The following is a special report on a new and unique household wealth index, prepared by Barclays Wealth and the Economist Intelligence Unit (EIU), which predicts how the global distribution of household wealth will change over the next ten years across 50 countries. The report, the first of its kind, clearly shows the gap closing between the established economic superpowers and the rising stars among the developing nations.
India
In less than two decades, India has been transformed from a slow-growing agrarian country into one of the world’s most dynamic economies.
Gross Domestic Product (GDP) has grown at an average of more than 8% annually over the past three years and by 8.7% in the most recent fiscal year, making India the second-fastest-growing major economy in the world. This economic boom has led to an unprecedented level of wealth creation.
India also has one of the fastest-growing affluent markets in the world. Although the country starts from a very low base, our Household Wealth Index suggests that there will be 411,000 households with wealth in excess of US$1 million in the country by 2017. The numbers of mass affluent, with wealth over US$500,000, is expected to rise from a negligible figure in 2007 to 1.9 million by 2017.
In recent years, the Indian stock market, which has seen a five-year bull run, has generated significant wealth. The Bombay Sensex Index has risen sixfold over the past five years, and climbed by 47% in 2007. There has been a run of IPOs on the back of this: 237 over the past three years, according to figures from Ernst & Young. Some 25% of Indian billionaires have made their fortunes through IPOs, according to Business Standard, an Indian newspaper.
Indian industrial families have often been beneficiaries of these IPOs. “Indian industrial families are unusually global in outlook,” says Mr. Aquilina. “It is not unusual to see family enterprises spread across the world with family members in Kenya, Canada, the UK and so on. They draw great strength from their ability to bring together and share ideas and expertise, and to benefit from collective knowledge,” he says.
Self-made entrepreneurs have also benefited from these IPOs, with Indian entrepreneurship on the rise. “A wave of successful, high-growth businesses grew up around the software industry,” says Professor K. Ramachandran of the Indian School of Business. “But this entrepreneurial spirit has not been limited to the software industry. People are generally more confident and optimistic about the possibilities of building their own businesses. We are also seeing a trend where members of industrial families are setting up new businesses, often diversified. These businesses start with favourable access to capital, social and support networks.”
As in many emerging markets, the wealthy in India have historically kept much of their wealth in tangible goods. Recent research by McKinsey reveals that Indian households hold more than half of their savings in physical assets like land, houses, cattle and gold. The latter has always had pride of place among Indians, who are the world’s largest consumers of gold. Recent estimates suggest that the population owns US$200 billion in gold, equal to nearly half of the country’s bank deposits.
More recently, affluent Indians, in keeping with the preference for tangible investments, have been investing in the Indian property market. Indian real estate has generated stellar returns on the back of low interest rates, strong demand and a huge influx of investment from sovereign wealth funds and Middle East investment groups, among others. Our research shows that property currently accounts for around 43% of overall household wealth in India.
“There has been a widespread investment in Indian real estate |
