons of development from that period is important for Indian timewear industry.
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A significant era in Chinese timewear industry dates back to the 1980s which saw the migration of Hong Kong watch manufacturing industry northward into the mainland and subsequently a rise in industries for joint venture manufacturing and assembly of watch parts. Electronic quartz watches were introduced and made their mark in the mid-range market followed by the launch of various imported and international brands. However there was a growing concern about the effect that the entry of imported watches to the market will have on watches that were made locally. Owing to this, there were four major price cuts introduced over the period from 1981 to 1987 to remain competitive, but this move proved to be detrimental to the local watch industry, with China-made watches being regarded as cheap products. The recovery from this situation was difficult. Only a few companies continued production, others chose to close down their business and remaining started to export their products in areas that did not have prominence of international brands. The above situation acted as an eye opener to the Chinese watch manufacturers who were not in favor of entry of imported products and they made an effort to cooperate and improve their product quality and invest more into design innovations. The efforts and improvements started showing results in 1990s. Consumers were attracted to the new designs and better quality offered by Chinese manufacturers which resulted in increased demand for these watches. Manufacturers also started to cater to the needs of astute watch collectors by launching special editions and collector models. Post this era there has been a successful coexistence of imported, jointwatches in the Chinese timewear industry. venture and China made
The retail industry in China also played an important role in the growth of the Chinese timewear industry. It has the advantage of abundant supply and broad distribution network. The retail sector has seen increase in demand from both Chinese and international brands. Watch industry in cities like Shenzhen, Shanghai and Beijing has undergone a lot of change. More companies now indulge in increased level of marketing, promotion, taking part in exhibitions etc. in order to improve interaction with various segments of the industry, both within China and abroad. Thus looking back at the developments since 1980s the Chinese timewear industry has grown manifold and has made an effort to improve its quality and increase focus on branding and promotion. Manufacturing capabilities and challenges of Chinese timewear industry China is one of the largest manufacturing hubs for watches and is a great power in production and consumption of watches. Having mastered the manufacturing techniques the Chinese market is today producing watches across all segments including high end watches. Low production costs and skilled manpower are the key success factors for the Chinese watch manufacturing industry. Large volumes of business from other countries in the world further help them in lowering their costs. The watch industry in China has formed a clustered development. Six major producing areas are Pearl River Delta in Guangdong, Fujian, Zhejiang, Jiangsu, Shandong and Tianjin. However the Chinese watch industry is not devoid of challenges, apart from rising costs in China for manufacturing watches, the international market still depends largely on the Made in Swiss mark on luxury watches. The Chinese industry is still largely perceived to lag behind in technological advancement, superior quality and skilled craftsmanship that are desired in high end watches. The Swiss have a technology leadership and brand advantage over the Chinese.
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Premium watch market in China and its comparison with India China is one of the fastest growing markets for luxury watches in the world. It has even surpassed Hong Kong, a favorite tourism driven market, in market share of international high end watch brands. India has been trailing the Chinese timewear industry growth since a long time now. China has been far ahead of India in terms of Swiss watch exports. In terms of value for Swiss watches, India is still about 7-8 years behind China. In 2010 (January-September) watches worth 754.1 CHF million were exported to China recording an increase by ~59% compared to that in the year 2009. Compared to this Indias share in exports was just 67.7 CHF million, a growth of ~37% since 2009. Hong Kong is one of the leading market for Swiss exports and its value far surpasses that of China and India. In 2009 Swiss exports to Hong Kong were ~1741 CHF million and an increase of more than 42% is already registered for the Jan-Sep 2010 duration. Given the growing economy, infrastructure, retail and high net worth individuals India is bound to catch up with China in years to come.
Exhibit 7
Swiss watch exports (in CHF billion)

2697 2433 2168 1945 1546 1641 1420 1768
826 577 62.7 49.3 281 94.2 197 351 403
701
India
2002 2003 2004
China
2005 2006 2007 2008
HK
2009
Exhibit 8
HNWI growth in India and China (in 000) 477 413 287 211 61 70 83 100 123 84 127 300 320 345 364
50
India
2002 2003 2004 2005 2006 2007 2008
China
2009
Indias population of high net worth individuals grew to 126,700 in 2009. China has the worlds fourth largest HNWI base of 477,000 wealthy people at the end of 2009. Though currently the numbers of HNWIs are more in China than in India, the growth rates are higher in India.
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Another key learning for India from Chinese timewear industry is how the Chinese government has aided the growth of this industry by socio-economic reforms and reduction in duties. Growth in China accelerated significantly around 2002 at least partially owing to the reduction in effective tariffs on imported watches. Import tariffs on Swiss watches up until 2001 were around 23%, with various staggered categories. This structure has been simplified over the last few years, with tariffs cut by 2-3 percentage points per year at the same time. By 2005 there were just two levels of import tariff; 11% for mechanical watches and 12.5% for quartz watches.
Key learning for the Indian timewear industry

The Indian timewear industry could learn a lot from the timewear industries in some of the developed and developing nations. Be it Chinas manufacturing capabilities, Japans technological excellence or effective marketing by US and European countries. Government support for the watch industry The Chinese and Japanese governments have helped the watch industry grow and flourish by developing the required infrastructure and by implementing industry friendly policies and regulations for taxation and duty structure. Reduction of duties Internationally the duties applicable on import or manufacturing of watches has reduced over the years and is not very high at present. The simplified duty structure has benefitted all stake holders in the timewear industry value chain and has been conducive for the growth of the industry. Achieving manufacturing excellence Internationally countries operate on a low cost framework achieved by cheap labor and low infrastructure cost. This enables the manufacturing companies in these countries to have start-to-finish operational excellence be it in component manufacturing or in assembling and gives them the ability to furnish large orders. There is increased focus on skill development to develop manpower to cater to the requirements of the industry. Chinese manufacturing companies use specialized machinery and upgrade it regularly to cater to the increasing demand of the industry. In China there is increased focus on the vocational skills to build trained manpower for the watch manufacturing. In Taiwan and China, precision manufacturing has provided huge employment opportunities to women. Increased focus on marketing of this industry A watch initially a utility product has been transformed into a lifestyle product. The need to own different watches for different occasions has been created through increased focus on marketing by watch brands. Penetration of watches internationally is high and people own multiple watches due to the effective marketing techniques adopted by the industry. Increased focus on the development of quality retail space for the watch industry China and Hong Kong have encouraged the development of quality retail space. Hong Kong has a number of high streets that serve as ideal locations for high end watch retail stores. China market has new store openings on daily basis across various formats like boutiques, shop-in-shops, kiosks etc. Watch retail stores in China and Hong Kong are large, carry a lot more variety and match international standards of look, feel and ambience. Thrust on technological advancement Japanese market thrives on increased use of new technology and user friendly feature additions in watches. This is constantly done to provide value to the consumer and enhance multiple owner ship.
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Impact of duty reduction in other sectors

The duty structure in India has been a major road block for the sale of high price watches. It penalizes the large companies which operate by the rule book at the cost of grey market dealers who do not adhere to the duty structure. In the past, duty reduction in many other industries in India has had a positive effect on their growth. A case in point is the reduction of import duties on gold, which has evolved the industry into one with a uniform and transparent import structure, which benefits legitimate customers and business houses, besides increasing government revenues. Here is a look at how the gems and jewellery, telecom and auto industry has gained from duty and taxation reforms. The Gems & Jewellery Industry A leading foreign exchange earner for the country, gems and jewellery sector is growing at an annual rate of 15% and accounts for nearly 20% of the total Indian exports. The sector is very labour intensive and provides employment to over 1.8 million people, directly or indirectly.
Exhibit 9
Gems & Jewellery Exports (in ` crore)
150000 120000 90000 60000 30000 0
2002
2003
2004
2005
2002
2007
*2008
*2009
Source: Gem & Jewellery Export Promotion Council
Data for 2002-2007 corresponds to calendar year * Data for 2008 and 2009 correspond to FY April to March
Indian jewellery market has two major segments, gold jewellery that constitutes nearly 80 per cent of the market and diamonds that includes fabricated studded jewellery forming the rest. Of the gold jewellery manufactured in India, domestic market constitutes a lions share. However, India exports a major portion of the rough, uncut diamonds processed, either in the form of polished diamonds or finished diamond jewellery. India is not only the largest consumer of gold worldwide, but is also the leading diamond cutting nation. Some of the steps taken by the government over the years to make Gems and Jewellery industry competitive in the international market are given below. The abolition of the Gold Control Act in 1992 that allowed large export houses to import gold freely. Exporters in export processing zones were allowed to sell 10 percent of their produce in the domestic market. In 1993, gold and diamond mining was opened up for private investors and foreign investors were allowed to own half the equity in mining ventures. In 1997, overseas banks and bullion suppliers were also allowed to import gold into India. These measures led to the entry of foreign players like DeBeers, Tiffany and Cartier into the Indian market.
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In 2004-05 the government lowered import duty on platinum from USD 13.82 (~ ` 622) per 10 gm to USD 5.03 (~ ` 226) and exempted rough coloured precious gems stones from customs duty at the first stage itself, instead of claiming reimbursements later. Rough, semi-precious stones were exempted, a move aimed at further promoting the exports of studded jewellery and platinum jewellery. In 2007, the government abolished import duty on polished diamonds. Cutting and polishing of gems and jewellery was treated as manufacturing for the purposes of exemption under Section 10A of the Income Tax Act. Government set up SEZs and gems and jewellery parks to promote investment in the sector. Surat home to thousands of diamond units with lakh of diamond workers has been recognized as Town of Export Excellence. Duty free import entitlement of tools, machinery & equipment has been allowed. With the impetus provided by the government over the years, gems and jewellery industry in India has grown exponentially. The industry has emerged as one of the leading foreign exchange earner for the country with sizable exports and provides employment to 1.8 million people and based on industry estimates in the next 5 years it should create additional employment for around 1.1 million people. Indian Telecom Industry The Indian telecommunications industry is the worlds fastest growing telecommunications industry, with ~671.70 million telephone (landlines and mobile) subscribers and ~635.50 million mobile phone connections as of June 2010. It is projected that India will have 1.159 billion mobile subscribers by 2013. Furthermore, projections indicate that the total number of subscribers in India will exceed the total subscriber count in the China by 2013. The industry is expected to reach a size of ` 336,825 crore by 2012 at a growth rate of over 26%. At the onset of 2009, the sector directly employed about 1, 50,000 people, while providing jobs to another 1.5 million with retail outlets etc According to Indian Cellular Association (ICA), the production of mobile phones in India was 100.9 million in 2009 and had grown from just 31 million units in 2006. The industry projects a yearly production of 250 million units by 2012 with a large portion (~100 million units) of this for the export market. The growth in production will be driven mainly by the expanding mobile subscriber base in India and favourable government policies promoting local electronics manufacturing in India. Government policies to promote the industry The customs duty was first lowered followed by a cut in the excise duty in 2001-02. This enabled the organised sector to offer mobile products to the consumers at the same prices as that of the grey market. The grey market then constituted nearly 90% of the total market and was subsequently eradicated. With the consumption attaining global scales, several global leaders and EMS companies invested in mobile and related equipment manufacturing in the country. Most of the investments in the manufacturing value chain are currently concentrated towards assembly operations. In 2010, the government extended full exemption from basic customs duty and CVD available for parts, accessories for manufacturing of mobile handsets to parts for manufacture of battery chargers and hand free headphones. This is yet another step by the government to make India a global manufacturing hub for mobile phones. Mobile phone companies have responded positively to the government policy and are pushing through indigenization effort by bringing global component vendors to set shop in the country. Most of the renowned companies have set up base in India. While LG Electronics, Nokia and Elcoteq have already set up manufacturing bases in India, there are many others like Sony Ericsson looking at setting up facilities in India. Mobile phones in rural India
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Mobile phone usage is rising faster in rural India where around 70% of Indian population resides. Mobile phones have even made inroads in areas where people do not have access to regular landline network. Players like Nokia are doing tremendous marketing efforts to make rural consumers aware of the use and features of mobile phones. Handset manufacturers are introducing new products that are specifically targeted at rural markets. Ultra low cost mobile phones are being introduced specially for these markets. Mobile phones with long lasting batteries and torch lights have found a very large consumer base in rural areas. Thus, giving rural consumer a range of choices suited best to their needs and lifestyle. Conclusion Mobile phones have become so much more than just a means of communication, more so with the advent of 3G technology, continuous innovations in handsets and feature additions in mobile phones this trend is all the more likely to grow in near future. Automobile & Automobile Component The Automotive Component Manufacturers Association of India (ACMA) estimates the size of the auto component industry at around USD 86,400 crore in 2009-10 growing at a compounded annual growth rate (CAGR) of 19.2 per cent. In 2009-10, the industry exported auto components worth USD 15,300 crore. Engine parts (31%), Drive transmission and steering parts (19%), Suspension & braking parts (12%), Body & chassis (12%), Equipments (10%) and Electrical parts (9%) form the major auto component categories.
Exhibit 10
Gems & Jewellery Exports (in ` crore)
120000 90000 60000 30000 0
40 30 20 10 0
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
Production in USD Mil Source: Source: Automobile Component Manufacturers Association
Custom in %
The automobile and the automobile component industry have received a lot of impetus from the government following the liberalization of the economy. The government has decreased excise rates for automobiles in all categories over the years. The chart above illustrates decline in tariff rates in auto-components and the rapid growth of production in this sector. When the government was looking to open the economy by making it easy for the automobile companies to import, many had feared that this could harm the sector. However domestic consumption of the automobile sector has also been growing driven by drop in prices. This has been made possible due to customs and excise cuts in auto components and in automobiles. Other factors such as rapid income growth and the improvement in infrastructure have also resulted in demand expansion.
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Recommendations of the Report

Assistance in reviving the manufacturing capabilities
06
India is one of the few countries besides Switzerland, Japan US, Taiwan & China to have watch manufacturing capabilities. Given Indias strength and a history in watch manufacturing, it can emerge as the next major watch manufacturing hub of the world. It will not only generate employment but will also help India earn foreign exchange. India has a large domestic market, abundance of skilled labour and a history in watch making to its advantage. Currently with no hubs for mid price segment watch manufacturing and rising costs in other Asian countries India has great opportunities in the watch and components manufacturing sector. Given the low land requirement and eco friendly nature of the industry government should encourage the watch manufacturing sector in India. Following steps can be taken to develop this capability; Support with infrastructure for developing manufacturing hubs and units in smaller towns. Government can develop special manufacturing hubs for the watch industry in existing/new manufacturing bases and invite large international watch manufacturers to set-up their assembling plants in the country. There is a significant value addition that could happen around the area due to this cluster development In this industry, the land requirements are not very large. Depending upon the capacity land in the range of 3-12 acres is sufficient to set up a unit for component manufacturing. However the land should be provided at concessional rates to make it viable for manufacturers. Special area for ancillaries should also be taken into consideration. Cluster development would result in generation of high skill jobs. Employment opportunities especially for women folk could increase as this industry involves a lot of precision based work. Current manufacturing facilities in Rajkot, Hosur, and Tumkur etc. could also be developed as export hubs. Remove or lower the restrictions on import of machinery for watch manufacturing. Duty on raw material import currently stands at 16% and excise at 10.3% bringing the overall tax liability to around 28-30%. Any reduction in the same will be good for the industry. Schemes similar to Technology Up gradation Fund Scheme should be implemented to give a boost to the industry. Special vocational courses encouraging the development of watch-making skills should be introduced. Also design schools and engineering schools should be encouraged to introduce watch design and engineering courses to develop people with the required skill sets for the industry.
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Reduction and Rationalization of duties and taxes

High duties along with multiple & varied taxes are one of the key impediments to the growth of watch industry in India. It has encouraged evasion of duties and resulted in ever growing grey market. Brands have not been able to get significant volumes because of this and therefore many of them are facing difficulties in turning profitable. Globally there is miniscule duty on all products including watches but in India there are high duties imposed. Most companies absorb this increase in cost by lowering the margins for the retailer and the brand. However some companies pass the increase in cost due to duties to the consumer discouraging him from buying watches in India. There is a strong need for the duties and taxation structure to be reduced, rationalized and simplified so that all the stakeholders in the watch industry namely, brands, manufacturers, retailers and consumers benefit from the same. The key recommendations in this regard are Duties Duties need to be lowered as it would help curb the grey market where government is losing due to tax and duty evasion. It would also translate into higher margins for retailers that would help them in raising the quality standards at their retail outlets. Consumers would also benefit from the wider range, better staff quality, store ambience and more discounts offered by the retailers. Duties on luxury watches with high price jewellery items in it should be low, at par with that on branded jewellery. The countervailing duty (CVD) should be levied on FOB/CIF prices and not on MRP as is the case with , many other industry sectors. Abatement should be increased to around 45%, as the average trader margin is around 25% of MRP and not just 17% of assessable value, as is the perception. Credit should be provided on duty payments as a large amount of money is blocked in the same. Duties should be lowered at par with other industry sectors like auto and mobile phones Taxation Value based taxes should be levied instead of the current practice of a fixed percentage based taxation which is same for all watches irrespective of their prices of the watch. Watches in lower price segment (` 500-750) should be made free from any excise. This would not only make these watches more affordable for consumers but will eliminate the malpractices & reduce the size of grey market which is most prevalent in such low price segments. Rationalization of tax slabs is required, as including watches in the highest tax slab conveys a negative perception amongst stakeholders that the government is not keen on promoting this industry. Excise should be calculated on manufacturing cost and not on MRP . Faster implementation of GST GST implementation would simplify the taxation structure and is essential for addressing a number of issues that are impediments to the growth of Indian watch industry. GST would have several beneficial effects, including Uniform taxation - the rate of taxation would be the same across all geographic boundaries of India and thus would eliminate the opportunity for arbitration as well as provide goods at a uniform rate everywhere in India.
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Simplified taxation - calculating a GST at a uniform rate would be much easier and it would make adherence to the proposed tax simple. Single point taxation - rather than a multiplicity of authorities to deal with, a single-point taxation could be dealt with through a single-point window thus creating greater efficiency and speed of operation within the system. Increase penetration of watches - the price of watches products would fall if the overall tax rate is reduced to 16% GST as proposed. This would expand consumption base and also enable current consumers to buy more. Non inclusion of watches in the Weights and Measures act Watches should not be classified as packaged goods and therefore should not be under the jurisdiction of Weights and Measures Act. The act results in operational difficulties and non compliance results in stock seizures and fines in case of inspection. Non inclusion of watches from this act would help reduce taxation and operational difficulties. Allow FDI in single brand retail Currently many international brands are not entering the Indian market because of the FDI restrictions and the complexities of franchisee and joint venture arrangements. Opening up of FDI in single brand retail would help the watch industry grow in many ways; It will open up the market and will bring many international players to the market. Fresh money inflow in the market shall lead to better distribution and marketing of brands. Increased job opportunities in the sector. Organized retail in watch industry will evolve further as international quality mono brand boutiques open up. Mono brand stores would bring alive the ethos of the brand to the consumers. It would help in maintain uniformity of look and feel of a brands retail store across the globe, which the new age consumer expects of an international brand. It would give the consumer more variety to choose from. It would also help establish quality standards of luxury retailing in India. Assistance in expanding distribution reach The penetration of watches in rural sector and smaller towns/districts is very low, as setting up a distribution network there is an expensive task. A well established government network can be of great assistance here. Government can help the industry by lending its vast post office/bank network in rural areas and smaller towns/districts to industry players for setting up kiosks for selling watches in these areas. Other recommendations Horology should be promoted and developed as a science and encourage more R&D in the sector. There is need for horology as a subject to be promoted which like auto engineering as the industry lacks learned mechanics and experts on watches.
Recommendations to industry
Increased spend on marketing and promotion: There is a need to generate more awareness amongst consumers. Players in the watch industry need to take initiative and create awareness about the watch market. It is not only required to graduate the industry from a watch business to brand business but it will also help in increasing penetration, multiple ownership.
32
Focus on better retail outlets: Industry should work towards opening quality retail outlets where consumers get a large variety of products, good service levels and assistance from knowledgeable well trained sales staff. Need to make inroads in rural markets: The timewear industry players should make concentrated efforts in capturing the rural market. Some of the initiatives that can be worked upon are; Watch models should be specifically designed for these markets to suit the daily lifestyle and needs of rural consumers Prices should be made highly affordable especially for basic models Increased effort on marketing and promotion to create awareness for various brands and encourage users to buy watches and consistently upgrade Since it is expensive to set distribution base in rural markets, tie up potential with government postal/ bank networks can be explored New retail channels such as mobile vans, ITC choupal should be evaluated for rural sales and distribution of watches
Benefits to the Government

Impact of reduction in excise duty in the mass to mid segment: In the mass to mid segment, the reduction in excise duty will lead to better tax compliance and watch penetration. Though the gain in terms of revenue collection will not be there, this would lead to curb the market of counterfeits and cheap imports. There will employment generation in both watch and components manufacturing as more companies would like to set shop in India in this segment and India could become the next manufacturing hub in Asia.
Exhibit 1
Current Scenario Total Government Earnings (Rs Cr)
Yr2010 400
Yr 2011 435
Yr 2012 460
Yr 2013 500
Yr 2014 535
Yr 2015 575
Government should totally remove the excise duty in the sub ` 1000 segment and reduce the duty in the mid segment. Reduction in excise duty will lead to better tax compliance and increased penetration in the mass to mid segment. However the biggest gain will be through the employment generation in this segment.
Exhibit 2
Future Scenario Total Government Earnings (Rs Cr)
Yr2010 400
Yr 2011 335
Yr 2012 370
Yr 2013 425
Yr 2014 495
Yr 2015 575
Employment generation in the timewear industry The employment opportunity exists across the value chain from manufacturing to retailing to services. Currently with no hubs for mid price segment watch manufacturing and rising costs in other Asian countries India has great opportunities in the watch and components manufacturing sector. The current employment in the time wear industry in India across watch, clock and timepiece manufacturers, and makers of components such as cases, dials, bracelets and others is estimated at 40,000 people. This includes employment in both the organized sector and the unorganized sector both estimated at 20,000 each and includes both skilled (engineering) and non-skilled (assembling) workers. Indirect employment estimated at 160,000 is generated by firms servicing the needs of the watch manufacturer. This does not include employment generated by retail, servicing and after sales.
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The cost of manufacturing in China is on the rise and has created an opportunity for alternate watch manufacturing destinations to claim stake. The overall cost of manufacturing in China is increasing due to labor shortage, rising minimum wages, rising wage levels and appreciation of currency. If India acts decisively, it promises to be the next manufacturing hub for watches for the world ahead of the other Asian countries due to the history in watch manufacturing and large domestic market. Even if India aims to capture 10% of watch export market controlled by China over the next 5 years and a higher share of the increased domestic consumption, India will require investments in infrastructure to support modern watch manufacturing units that could produce 100m watches additional watches to the total current production. However, the government will need to support the watch industry by rationalizing taxes, especially in sub ` 1000 which is currently marred by counterfeits and cheap Chinese imports. This will incentivize companies to set up their assembling units in India. This will attract component manufacturers to set up their plants to cater to the demand created by these assembling plants. Government should continue to extend excise duty benefits in special zones in Himachal Pradesh and Uttaranchal post implementation of GST. This would encourage a lot of players to set up plants further in this region and thus generate employment. Similar increase in employment has been observed in the mobile manufacturing in India. Nokia had set up its plant in Sriperumbudur, Chennai in 2006 and currently employs 8000 people. In order to cater to the production needs of Nokia, 7 global and domestic component suppliers and service providers have signed up with the Telecom Park and are expected to create more than 30,000 jobs when it is in full operation. HMT which was leader in the domestic watch industry, has suffered due to rampant counterfeit market. Govt of India can help HMT in its revival by creating favourable conditions for becoming a major manufacturing force in the watch industry. HMTs infrastructure and the skilled manpower can be gainfully employed in manufacturing both its own brand and a third party component manufacturer. Creation of a favourable environment to enable India to become a manufacturing hub will have help reduce imports, thus releasing precious foreign exchange. Increase in exports of components and finished products will help bring foreign currency into India. This will also help the countrys balance of payments and balance of trade position. Impact of reduction in import duty in the mid to premium segment The increased growth will be achieved as a number of international brands will be incentivized to enter into the Indian market and the existing brands in the Indian market will expand their operations. Currently more than 60% of the total watch spend by Indians is being done internationally. These purchases will be diverted to India owing to reduced tax liability and better retail offerings. The reduction in duties will not result in loss of revenue for the government as the reduction in excise or import duty collection will be compensated by increased revenue from VAT on higher market size. Due to lower taxes, it is expected that there will be higher tax compliance and therefore higher number of watch traders and manufacturers will pay taxes. As a result of reduction in taxes, it is estimated that the government will earn 140% more through taxes (both excise / import duty and VAT) in 2015.
Exhibit 3
Current Scenario Total Government Earnings (Rs Cr)
Yr2010 325
Yr 2011 280
Yr 2012 320
Yr 2013 380
Yr 2014 460
Yr 2015 550
34
Reduction in import duty by 50% will lead to better growth for the sector, better tax compliance and increased spends in India rather than abroad. This will lead to higher revenue generation for the government in the form of taxes and duties.
Exhibit 4
Future Scenario Total Government Earnings (Rs Cr)

Exhibit 5
Yr2010 325
Yr 2011 485
Yr 2012 640
Yr 2013 825
Yr 2014 1055
Yr 2015 1330
Expected Growth in Employment in Manufacturing 320,000
Exhibit 6
Expected Employment in Watch Manufacturing Cases7%
Other Products 18% 160,000 80,000 40,000 Direct Employment

2010
Dials7%
Straps & Bracelets 25% Assembling 43%
Indirect Employment
2015E
As per industry estimates, if India can additional manufacturing capacity for 100 million watches over the next five years to cater to the domestic and international demand, it will result in direct employment of additional 40,000 people. This would include employment in assembling operations and manufacturing of components such as dials, hands, cases, bracelets, straps, buckles, etc. The increased activity in watch manufacturing will also result in increased employment of people in industries supporting watch industry operations. With increased manufacturing activity, it is estimated that the sector will generate a total employment for 80,000 people and will support nearly the 3,20,000 people. Additional employment is generated by dealers, retailers and service centers across the country. The overall employment generated by all such stores is estimated at 1,60,000 people. However, if the government does not necessary steps to curb the menace of counterfeits and also utilize the opportunity available due to rising cost in China, companies would start looking at moving their requirements to other Southeast Asian countries like Thailand, Vietnam etc. A case in point is the shift of manufacturing, of consumer durables, auto and many other products, over the years to Vietnam and Korea.
Conclusion
Indian government should do away with their protectionist policies and create a level playing field amongst all players in the industry. Efforts should be made to remove the various factors that are impediments to the growth of the industry so that the Indian timewear industry can mature and be at par with other countries.
35
About Technopak
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C on t e n t s

India Timewear Industry - 2010 |

| India Timewear Industry - 2010

India Timewear Industry - 2010 |

| India Timewear Industry - 2010

India Timewear Industry - 2010 |

| India Timewear Industry - 2010

Overview of Indian Timewear Industry

Organized, 40% Unorganized, 60%

Source: Technopak Analysis

India Timewear Industry - 2010 |

Value (in Rupee Crore)

Volume (in lakh pieces)

Gender Based Segmentation

Women 40% Men, 60%

Source: Technopak Analysis

| India Timewear Industry - 2010

Key growth Drivers

Urban 230m 30m Top 30 Cities 80m Top 100 Cities

Source: Technopak Analysis

India Timewear Industry - 2010 |

| India Timewear Industry - 2010

Supply Chain Overview

India Timewear Industry - 2010 |

Indias Manufacturing Capabilities

| India Timewear Industry - 2010

India Timewear Industry - 2010 |

Indias Strength and Opportunities as a Manufacturing Hub

Indias Weakness and Threats as a Manufacturing Hub

| India Timewear Industry - 2010

India Timewear Industry - 2010 |

Current tax structure in India

Value Added Tax

Excise Duty Classification relevant for the watch category

| India Timewear Industry - 2010

Value Added Tax

Custom Duty Structure in India

Cost and Margin Structure across Timewear Market in India

Excise/ Custom Duties

India Timewear Industry - 2010 |

Key Challenges & Bottlenecks

| India Timewear Industry - 2010

Watches under Weights & Measures Act

India Timewear Industry - 2010 |

| India Timewear Industry - 2010

FDI restrictions in retail

India Timewear Industry - 2010 |

Global Timewear Industry

World watch market segmentation by type

World Watch Production by Type Mechanical, 2%

Development of World Production by Type 20 200

Digital Quartz, 18%

Unit Million Pieces

Source: JCWA (Japan Clock & Watch Association)

Swiss exports of Mechanical and Quartz watches

| India Timewear Industry - 2010

Key importing and exporting countries

Main importing countries of watches in 2009 (in USD billion)

Source: Technopak Analysis

Source: Technopak Analysis

Key Players in the World Timewear Industry

India Timewear Industry - 2010 |

Swiss watch exports (in CHF billion)