Mumbai: When Nita Ambani went shopping for 25,000 pieces of high-end Japanese crockery, she did not go to the Noritake store in her posh neighborhood of southern Mumbai.    

Instead, the wife of the richest man in India called a Noritake store in Sri Lanka, where the upscale dinnerware for her new USD 1 billion home would be far cheaper.    

Ambani's decision illustrates why India's growing number of wealthy consumers has not translated into riches for luxury retailers such as LVMH or Prada despite what, on the face of it, looks like a no-brainer.   

An economy growing at nearly 9 percent has spurred more than 200,000 millionaires, trailing only the United States and China.   

The total net worth of "ultra" high net worth individuals -- defined by net worth of more than USD 5 million -- is USD1 trillion and is expected to surpass USD 5 trillion by 2016.        

Yet India accounts for only half a percent of the global luxury market at USD 846 million. Greater China, on the other hand, accounts for 10 percent of the global market at USD 17 billion.    

Trying to sell expensive chic in India faces several challenges: steep import duties of up to 30 percent, inadequate luxury retail infrastructure, real estate regulations and a clientele that prefers to buy its luxury overseas for reasons of cash and cachet.   

"India is a tough market, the system is laborious," Gayatri Ruia, Development Director of Palladium in Mumbai, a mall that houses several brands, including luxury and premium.   

"And the Indian spending pattern is different. In Japan or China, even an entry level secretary would not be seen without a Louis Vuitton bag."    

Wealthy Indians are not opposed to spending money on expensive goods, as can be seen in the proliferation of  Porsches and other high-end cars in Indian cities. But a rich businessman driving an expensive foreign car may not spend lavishly on luxury branded suits, for example, Ruia said.   

"The average Indian wealthy person sees no value in branded goods. The few who do are in the habit of shopping while vacationing abroad."   

Signs are that this will not change soon. The Indian luxury market is expected to grow at an average of 5 to 10 percent between now and 2013, compared with a robust 25 to 30 percent forecast for China.

(Agencies)