India’s population of high net worth individuals (HNIs) has become one of the largest in the world. In 2010, we were 12th in the global list, replacing Spain.
According to a World Wealth Report by Merrill Lynch Global Wealth Management (MLGWM) and Capgemini, it is the second straight year in which India’s HNI population growth has been among the top.
“India’s HNI population grew at 20.8 per cent to 153,000 compared with 126,700 in 2009,” said the report. It added HNIs continued to benefit from a robust economy and strength in other key wealth drivers such as equity-market performance.
According to another report by Kotak Wealth Management, “Propelled by this economic boom, there has been an unprecendent level of wealth creation. Average income levels have risen manifold and many individuals have suddenly become millionaires.”
The resulting increase in money available for spending and the country’s increased integration with the global economy have widened the population’s exposure to major global luxury brands and triggered a “luxury revolution”, the report added.
Atul Singh, managing director and head of MLGWM, said, “With a GDP growth of 9.1 per cent in 2010 and an increase in market capitalisation by 24.9 per cent India presents a great opportunity and continues to remain an important market for wealth management providers worldwide.”
Entrepreneurship is clearly the dominant source of domestic wealth, noted the Kotak report. “But fast-growing service industries such as technology and financial services have also catapulted many hitherto middle-income group individuals into the ultra HNIs bracket,” it said.
Crisil Research has defined an ultra high net worth household (ultra HNH) as having a minimum average net worth of Rs 25 crore. According to reports, in the year 2010-11, the number of HNHs in India was estimated at 62,000. “This number represents a meagre 0.03 per cent of total households in India but is poised to more than triple to 219,000 households by 2015-16,” added the Kotak report.
Ultra HNIs are the cream of the society and seek to maintain a lifestyle in keeping with their social standing. “They are highly brand-conscious and, in some cases, have strong brand loyalties. They are heavy spenders, be it on high-quality homes, food, clothing or the luxuries of life in entertainment, education, travel and family vacations,” the report elaborated.
They’re also on a lookout for new ways to splurge on art, artefacts, yachts and the like.
Wealth managers and luxury brands would be beneficiaries. For them, a rising number of HNIs would translate into an appreciable increase in their addressable market. Further, this would allow wealth managers and luxury brands to evolve more innovative marketing strategies and target their products in better and more effective ways.
World scenario
Though India might have made its place among the top 12 countries, globally the HNI population is still concentrated in three markets. According to the Merrill Lynch report, the US, Japan and Germany together accounted for 53 per cent of the world’s HNIs in 2010; the US alone constitutes 28.6 per cent of the global HNI population. The world’s HNIs expanded in population and wealth in 2010, surpassing the 2007 pre-crisis levels in nearly every region, said the report. The global HNI population and wealth growth reached more stable levels in 2010, with the population increasing 8.3 per cent to 10.9 per cent. Their financial wealth grew 9.7 per cent to reach $42.7 trillion. The Asia-Pacific witnessed the strongest regional rate of HNI population growth, surpassing Europe in 2010. Interestingly, in 2009, HNIs’ wealth in the Asia-Pacific had already overtaken Europe.
With the economic scenario again showing signs of worsening and capital markets around the globe under pressure, experts believe the year is likely to end with muted growth in the population of HNIs. More, if the latest statistics from the Securities and Exchange Board of India are any indicators, a possibility of reduction in wealth is evident. According to the capital markets regulator, the assets managed by portfolio managers as on May 31 showed a sharp fall of 33.9 per cent at Rs 2,40,042 crore, against Rs 3,62,946 crore managed at the end of last calendar year.
