This article gives a perspective of the wealth of Indian individuals – this excludes by definition, institutional wealth (investments by banks, Govt etc).
First of all, what is this animal – “wealth” that we all have been talking about recently ? Accumulated savings is wealth. Every person has some wealth – some more, some less. Wealth is a recent phenomenon in India, because till 2 decades back, the absolute amount that we used to save was not significant. But in the last 20 years, the wealth with Indian individuals is growing at an unprecedented pace, so much so that we have generated as much wealth in the last 6 years as we have done in the first 60 years after independence !!! If you imagine a graph of Indian wealth by years for past 60 years, the wealth “worm” after crawling for many decades became a “butterfly” at one point of time – no points for guessing the year after which this happened – it is in the early 90s, no coincidence that India started our reforms program in true earnest in this phase.
The combination of continuous reforms and favourable demographics have, in the long run, placed India’s GDP firmly on the high-growth path. Add to this the nation’s middle-class values of high savings, and as we can see above, we are clearly poised at an inflection point in terms of wealth accumulation. So, the above is a resultant of the GDP growth rate of 7%+ p.a. witnessed for more than a decade and the savings rate of 30%+ : it is pure math and as a country, we need to grasp the opportunity with both hands, build institutions to exploit this phenomenon, look after our wealth more responsibly.
Despite formidable headwinds in recent years, including the 2008 global financial crisis, the subsequent Euro-zone debt impact, and the persistently high inflation, India continues to be one of the fastest-growing nations in the world.
So, how much is total Indian wealth with individuals like you and I ? It is a (staggering) Rs 86 lakh crore of financial assets (excluding investments in real estate and in gold). This is the bottom-up counted wealth of individuals in stocks (direct equities), mutual funds, insurance policies, fixed deposits and small saving instruments like post-office savings etc.. This wealth has been increasing in the range of upto Rs. 10 lakh crores every year in recent years, and this might give an idea of the “recency” of our wealth.
Fixed deposits & bonds have become the top contributor to overall wealth held by individuals in India, displacing last year’s topper, direct equity, primarily due to the recent uncertainty in the financial markets.
Other Key Highlights:
• Fixed Deposits and Equities jointly aggregate around 62% of the total Individual Wealth in India
• Indian Investors are more prone towards Debt instruments which comprise 68% of their wealth in comparison to global counterparts at 53%, in case of Equity – the global investors are less risk-averse at nearly 41% whereas Indians have invested approximately 32% of their wealth in the same category
• Alternative asset instruments (structured products, private equity funds, real estate funds) combined with retirement benefit investments like PF & Insurance is poised to grow significantly in the coming years.
• Wealth of Indian individuals is expected to grow at an annual rate of 20%+ in coming years and should double in next 3-4 years !!
The Rs 86 lakh Crore of wealth is spread as follows : Fixed depoist/bonds – 27 lakh crore, Direct equity – 26 lakh crore, Insurance – 15, Savings deposits + small savings – 11, PF – 4, Mutual Funds – 3.
(This article has been co-written along with Varun Saxena, Head-Marketing of Karvy Private Wealth. It also forms the base for Karvy Private Wealth’s India Wealth Report. )