As the global economic downturn caused by the sovereign debt crisis in Europe advanced, the economies of many countries turned turtle, unemployment shot up, living conditions deteriorated and many iconic businesses went bust. However, the number of wealthy continued to grow.
In India, what led a quantum jump in the number of Indian billionaires was the domestic liberalisation process in the 1990s through a series of path breaking economic and capital market reforms that freed the economy, promoted entrepreneurship, and encouraged capital and wealth creation.
A few years ago, public displays of opulence would perhaps have elicited a different reaction. But, with average income rising steadily, attitudes are changing and that trend is unlikely to reverse because, barring any unforeseen circumstances, there is near-consensus globally that the India growth story will endure in the long term.
The Indian ultra HNH
CRISIL Research has defined an ultra HNH as one having a minimum average net worth of 250 million essentially accumulated over the past 10 years, which as per our proprietary tool IDeA (Income and Demographics Analysis) gets mapped to a minimum income of 35 to 40 million.
The total net worth of Indian ultra HNHs, is expected to reach 318 trillion in 2016-17 from an estimated 65 trillion in 2011-12. This growth in net worth will be driven predominantly by growth in the number of ultra HNHs and the returns on wealth.
Over half of the ultra HNHs in the country are in the four metros. The other top 6 cities account for 13 per cent and the next 40 cities are home to about 15 per cent. The rest are spread across the country.
Based on our findings, using parameters such as source of wealth, motivation for wealth creation, spending and investing patterns, attitude towards charity or philanthropy, and perpetuation of wealth, we had, in our previous report, classified the Indian ultra HNI into three groups:
Our survey this year was conducted in the backdrop of the global economic downturn and its domestic repercussions, reflected in a slowdown in macro-economic and industry parameters such as GDP growth, and index of industrial production.
However, most ultra HNIs refused to acknowledge that there is a downturn when it comes to spending. A number of items that may qualify as luxury to most other individuals are essential (non-discretionary spends) items for the super rich.
But, on investments the story is totally different. Most of them are people of high business acumen and they recognize a risk when they see it.
Asset classes such as equities and commodities were found wanting, a reflection of the subdue state of these markets. Instead, there was an increase in safe-haven investments such as debt, fixed deposits and gold. And in real estate too, whenever low-risk opportunities such as distress sale arose.
Our survey this year also delved deeper into the psyche of the ultra HNI when it came to luxury cars, which happens to be one of the big-ticket spend items. Our findings suggest that the Indian ultra HNI is increasingly thinking like his global peers when it comes to cars that they aspire to own. Exclusivity is perhaps the most important criterion in their choice of cars but, they are also extremely conscious of the uniquely Indian setting, such as existing road infrastructure, traffic conditions in most cities, and luxury car servicing and maintenance infrastructure.
Trends in education are also revealing. An earlier generation of ultra HNIs may not have been as highly educated but, across classes, they are emphatic that their children need the best in education that is available. The ultra HNI feels that it is also vital in today’s business environment.
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