Mike Derrett’s IBI India Article: Indian Boating – Leaking, But Not Sinking!

Back in the boom years prior to the Global Financial Crisis of 2008, India was one of the most interesting new leisure boating markets with a surge in boat sales which attracted exhibitors and visitors to the first India International Boat Show in Cochin in 2003 and on to the launch of the Mumbai International Boat Show in 2007. Business appeared promising and on a steep upward curve with sales of over 50 leisure boats in 2007 in a country with a leisure boat population of under one thousand. Today the reality is different, Marina developments have stalled and the elasticity of optimism for leisure boating has been stretched to breaking point. IBI Asia correspondent Mike Derrett travelled to Mumbai, the nations boating capital to talk to the industry…

Economy
Since the early 1990’s India has seen accelerated growth in the world economic stakes; the largest democracy with a population of 1.2 billion, India is the sixth largest economy in the world and has the second largest population after China with over one billion people. In 2010, the Indian economy rebounded robustly from the global financial crisis – in large part because of strong domestic demand – and growth exceeded 10% year-on-year in real terms. However, India’s economic growth in 2011 and 2012 slowed considerably because of persistently high inflation, interest rates and little progress on economic reforms. High international crude prices have exacerbated the government’s fuel subsidy expenditures contributing to a higher fiscal deficit, and a worsening current account deficit.  GDP growth figures have dropped to an estimated 5.4 % in 2012 down from 10.1% in 2010. If any further proof is required of the economic slide, the latest car sales figures for February 2013 are 25% fewer than February last year with predictions that 2013 will be the first year that car sales will shrink since 2002-03, a stark contrast where, for much of the decade, sales have been rising between 20 to 30% per year.
For the visitor to India the vibrant economy is often a fact that is difficult to reconcile with the desperate poverty seen in the city streets and in the countryside. It’s a country of vast contrasts. Over 300 million people survive on the equivalent of one US$ a day yet the country has a middle class of 200 million of which 50 million are reported to have an annual income of 100,000 US$ and is home to 83,000 US$ millionaires, a figure that was until recently  increasing by nearly 20% a year. On top of this, (and of particular interest to the Superyacht industry), there are an increasing number of high net worth and ultra high net worth individuals that make India one of the major markets in the world for private jets.
The Indian boating market
With the economic growth of India it’s not surprising that leisure boating had been growing since 2000 although this has slowed dramatically in the past two years. Unlike China where boating mainly exists at the high end, India has developed at both ends of the market spectrum. At a prestige level with larger power and sailing boats, but also with sailing dinghies and smaller power boats up to 35’ in length. Early Indian boating largely depended on sailing boats and dinghies based around Sailing and Yacht Clubs, a legacy from the old British Colonial days. Prosperity brought increased interest in leisure boating, with small outboard powered utility boats providing the initial sales, many going to tourism operators and commercial operators, a classic scenario for a new boating market. Even now an important part of the boating market in India is the market for practical boats that are used for private transport rather than just for fun on the water. Even so a foreign branded leisure craft is considered a major status symbol with sales since 2005 including numerous larger flybridge boats up to 110’ in length. Now it’s estimated that there are over 1,000 leisure boats of all sizes in India with some 60% concentrated in Mumbai the commercial capital of the country. Here 300 boats ranging from small sailing dinghies to 30 metre power yachts lie on swinging moorings off the historic Gateway to India. Nearby is the historic Royal Bombay Yacht Club founded in 1846, the oldest yacht club in Asia and the second oldest in the world.  The Club Commodore Aashim Mongia also runs West Coast Marine Yacht Services in Mumbai importing Majesty, Gulf Craft and Viking power boats and sailing boat brand Grand Soliel. Mongia is realistic about the current market in India ‘Boat sales in India have declined from a peak in 2007 of some 50 leisure boats with a total estimated value of US$15 million to 10 boats in 2012 valued at US$1.5 million’. Over lunch at the club we were joined by industry colleagues Gautama Dutta head of Marine Solutions importing the Ferretti, Riva, Sea Ray and Jeanneau brands and Shakheel Kuldroli who runs an active sail and adventure training school, Aqua Sail. All are founder members of the India Marine Federation, a member of ICOMIA. Talk soon turned to the current state of the Industry, according to Gautama Dutta ‘We have come a long way as 10 years ago people did not know what the word marina meant, now they do, but despite all of our efforts only two small marinas have been built in Cochin and in Goa in the south.

Here in Mumbai is where we need berthing space as the swinging moorings are nearly full and we need the convenience of marina facilities to attract clients interested in larger yachts. The main problems on developing a marina relate to two points, firstly the high cost of waterside land in Mumbai and secondly the bureaucratic process of obtaining the considerable number of permits required’.  Shakheel Kuldroli however is happy about the way his sailing school is developing which works mainly with young people citing that ‘Indians love travelling and spending in this area is still increasing even in the current downturn, the market demand is moving from passive leisure to active leisure and we need to offer that and I’m sure that there is latent demand for leisure boating but it’s a long term thing’. The three industry members are particularly concerned about other issues restricting the industry such as the shipping regulations which do not differentiate between commercial and leisure craft and the high level of security on water brought about by the Mumbai terrorist attacks of 2008.  Local Fairline and Monterey dealer Riyhad Kundanmal of Ocean Crest Marine considers ‘The lack of a single transparent agency to facilitate the procedure of the permits and licenses required for the use of a leisure boat is a problem too’.
On a commercial level the imposition earlier this year of a luxury products tax, which includes leisure boats, is seen as particularly devastating to the industry with duty and tax on imported yachts amounting to 47.3%, which is still subject to VAT of 5%. Through the IMF the industry is trying to lobby Government on all of these issues, a key issue is getting the message across that leisure boating is an industry that can grow considerably and benefit local economies.

The lack of a major boat show this year in Mumbai is a promotional setback for the industry, according to Maneck Davar, CEO of organizers Spenta Media, ‘In the current market conditions we have decided to suspend the show for the time being as we were not clear on the level of support from the industry, we are hoping to re launch in 2014’.


The long term potential for leisure boating in India could improve given a recovery of the current economic downturn and the provision of boating infrastructure. There is an imbalance between the high demand for boating and the availability of marinas and service facilities. There has been much talk of marina developments in the past seven years, but no full service marina has yet materialized. With India the World’s largest democracy and the master of bureaucracy, it is not surprising that growth of marinas has been slow. In India marinas are often perceived as something for the fortunate few and with strong opposition from environmental and fishing lobbies it can be difficult for elected politicians to support.
The key strength of India as a boating market is the cultural acceptance by Indians of boating as a leisure activity, they relate immediately to the fun and sense of achievement leisure boating offers. In this respect India ranks ahead of China where acceptance of leisure boating or even an understanding of it is only just emerging. On top of this there is real demand for boats as a practical means of transport, especially in Mumbai. In the words of Aashim Mongia owner of West Coast Marine Services, ‘Indian boating is a sleeping Tiger waiting to be woken up!’
© mike derrett 17th March 2013
Main reasons for the current downturn in Indian leisure boating:
•    The rules and regulations for leisure boating are absent.
•    High level of taxes and duties with the recent imposition of a luxury tax making imported boats subject to duties and taxes of 47.3% plus 5% VAT.
•    The lack of boating infrastructure, mainly marinas.
•    Downturn in the economic growth in 2011/12.
•    Strict security regulations for boating which appeared after the Mumbai terrorist attacks of 2008 which effectively prohibit leisure boating at night.
•    No major boat show – The Mumbai International Boat Show has been cancelled for 2013.

Contributed by Mike Derrett

http://www.mikederrett.com/

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