Billionaires on the rise in rapidly growing India

Stark contrast with majority of population living on a pittance, while ranks of super-wealthy swell.

Women browse merchandise inside a Fendi store, a brand of LVMH Moet Hennessy Louis Vuitton SA, at the DLF Emporio shopping mall in New Delhi, India. Graham Crouch / Bloomberg

Wealth creation in India is on the rise, with the number of billionaires in the country rapidly growing.

Although about two-thirds of the population live on less than US$2 a day, the country’s economic growth is sharply boosting the number of ultra-wealthy Indians.

“Wealth creation in India particularly is expected to accelerate with the number of UHNWIs (ultra high net-worth individuals) expected to double over the next decade,” says Shishir Baijal, the chairman and managing director of Knight Frank India. “This reflects a more positive outlook for India’s economy after 2013 was marked by capital outflows and a sharp devaluation of the rupee.”

India’s economic growth slowed to 4.5 per cent in the past financial year, which ended last March, and the Indian rupee crashed to record lows. But the slowdown in the country’s economy is widely believed to have bottomed out.

India is expected to have more billionaires than countries including the United Kingdom, Germany, and France by 2023, according to a report released this month by Knight Frank. The global property consultancy forecasts that the number of billionaires in India will increase to 119 by 2023 compared to 60 last year and just 23 in 2003. Its rate of growth in the number of billionaires is expected to outpace that of China.

“By 2023, only three countries in the world, namely the USA, China and Russia, will have more billionaires than India,” says Samantak Das, the chief economist and research director at Knight Frank India. “During the next decade, at 98 per cent, growth in billionaire count in India will be much faster than either of the global [38 per cent] or Asian [66 per cent] benchmarks. The out-performance in growth of UHNWI count in India [99 per cent] is even larger when compared to the global or Asian benchmark.”

The development of India’s economy is the major factor behind the projected increase in wealth. The sheer size, with a population of 1.2 billion, offers an opportunity for Indians to scale their businesses within the country to generate wealth.

The report defined UHNWIs as those who have net assets of US$30 million or more, excluding their primary residence, while billionaires would of course have net assets of $1 billion or more.

The latest global rich list compiled by Hurun, a research firm based in China, recently revealed that Mukesh Ambani, the chairman and managing director of the conglomerate Reliance Industries, is India’s richest individual with personal wealth of $18bn. He was ranked 41st on the list. Other Indians who made it on to the list included Azim Premji, the chairman of Wipro, and Dilip Shanghvi, the managing director and founder of Sun Pharmaceuticals. Both came in at 77th position with a fortune of $13.5bn each. India moved up one place on the global list to fifth place for its number of billionaires compared with the previous year.

“Manufacturing, pharma and technology, media, and telecommunications are the preferred sectors with 17, 12 and 10 billionaires respectively,” Hurun said. “The combined wealth of the Indians billionaires comes to $390bn.”

About half of India’s billionaires live in Mumbai, according to the rich list. It stated that 15 billionaires choose to live outside of India, which is the highest proportion of any country.

“This past year, the Indian rupee weakened by 12 per cent against the US dollar, making it harder for Indians to make the cut-off,” it added.

Rising wealth in India has led to luxury brands increasingly tapping the market, including high-end car brands such as Porsche and Rolls-Royce to the French fashion house Louis Vuitton.

“These are exciting times for the luxury sector in India, which is buzzing with activity,” says Rajat Wahi, a partner at KPMG India. “In 2013, several players expanded their business in the Indian market and we expect 2014 to be equally – if not more – buoyant for the industry.”

The Indian luxury market grew by 30 per cent last year over the previous year to $8.5bn, according to KPMG. It is expected to reach $14bn by 2016. Reflecting the surge in wealth in India, the insurance company Tata AIG’s private client group, which focuses on insuring items for very affluent Indians, is experiencing growth of 100 per cent year-on-year in its business.

“Earlier people would only insure jewellery, however they now also include insurance for art and other collectibles,” says Gopa Menon, the national manager at Tata AIG General Insurance. “Tata AIG has insured women’s clutch bags worth 10m rupees [Dh601,244], pianos worth 2m rupees, watches worth 20m, lamps worth 1m rupees amongst other luxurious collectibles.”

Karvy Private Wealth, a wealth management company based in Mumbai, projects that total individual wealth in India will more than double from 202 trillion rupees to 411tn rupees in the next five years.

“With the beginning of reforms for liberalisation, privatisation and globalisation in the early 1990s, the wealth held by individuals in India in financial assets started to grow considerably,” Karvy says.

“We are going through the inflection point and wealth held by individuals is expected to grow manifold over the next decade.”

Mumbai is expected to enter the top 10 global cities that matter to the world’s wealthy by 2024, displacing Paris in 10th position, according to Knight Frank. It ranks its top global cities on economic activity, quality of life, knowledge and influence and political power. It also takes into account cities’ UHNWI population. When ranked by UHNWI growth over the next decade, Mumbai is in fourth place among all global cities with an estimated rise of 126 per cent from 577 to 1,302 by 2023. Delhi ranks fifth with a 10-year UHNWI population increase from 147 to 321 by 2023, up 118 per cent .

Frederic Neumann, HSBC’s co-head of Asian economic research, says that financial assets in India are expected to grow by about 120 per cent over the next five years.

“We should make the point, however, that not everyone in Asia is revelling in new-found wealth,” says Mr Neumann. “Amid all the hype, it’s often forgotten that the majority of people in the region continue to live in poverty, with those fancy bags, let alone more basic necessities, still a distant dream.”

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