The 36 million watch industry expects to see a dramatic shift from the unorganised sector to branded products. Industry players estimate that the duty cuts announced in the Union Budget last month will boost the mass market segment, curb smuggling, offset rising raw material costs and enable introduction of more international brands.

Last month, Finance Minister P Chindambaram announced the reduction on import duty on dials and movement parts by 7.50 percentage points. As a result import duty came down to 5 per cent from 12.5 per cent.

Harish Bhat, COO, Titan Watches and president of the All-India Federation of Horological Industry, said, "The duty reduction for dials and movements has reduced incentives for the smuggled watches. Twenty per cent of the Indian watch market consists of the unorganised segment, where either products or components are smuggled and assembled in India."

 He added that the proposals would enable the companies to ease the burden of shooting raw material costs. In the last one year prices of steel, brass and gold -- raw materials required for watch manufacturing -- have risen sharply.

Salil Sadanandan, senior vice-president (marketing and sales), Timex Watches agrees, "The duty reduction on dials and movements will bring down the component costs, leading to improved margins. It will be easier to introduce new products and brands."

To lure more customers Titan plans to introduce products below Rs 500 price point under its Sonata brand. "With prospects of growth in the mass market segment, the company will be launching watches priced lower than Rs 500, which will be retailed through World of Titan showrooms as well as independent retailers," said Bhat.

On the other hand, Timex is optimistic about the luxury segment. Sadanandan said, "The luxury segment is growing at 20-25 per cent in value terms. The company would be launching new brands and premium products in the Rs 1,000 - Rs 10,000 segment."

Recently, Timex entered into a licensing agreement with fashion house Valentino SpA and has acquired Italy-based Vincent Berard SA. Later this month, the company will be launching Nautica watches in India.

However, others like Japanese watch company Citizen Watch India were not optimistic about the duty cut proposals. Sebastian Lukose, manager sales, Citizen Watches India, said, "The budget is a status quo for the company as we do not have manufacturing base in India and also the additional education cess has offset the duty benefits."