The total individual wealth in India is expected to grow at a CAGR of 13% from Rs. 304 lakh crore currently to reach Rs. 558 lakh crore over the next five years, predicts the Karvy Wealth Report 2016.
Individual wealth includes investments in financial and physical assets.
Of the total Rs. 304 lakh crore wealth currently held by individual investors, Rs. 172 lakh crore is held in financial assets while Rs. 132 lakh crore is in physical assets. The report estimates that individual wealth in financial assets is expected grow by a CAGR of 15% till FY21 to touch Rs. 342 lakh crore.
Individual wealth in financial assets
On the other hand, individual wealth in physical assets is estimated to reach Rs. 216 lakh crore in the next five years. “Owing to the turbulent year in the equity markets, which fell 4-5% in FY16, fixed deposits regained the top spot as the most preferred vehicle among financial assets,” said the report.
Attractive interest rate (8.5-9% until 2013-14) has been the main reason for investors preference for fixed deposits. The interest rates have come down to 7.25-7.75% in FY16, mainly because of a cumulative cut of 125 basis points in the repo rate by the RBI. The report says that fixed deposits are expected to continue holding the top spot for the next year considering the surge in bank deposits due to demonetization.
Individual wealth in physical assets
Wealth in physical assets rebounded sharply, growing by 10.32% in FY16 after witnessing a drop of 2.3% in FY15. Gold and real estate together form nearly 92% of the physical wealth in India.
Global individual wealth
In 2015, global private financial wealth grew by 5.2% year-on-year in 2015 to $168 trillion compared with a 12% growth in 2014. However, an interesting trend is that for the first time, Asia-Pacific has come to the forefront surpassing even North America - growth in North America was a meagre 1.8%, whereas Asia-Pacific grew at 13.4%. The Asia-Pacific was also home to the largest proportion of UHNIs (31%).
In Europe, private financial wealth grew by 4-6%. Japan and China together drove nearly 60% of UHNI population growth.
Global UHNI wealth is projected to surpass $100 trillion by 2025, nearly three times the 2006 number, again led by strong growth in Asia-Pacific, where the number could rise to $42 trillion, far outstripping North America’s expected $25.7 trillion. By 2025, using historical growth rate assumptions Asia-Pacific’s HNWI population would more than double to 11.7 million individuals, well ahead of the anticipated 7.6 million for second-place North America. If past growth rates hold, this region would remain a dominant force over the next decade, representing 40% of the world’s HNWI wealth, more than that of Europe, Latin America, and the Middle East and Africa combined.
Global wealth across key asset classes
Edited excerpts from Karvy Wealth Report 2016.
