Kotak Mahindra and CRISIL Research recently published a survey of India’s rich titled ‘Top of the Pyramid’.
Here are key highlights of the report:
1) The report expects a five-fold increase Our estimates suggest that the total net worth of Indian ultra high networth households will reach Rs 318 trillion in 2016-17, a five-fold increase from today’s Rs 65 trillion. This growth is expected to be driven predominantly by growth in the number of ultra-high networth households and returns on wealth.
2) There are more than 81,000 ultra high networth households in India in 2011-12. A HNH is a household with a minimum net worth of Rs 25 crore. Although this number represents a miniscule 0.03 per cent of the total households in India, it is poised to more than triple to over 286,000 households by 2016-17.
3) Entrepreneurship is clearly the dominant source of wealth in India, but fast-growing service industries such as technology and financial services too have catapulted many hitherto middle-income group
households into the ultra HNH bracket.
4) Over half of the rich households in the country are in the four metros. The other top 6 cities account for around 13 per cent and the next 40 cities are home to about 15 per cent. The rest are spread across the country.
5) The survey on luxury cars also indicates that the Indian ultra high networth individuals as a class represents a market with very distinct tastes, borne out of a combination of rich traditions and heritage and modern needs. It is also increasingly likely to become a market that is becoming younger with time, as indicated by the success that some recent entrants into the luxury car market have been able to achieve by targeting the youth.
6) The approach of the rich towards investments this year was cautious and low risk, reflecting the economic and business sentiment of the day. Many of them used their business acumen and understanding of markets and shifted focus to investing in safe havens such as debt and gold. Proportion of incremental investments in equity markets was stable even in uncertain situations as they view it as a long-term bet.
7) The general feeling among our respondents was that the situation would come back to normal by mid to late 2013. So, many of them are in a wait and watch mode and caution has crept in only on investments so far. But if the uncertainty concerning the global economic recovery lingers for some more time, however, there is a real risk that the patterns seen in investments will spill over into spending. And in a tough economic climate, such as the current one, some of the above mentioned findings may well turn out to be game changers on the road to success.
8) On an average, the inheritor wealthy owns 3-4 cars, while the self-made and the professional own 1-2 cars each. Interestingly, the number of rich who owned more than 4 cars was more in the non-metros than in the metros.
9) Most rich increasingly prefer to let the child study in India until graduation, perhaps because they are quite comfortable with the quality of such institutions in the country up to this level, and also because it helps in the family staying together during the childhood years. For post-graduation, there is an overwhelming preference for institutions overseas, because of the apparent dearth of such high quality
colleges in the country.
10) Despite the staggering rise in gold prices during the year and the portends for further such increases in future, most rich continue to view and buy gold in the form of jewellery rather than as an investment.