NEW DELHI: Increasing brand awareness among Indian youth and growing purchasing power in tier-II and tier-III cities are expected to drive India's luxury market to $18.3bn this year, according to a new industry report.

Trade body ASSOCHAM said that would represent a compound annual growth rate of about 25% on the current level of $14.7bn.

Five star hotels, fine-dining restaurants, electronic gadgets, luxury personal care items and jewellery all performed well in 2015 and these sectors are expected to grow by 30-35% over the next three years, the study forecast.

In addition, increased consumption in smaller towns and cities will see spending on big ticket items, such as on luxury cars and SUVs, rise upwards of 18-20% over the same period.

With the luxury market expected to grow at over 25% year on year, Private Equity investments (PE) in the luxury segment are expected to increase and support the enhanced size of the Indian luxury market, the report added.

Furthermore, high internet penetration across tier-II and tier-III cities, along with high disposable income, is expected to lead to around 100m transactions on the internet by 2020.

Accompanying the projections, the report included a nationwide survey of 250 employees aged 20 to 65 from the country's major cities.

According to the survey findings, Delhi ranked first in terms of luxury spending in 2015, followed by Mumbai, Ahmedabad, Pune and Bangalore.

The survey found that a majority of women tend to make purchasing decisions around cosmetics, perfumes, spa treatments, clothes, footwear, bags and jewellery. Men, on the other hand, mostly make luxury purchases related to alcohol, watches and vehicles.

More than 69% of survey respondents said they prefer to purchase well-known luxury brands while 65% separately indicated they would pay a premium for well-known, popular luxury brands.

Finally, in further evidence of the growing importance of online shopping, the survey found that nearly 85% of potential consumers search for luxury brands on the internet at least once a month.

Data sourced from ASSOCHAM; additional content by Warc staff