Millionaires in India on the rise

MUMBAI: In the coming decade, the number of dollar millionaires in India is expected to soar to 411,000 from a previous negligible figure. According to a report prepared by the Economist Intelligence Unit (EIU) for Barclays Wealth, the wealthiest households in India are projected to hold a staggering $1.7 trillion, surpassing the country’s current market capitalization of approximately $1.3 trillion. Although these affluent families will constitute only 0.2 percent of the overall population, their financial clout will be substantial.

In contrast, smaller nations like Singapore and Hong Kong are anticipated to display a significantly higher concentration of millionaires, with around 40 percent of households in each possessing wealth exceeding $1 million. Despite this disparity, India is poised to emerge as one of the world’s rapidly growing prosperous markets, potentially ranking as the 8th largest wealth center by 2017.

The number of mass affluent individuals—defined as those with wealth above $500,000—is estimated to increase dramatically from virtually nothing in 2007 to 1.9 million by 2017. This remarkable growth can be attributed to a sustained five-year bull run, which has notably bolstered the fortunes of many corporates and entrepreneurs seeking to raise funds from the markets. Furthermore, inherited wealth and escalating corporate salaries continue to serve as essential drivers behind this financial upswing.

As is typical in many emerging markets, the wealthy within India have traditionally been inclined to possess much of their wealth in tangible assets. New insights from McKinsey reveal that Indian households allocate over half of their savings towards physical assets such as land, property, cattle, and gold. Property alone contributes to 43 percent of total household wealth.

Additionally, gold maintains its status as a favored investment vehicle among Indians, who are recognized as the world’s largest consumers of the precious metal. Recent estimates indicate that the population holds $200 billion worth of gold, equating to nearly half of the nation’s bank deposits.

However, this trend may see a transformation over the forthcoming decade, as financial instruments such as REITs, real estate mutual funds, gold ETFs, and bullion trading platforms gain traction. Investors are likely to pivot towards these modern avenues for holding traditional assets like property and gold.