The country is also poised to become a manufacturing hub for global luxury brands in the next four to five years, a report by Ficci-Yes Bank said.
The report said that India's high networth individuals (HNIs) population is increasing substantially and an active age group (25-45 years) is set to rise to a third of the population, which would boost the sector.
"This optimism stems from the fact that global brands like Louis Vuitton and Frette are already looking at India as a manufacturing base for their products, while others are sourcing their requirements from India," Ficci said.
The report suggested initiatives, including corporatisation and forming partnership with international fashionuxury councils, for the government and private players in order to expedite the creation of a hub for the manufacture of global luxury brands.
The luxury sector needs to be treated in isolation with other retail sectors as the dynamics governing it are significantly different in nature, Ficci said.
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To reach its potential, the Indian retail sector requires significant capital, technology and best practices to bridge the existing productivity gap, it said.
The constant back and forth on policy decision on retail acts as a dampner for luxury brands, the industry body said, adding that the Indian tariff structure also needs to be streamlined.