While the Western markets are faltering, luxury retailers are searching for the next location to sell their high-end goods, and it looks like India might just be the place.

While India makes up just 0.4 percent of global luxury good sales, the market is growing at 25 percent a year, according to a recent Bain & Co. study.

There are 1.5 million households in India who could afford luxury goods, compared with 1.6 million households in China, according to McKinsey.

The numbers have prompted some luxury brand names to open retail stores in the largest cities in India in recent months, despite the economic downturn.

New entrants say that gaining a foothold in India has not been easy, and doing business has been difficult.

Santosh Desai, chief executive of Future Brands, an Indian consulting company, said part of the difficulty for foreign manufacturers of luxury goods rests in the Indian social hierarchy.

People buy brand-name luxury goods in other markets to show that they are successful, but because of India’s entrenched caste system, people are already defined by accent and last name, no matter how much money they make, he said.

In addition, Christian Blanckaert, executive vice president of Hermès International, describes the country as “a nightmare” for international retail businesses because of the laws and bureaucracy they have to navigate to enter the market.

Full story at IHT