Plotting India On The Global Wealth Map

Several unprecedented uncertainties staring at global wealth momentum engulfed the planet last year. World over, the geopolitical turmoil around historic events such as Brexit, the Trump administration and the China debt crisis to name a few, left wealth advisors and the high net worth population anxious.

Set against this backdrop, the health of the global economy, however, has surprised many. India has registered staggering double digit growth in the number of high net worth individuals across all three categories (5m+, 50m+ and 500m+) according to the recently launched Knight Frank Wealth Report 2018. The projection for the next half a decade indicates that the wealthy population in the country is set to expand at a faster rate.

Nevertheless, some global concerns remain. From the hardening of interest rates to protectionist policies, the world’s wealthy population needs to tread cautiously

The world added close to 12000-odd ultra-wealthy individuals or people with a net asset worth of more than USD 50 million in the 12 months to December 2017. At least 500 of these were Indians. In the past half a decade this affluent class in the country has grown at an exponential rate of 54%. Projections for the subsequent 5 years indicate that their numbers are set to accelerate even faster.

While Asia is expected to add the highest number of ultra-wealthy people in the world China, Japan and India would be the top 3 contributors of this narrative. In fact, Mumbai and New Delhi would be amongst the top 10 cities on a global list to add the highest number of households with an annual income of over USD 250,000.

Wealth managers in India said that majority of their clients’ wealth had grown over the past 12 months primarily-driven by the country’s strong economic fundamentals, performance of non-property investments and performances of own businesses.

Property investments were amongst the lowest contributors towards wealth generation in India. The dwindling confidence is largely linked to the sluggish record of the residential property market over the past few years. Widespread delays in delivery of projects across the country have pushed potential investors away from the once lucrative asset class. Meager returns from the sector added to its woes.

The trend is also reflective in investment portfolio allocations. While the Ultra High Net Worth Individuals (UHNWIs) globally allocated nearly a half of their investment portfolio into property, the affluent class in India budgeted just about one-third into the asset class. Even in terms of future investments Indian billionaires appeared skeptical as compared to their global peers.

Among other major trends Indians are traditionally known for their affinity for gold. However, the glitter seems to be fading. Globally more than one out of four UHNWIs contemplated increasing their investments in gold. Closer home in Asia, too, the confidence in the asset was significant, with 21% of the wealthy population investing their trust in the Midas touch. In India, however, the value for gold seems to have eroded with just 6% alluding interest in gold investments.

Dwindling interest levels in property and gold seems to have shifted the investment focus towards riskier asset classes such as equities. The stupendous run of the Indian stock market over the past 3 years appears largely responsible for drumming up this unprecedented confidence in the millionaire club. Among other assets the aftermath of demonetisation was evident in cash reserves. Globally only 17% of rich population reduced their cash holding as compared to 40% in India.

Going forward projections indicate stupendous growth of the wealthy population in India and across the globe but concerns over political risks persist. The uncertain future makes it imperative for wealth advisors to take additional caution and take informed decisions.