India set to become hottest destination for global fashion brands by 2025

Country's luxury retail market sales set to rise by 15-20% in 2025: McKinsey survey

India is set to become the hottest destination for global fashion brands, with the potential to emerge as one of the fastest-growing markets in the world by 2025.

 

According to the McKinsey Fashion Growth Forecasts 2025, retail sales of luxury brands are expected to rise by 15-20 per cent in 2025 compared to the previous year — well ahead of the US (3-5 per cent), Europe (1-3 per cent), and China (0 to minus 3 per cent). 

This trend is also expected to be mirrored in the non-luxury fashion sector, where retail sales are projected to grow by 12-17 per cent in 2025, compared to the US (3-4 per cent), Europe (2-4 per cent), and China (2-4 per cent). 

 

The reason for this growth is simple: India’s non-luxury segment boasts a 430-million-strong middle class, larger than the combined middle class of the US and Western Europe. This number is expected to reach 1 billion by 2030. Indian consumers are highly trend-conscious, a shift that is being accelerated by digitisation, alongside the increasing share of young consumers in the market. 

In the luxury segment, aspirational customers — who account for half of global luxury sales — are expected to grow from 60 million in 2023 to 100 million by 2027. 

Also, India’s ultra-high networth individuals (UHNIs) are expected to increase by 50 per cent from 2023 to 2028, making it the fastest-growing UHNI population in the world.

 

India’s story is also reflected in a Business of Fashion Insights-McKinsey State of Fashion 2025 survey, which shows that global fashion executives overwhelmingly view India as a promising market with strong growth prospects and a key focus for 2025. 

According to the survey, 54 per cent of global fashion executives consider India a promising market (this is calculated by subtracting the 13 per cent who view it as unpromising from the 67 per cent who see it positively, with the remaining executives indicating no change). 

This contrasts sharply with China, where sentiment is negative, with 18 per cent of executives considering it an unpromising market for 2025. The primary reason for this is slower gross domestic product growth, which has also impacted the fashion market. 

In mature Asia-Pacific (APAC) markets like Japan and South Korea, sentiment is more positive, with 54 per cent of executives holding a favourable view, while 44 per cent of executives in emerging APAC markets are in the positive zone. 

The prospect of a large market in India, coupled with the potential for export growth, has led more global fashion brands to establish manufacturing operations in the country. Initially, brands turned to Vietnam to reduce their reliance on China but have since shifted their focus to India and Bangladesh as emerging hotspots. However, recent political instability and climate disruptions in 2024 have caused leading brands manufacturing in Bangladesh to shift up to 40 per cent of their production to other markets in the second half of the year.