IndiaRetailBiz

Global financial meltdown resulting in collapse of capital markets had its impact on India’s HNWIs (high networth individuals or dollar millionaires), as their number dwindled by 39,000 (or 31.6 per cent) from 123,000 (2008) compared to 84,000 in the previous year (2007). This is the first drop recorded for India in the past seven years.

An HNWI is defined as the one who owns net assets of at least $1 million, excluding his/her primary residence and consumables. HNWIs are among the largest spending consumers patronising purchase of lifestyle and luxury products.

These are findings of the report titled “World Wealth Report” released by DSP Merrill Lynch and Capgemini, investment banking firms, on Thursday.

“India’s HNWI (high net worth individuals) population shrunk 31.6 per cent to 84,000, the second largest decline in the world, after posting the fastest rate of growth (up 22.7 per cent) in 2007,” said the report.

“India, still an emerging economy, suffered declining global demand for its goods and services and a hefty drop in market capitalisation of 64.1 per cent in 2008,” adds the report.

Globally, HNWIs are concentrated mainly in North America, Europe and Asia. While their combined wealth in 2008 dropped by 19.5 per cent to $32.8 trillion, their overall number was down by 14.9 per cent to 8.6 million.

This was a direct consequence of global market capitalisation plummeting by $30 trillion, or nearly 50 per cent, during the year.

Responding to the crisis in equity markets, HNWIs poured more money into fixed income, cash-based investments, and real estate, said Pradeep Dokania, DSP Merrill Lynch managing director and global private client head.

“HNWIs significantly increased allocations in art and jewellery, gems and watches in 2008 compared to pre-crises levels in 2006, as alternative flight to safety,” added Salil Parekh, Capgemini, CEO, financial services, India, Asia SBU.

The report, however, is quite upbeat on hopes of economic activity gain momentum in the coming years. It predicts an annualised growth rate of 8.1 per cent until 2013 and expects the overall wealth to rise to $48.5 trillion by then.

“HNWI financial wealth will grow to $48.5 trillion by 2013, advancing at an annualised rate of 8.1 per cent driven by the recovery in asset prices as the global economy and financial system right themselves,” says the report.

Our earlier report on the subject: