In what appears to be another sign of India's economy holding strong, the number of high net worth individuals grew by about 5,000 last year, according to a report released by Merrill Lynch and Cap Gemini Ernst & Young on Thursday.
At the end of 2002, there were roughly 50,000 HNWI in India, compared to about 45,000 the year before, says the World Wealth Report 2003.
"The rise was in line with regional growth in number and wealth of high net worth individuals," said Raj Sehgal, Merrill Lynch Global Private Client's market leader for India, in a statement.
High net worth individuals are people with financial assets of at least $1 million, excluding home real estate.
The total number of HNWI individuals in the Asia Pacific region rose 4.9 per cent, or a net 100,000 people, to 1.8 million at the end of 2002, with their combined wealth rising from $400 billion to $5.7 trillion.
The global wealth of HNWIs, meanwhile, grew 3.6 per cent to $27.2 trillion, with just under 200,000 people around the world joining the ranks of HNWIs.
"The number of high net worth individuals globally grew 2.1 per cent to 7.3 million at the end of 2002. This was the lowest growth rate in the last six years," said Sehgal.
Interestingly, for the first time in the last six years, the wealth of North American high net worth individuals declined by 2.1 per cent.
In the United States, there were an estimated 2,000,000 high net worth individuals at the end of 2002, down a net 100,000 people compared to 2002, largely due to declines in the US equities markets.
The wealth of the estimated 20 million people of Indian origin spread across the globe is $300 billion. High net worth individuals make up around $100 billion of this. The number of high net worth individuals in China was 210,000 at the end of 2002.
"The above average growth in the Asia Pacific region was supported by relatively high saving rates and robust GDP growth in key regional economies like China, South Korea and Australia," Sehgal was quoted as saying. "HNWIs in the region also responded quickly to insulate their financial wealth against new market realities and build diversified portfolios."
According to the report, the majority of HNWIs accepted the reality of the economic environment by insulating their existing financial assets and pursuing more conservative wealth preservation objectives.
"While many HNWIs held onto existing equity positions, they collectively avoided funneling new income into the stock markets and increased their holdings in fixed income and cash and also diverted funds to alternative investments, real estate and other investments less correlated to equities," the report noted. "The investor mantra became 'cash (and fixed income) is king'."
"India is a contrast to the West in many ways. The savings rate is upwards of 24 per cent. Indians are typically conservative and invest in fixed deposits and provident funds. Also, the traditional bastion of wealth was with the promoters of companies, who are now being replaced by sportspersons, technology professionals and film stars among others," said Nikhil Kapadia, head of DSP Merrill Lynch's private client group.
Equity as a component of wealth was only 3 per cent, said Pradeep Dokania, executive vice-president of DSP Merrill Lynch.
Sehgal said the wealth of high net worth individuals was estimated to grow 7 per cent annually over the next five years and touch $38 trillion by the end of 2007. This would be on the back of containment of terrorism and other factors, he pointed out.
Additional inputs: Business Standard
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