The watchmaking world might well be fixated on China these days, but it’s not the only emerging market with attractive growth prospects. Among the other new industrial giants of the world economy, India has the biggest claim to our interest, not only because her population of more than one billion adds up to a huge potential market, but also because of the peculiar relationship India has maintained with Swiss watchmaking since the late 19th century.
Exports to British colonials
Up to the middle of the 19th century, Europe and the United States were the traditional outlets for Swiss watchmakers, but the second half of the century saw a far-ranging diversification in markets. One of the causes was the appearance of American watch factories, like Waltham Watch and Elgin Watch, which made the United States the world’s most competitive market. Another factor was the technological revolution in communications and transport that multiplied global trading possibilities with the development of telegraph, steamships and railways. The orient could thus become the new outlet for Swiss watchmaking.
India was a new market that first commanded the attention of Swiss watchmakers between 1890 and 1914, thereafter expanding strongly into the 1920s. The value of Swiss horological exports to the Indian subcontinent rose from 658,000 francs in 1885 to 1.7 million in 1900 and reached beyond 21 million francs in 1920. Furthermore, finished watches were overwhelmingly responsible for this growth, representing 97.4% of watchmaking exports between 1885 and 1920. Swiss watchmakers refrained from setting up assembly plants in India as they did in Russia and Japan for example, nor was there a local watchmaking industry on the Indian subcontinent. It remained the exclusive hunting ground for Swiss-watch dealers.
Most of their watches were simple and cheap. Indeed, their average value declined from 22 francs in 1885 to 6.5 francs in 1915, before recovering to 17 francs in 1920. The trade was thus not just about luxury items for the wealthiest classes, but mainly watches for the middle classes that were emerging with the urbanisation and industrial development of India. The British colonial administration was an important consumer of Swiss watches. The railways and armed forces were also major clients, judging from the advertisements of Swiss companies active in India.
By the early 1920s, India had become a crucial market for Swiss watchmakers, taking an increasing share of the global exports of Swiss watches. In 1885 India accounted for only 1% of Swiss watch exports but this grew to 1.8% in 1900 and to 8.8% in the exceptional year of 1920, when the Indian market became nearly as big as the American market.
Watches for the people
Thereafter the export figures reveal a very stable Indian market in the interwar years of 1925 to 1940, when annual exports averaged 4.6 million francs worth of complete watches for the most part (95.4%). The half-a-million watches exported to the subcontinent each year represented more than 3% of total Swiss watch exports.
Nevertheless the structure of the market was transformed during the 1930s. In response to the world economic crisis, Swiss watchmakers brought new kinds of simplified and standardised watches on the market. In 1933 the West End Watch company, one of the biggest Swiss watch concerns in India since the end of the 19th century, launched the Secundus model both as a pocket-watch and as a wristwatch. The following year the company reintroduced its Sowar brand in a new low-cost wristwatch. They were aimed at the working classes and did much to make watches popular among India’s city dwellers.
Relocating to India?
When it became independent in 1947, India also broke away from the economic policies of the colonial era. In the 1950s and 60s, the state became a major player in the country’s industrial development. Import controls, followed by the second five-year plan of 1956-1961 revealed a state policy of promoting national industries while limiting foreign intervention in the domestic economy. For the watch industry, the government imposed quotas on watch imports through a system of licences for companies trading in India. These restrictions, which remained in force until the end of the 1990s, were meant to favour the development of a local watch industry.
The Swiss watchmaking establishment was well aware of the issues at stake but divided on how to respond: should it get involved by locating production in India to retain market share against foreign competitors? Or should it ban the practice in favour of exporting finished products? A Swiss watchmaking delegation was accordingly sent to India in 1958 to look into the possibilities of manufacturing locally. However, for the time being the Statut horloger that governed the Swiss watch cartel (see Watch AroundN°10) did not allow Swiss companies to invest directly abroad. A relaxation of the cartel’s restrictions in 1961 opened the possibility of a partial transfer of production to India. Thus half a dozen Swiss companies, including some that had been long present in the Indian market, hoped to set up local production units. In 1964, Tissot and Omega in the SSIH group, Favre-Leuba, Enicar, Degoumois, Benrus (an American firm with a branch in Switzerland) and Langendorf sent a joint petition to the federal authorities to be allowed to invest directly in India. However neither the Federation of the Swiss Watch Industry (Fédération Horlogère) nor the Swiss chamber of watchmaking managed to get industry consensus on the issue through ad-hoc committees. Some manufacturers put up stiff opposition to the transfer of production. In fact, until the end of the 1960s, no significant industrial venture involving Swiss watch firms succeeded in getting off the ground.
Abandoned to the competition
Meanwhile, the Swiss watch industry’s main competitors were on the warpath, investing in India and contributing to the birth of watchmaking in that part of the world at the start of the 1960s. Industrialists from the French watchmaking town of Besançon, for example, set up the Indo-French Time Industries company in Bombay with Indian partners, while the German firm, Kasper & Co. of Pforzheim, founded Asika Time Industries at Coonoor with local associates. Both assembled movements imported from France and Germany respectively. However, Japan’s Citizen Watch Co. became the leading player in India by setting up a joint venture in Bangalore with Hindustan Machine Tools (HMT), a state enterprise created in 1953 to make machine tools and precision instruments. The Japanese watch company, which had also been producing machine tools since the mid-1950s, sent some over to equip HMT’s watchmaking workshops. It then went on to supply movement blanks and parts until its Indian partner was ready to manufacture its own movements. The closest cooperation was in the training of technical staff. In 1961 Citizen invited 51 Indian engineers to spend a year studying at their factories. In June the following year a team of Citizen engineers was sent to India to help their returning Indian colleagues set up production. The Indian plant was complete by December 1962. During the 1970s HMT emerged as the leading Indian watch manufacturer. Even though Indian production consisted primarily of assembling parts imported mostly from Japan, it expanded strongly in the 1960s and 70s. From 1965 to 1980, domestic watch production soared from 208,000 units to 4.8 million. From the end of the 1980s, the Titan company joined in as driver of the Indian watch industry with its quartz watches and became HMT’s main challenger. In 1993, India’s output of watches reached nearly 30 million units with HMT claiming 47% of the market and Titan 37%.
The result of this policy was the stagnation of watchmaking exports to India, which did not have the freedom to expand. Exports of finished watches (93.8% of the watch trade with India in 1955) had continued and even increased significantly until 1955. But HMT’s watchmaking debut during the sixties triggered a drop in exports from 918,000 finished watches in 1955 to 30,000 in 1970 and just 12,000 in 1980. While watchmaking exports to India remained high, they consisted mainly of components for Indian companies. The share of complete watches in the horological exports to India likewise slumped from more than 90% in the 1950s to 46% in 1970 and 24% in 1980.
A free market at last
Economic liberalisation policies adopted from the end of the 1990s enabled Swiss watchmakers to return to the Indian market in strength. All import restrictions on Swiss watches were gradually removed, notably the import licences in 1998 as well as the lower price limit for imported watches – 35,000 rupees (about 1,000 US dollars) until 2000, then 4,000 rupees ($120) until 2002 when India lifted all trade restrictions on watches.
With trade liberalisation, exports to the subcontinent rose from 14 million francs in 1990 to 21.9 million in 2000 and to more than 77 million in 2008. Furthermore, the proportion of finished watches in the horological exports leaped from 24.3% in 1980 to 95.9% in 2000, also reflecting the changes that took place in the 1990s.
Despite this strong growth, India ranked only 26th among the Swiss watch industry’s markets in 2009. However it shares with a number of far-east countries the distinction of being among the fastest growing markets. The recent opening of single-brand boutiques in Bangalore and in India’s other urban centres (Omega, a pioneer, had five by 2010) is a sure sign that this market has potential.