VARANASI, India — Over the last two decades luxury brands have eyed India’s fast-moving economy, booming middle class and youthful population, already among the world’s largest, hoping they had discovered their next big market. But it wasn’t to be.

Along with India’s protectionist policies (talks with the European Union on a free-trade agreement have been stalled since 2007), the rise of Hindu nationalist politics has become a major obstacle to realizing the country’s promise of growth.

Since the Bharatiya Janata Party formed a national government in 2014, the Indian fashion industry has been pressed to aggressively promote traditional attire and bypass Western styles. The effort aligns with the party’s broader political program: to project multi-faith India, a country of more than 1.3 billion, as a Hindu nation.

And with Narendra Modi, the party’s strongman of Hindu nationalism, as prime minister, fears that the country would head into a phase of aggressive nationalism have largely come true. Members of minority communities, accused of being disrespectful to cows, sacred to Hindus, have been lynched. Critics of Mr. Modi have been branded as “anti-national,” some shot and killed by Hindu nationalist activists.