India’s high net worth individual (HNI) population shrank by 31.6 per cent to 84,000 in 2008, mainly due to a drop in the pace of economic growth and erosion in market capitalisation, according to the Asia-Pacific Wealth Report released by Merrill Lynch Wealth Management and Capgemini.
This is the second largest decline in the world. In 2007, India had posted 22.7 per cent growth, the fastest in that year.
According to the report, HNIs are those individuals who have investable assets of more than $1 million, excluding primary residence, collectibles, consumables, and consumer durables.
“After experiencing the largest growth in HNIs in 2007, India reversed the trend in 2008, as the key drivers of wealth such as GDP and market capitalisation were hit hard by the global financial crisis. The drop in GDP growth and market capitalisation caused an erosion of massive amount of HNI wealth in 2008,” said Salil Parekh, CEO (Financial Services), India and Asia-Pacific, Capgemini.
The financial crisis has made a dent in the wealth of HNIs in India. But the high pace of economic growth gives them a chance to increase wealth. In fact, their ranks are expected to swell in the next 10 years. India would have over 250,000 people in the HNI club by 2018.
“In 2018, India’s HNI population is expected to be more than triple its size in 2008, with emergent wealth playing a key role,” according to the report.
Pradeep Dokania, head of global private client, DSP Merrill Lynch, said the asset-allocation preferences and the distribution of wealth by the HNIs also resulted into a decline in numbers.
India suffered declining global demand for its goods and services, causing GDP to slow, and a drop of 64 per cent in 2008 in market capitalisation. At the end of 2008, its high net worth wealth was at $310 billion, down 29 per cent.
The report, however, said the Asia-Pacific region would be one of the strongest drivers of the global HNI wealth going forward, based on key macroeconomic and other wealth drivers.
Like China, relatively few among the current Indian HNI population (13 per cent, compared to 22 per cent in Japan) have inherited their wealth and fewer still (9 per cent) are over the age of 66, suggesting that the economic growth has the potential to boost the size of the HNI population.
The Merrill Lynch-Capgemini report also said that wealth was likely to extend beyond the metropolitan areas. “India currently has 80 million middle-class households and only 25 million reside in Tier-I cities like Mumbai and Delhi, while many others live in smaller cities and beyond.”
There were already 51 districts that had twice the market potential of four metros combined, showing the potential for HNI wealth to be even more geographically dispersed in future, it added.
The report said the markets in China and India were forecast to grow faster than their peers within the Asia-Pacific region and even faster than markets in Latin America, which have been known as engines of growth.
