NEW DELHI: India's online luxury market is expected to grow to US$35bn by 2016 on the back of increasing disposable incomes, expansion of modern retailing and the influence of Western culture, a new report has forecast.

According to trade body Assocham, the Associated Chambers of Commerce & Industry of India, the luxury market was worth just US$8bn in 2012, which means it will more than triple in size by next year.

Luxury ecommerce is growing at a compound annual growth rate of about 25%, Assocham estimated, and it identified the rising middle class as the biggest driver of online retail growth in the country.

As income levels rise, spending patterns are changing and this is creating good business opportunities for luxury brands, the report said.

Furthermore, India also has 140 million internet users and, with 75% of them aged under 35, the country has one of the world's youngest internet populations.

And as online access increases, that will mean more and more previously unavailable brands will be brought within reach of consumers in lower-tier cities, the report predicted.

"Luxury shoppers are well-connected digitally and it becomes easier for brands to showcase themselves online," said D S Rawat, secretary-general of Assocham.

"Luxury products sold online include apparels, stylish accessories, watches and high-end electronics," he added. "Most of these products are offered for sale at online portals at a price that is incomparable and certainly benefits the middle class audience too."

In terms of categories, the report noted that the luxury clothing market grew by 35% to Rs 13,230 crore in 2012 and is likely to reach Rs 32,000 crore by the end of this year.

The market for luxury electronic devices is growing at 38.5% while the jewellery market is growing at 42%, and discounting, combined with Indian consumers' "love" for luxury brands, is helping to stimulate the growth.

Data sourced from Assocham; additional content by Warc staff