On a recent summer evening, New Delhi’s socialites gathered at Bikaner House — the erstwhile pied à terre of Rajasthani royalty — for a fashion show of Tarun Tahiliani, a feted Indian designer, whose lavish bridalwear can range from $17,000 to $21,000 for a single outfit.

Guests were served flutes of pink champagne sprinkled with jasmine petals, lychee wantons, pulled pork tacos and tuna squares. They clapped appreciatively as models strutted past in glittering saris and full-skirted lehengas, embellished with elaborate embroidery and Swarovski crystals. 

Mr Tahiliani’s outfits are beloved by India’s super-wealthy business elites who, since the end of socialist austerity in the 1990s, have revelled in displays of their riches, boosting an indigenous luxury industry once believed to be recession proof. 

Yet as the designer unveiled his collection, top Indian industrialists, entrepreneurs and executives were enveloped in a cloud of gloom, worried about the faltering economy — and the government’s adversarial attitude towards private enterprise. 

India’s gross domestic product growth has slowed for four quarters in a row and shows little sign of picking up. At the same time, Narendra Modi’s government appears to view the business community with deep suspicion, if not outright hostility. 

“I’ve been working for 35 years, most of it in the financial industry, and I’ve never seen so much gloom and despair,” one Mumbai-based executive says. Few top industrialists are willing to express their unease openly, fearing retribution from a government that is notoriously sensitive to criticism. 

But Kiran Mazumdar-Shaw, founder of the Bangalore-based biotech company, Biocon, says Mr Modi’s public promises to eliminate the ills of “crony capitalism” seem to have left him wary of engagement with the corporate world.

“They want to distance themselves from crony capitalism, with the result that they don’t talk to business people,” she says. “As far as the common man is concerned, every businessperson is a crook and stealing taxpayers’ money. That is how sentiment is being inflamed.” 

The recent suicide of India’s “coffee king”, VG Siddhartha, was seen by many in the business world as symptomatic of a wider malaise. “If you look at India Inc, they are not in an ebullient mood. They are concerned. Alarm bells are ringing. We need to hear them,” Mrs Shaw says. 

After Mr Modi’s landslide re-election victory in May, some Indian industrialists were cautiously optimistic that the prime minister would turn his attention to reviving an economy showing signs of trouble. 

That hope was not realised. Instead of new stimulus measures or a fresh wave of bold structural reforms, the new government’s first budget in July set an aggressive target of increasing tax collections by 20 per cent. Businesses fear the ambitious goal will exacerbate what some call “tax terrorism” by officials under pressure to meet unrealistic targets.

The budget also levied a steep new tax surcharge on the super-rich, raising the effective tax rate for those earning more than $285,000 to 39 per cent, and nearly 43 per cent for those earning around $700,000. Nirmala Sitharaman, the finance minister, said no more than 5,000 individuals would be affected and that they should be willing to contribute to the nation. 

“The signal she sends is that rich Indians deserve to be penalised,” wrote the columnist Tavleen Singh. Ms Singh believes the latest tax rise will encourage more rich Indians to follow in the footsteps of the more than 23,000 dollar-millionaires that Morgan Stanley estimates have left India since 2014. The new taxes have had other unforeseen consequences, hitting foreign portfolio investors, who pulled an estimated $5.5bn from the stock markets in July. 

As the mood sours, the luxury industry is feeling the pinch. Footfalls in Delhi’s most upmarket shopping mall are said to have fallen 11 per cent last year, as the rich feared they would be under surveillance there. Once blistering sales for designer wear have tapered off. “The feelgood factor is extremely low — the lowest I’ve seen in decades,” Mr Tahiliani told me after his show. “There is such unease. Nobody is investing. People are just nervous about spending.”

amy.kazmin@ft.com

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