‘India’s household wealth erodes $700 bn in a year’

The past few months have been tough for wealth creation.

Written by Fe Bureau | Mumbai | Published: October 12, 2012 2:44:01 am

The past few months have been tough for wealth creation.

Economic slowdown,combined with widespread equity price declines and relatively subdued housing markets in several countries,has produced the worst environment for wealth creation since the financial crisis,according to the Global Wealth Report by Credit Suisse Research.

The result? Total global household wealth fell 5.2% to $223 trillion between mid-2011 and mid-2012,the first annual decline since 2007–2008.

Europe was responsible for $10.9 trillion of the total global loss of $12.3 trillion. Asia-Pacific (excluding China and India) was the other big regional loser,shedding $1.3 trillion on the back of the dollar appreciation.

While North America ($880 billion) and China ($560 billion) saw an increase in wealth,India saw a wealth erosion of nearly $700 billion,which has made the country drop back below the level it achieved in 2007.

However,the report points out that India has seen rapid growth in wealth since 2000,with wealth per adult rising from $2,000 in 2000 to $5,300 in 2011. Adjusted for exchange rate movements,wealth has grown at an average annual rate of 8% since 2000.

Given the 29% rise in the adult population,aggregate wealth more than tripled during the same period. In US dollar terms,there was a significant contraction in 2008,but most of this was due to an exchange rate depreciation.

The rupee took another dive in 2011–12,causing a 20% decline in wealth in US dollar terms.

In India,property and other real assets made up 84% of estimated household assets,according to the report.

Personal debts are recorded at only $162 per adult,but this figure may have been underestimated,given the significant underreporting of household liabilities.

The report states that while wealth has been rising strongly in India,and the ranks of the middle class and wealthy have been swelling,not everyone has shared in this growth and there is still a great deal of poverty. “This is reflected in the fact that almost everyone in India (95%) has wealth below $10,000.

At the other end of the scale,a very small proportion of the population (just 0.3%) has a net worth over $100,000,” the report states.

However,due to India’s large population,this translates into 2.3 million people. India has 237,000 members of the top 1% of global wealth holders,which equates to a 0.5% share. There are 1,500 ultra high net worth (UHNW) individuals with wealth over $50 million and 700 with more than $100 million,states the report.

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