Indian households’ wealth falls 18% in one year

Arvind JayaramBL Research Bureau Updated - October 11, 2012 at 10:01 PM.

The $699-b decline primarily driven by sharp depreciation of the rupee, says Credit Suisse report

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Indian households saw their wealth whittle down 18 per cent in dollar terms between mid-2011 and mid-2012 to $3,193 billion. As a result of the rupee’s fall, Indians’ wealth in dollar terms is now below the levels achieved prior to the 2007-08 financial crisis.

The decline was sharper than what was seen in many other countries and regions around the globe (see table) and was primarily driven by sharp depreciation of the Indian rupee, according to research agency Credit Suisse’s new ‘Global Wealth Report 2012’.

The $699 billion decline in Indians’ wealth was accounted for by a 17.4 per cent drop in the value of their non-financial assets like their homes, translating into a $586-billion erosion. In terms of financial assets, their wealth depreciated by 20.8 per cent, or $139 billion.

Other countries have not been left unscathed by the global gloom and the dollar’s strength, with the report estimating that total global household wealth fell by 5.2 per cent during the period under review to $223 trillion, the first annual decline since 2007-08.

Nevertheless, if one was to assume constant exchange rates during the period, aggregate global household wealth rose by about 1 per cent over the past year. This is not impressive in comparison to recent years, but still welcome amid the challenging economic environment.

Indian households appears to have taken a worse beating than global counterparts due to the 20 per cent depreciation of the rupee, compared to 14 per cent on average worldwide.

Europe worse-off

Indeed, the situation was far worse in Europe, which saw its wealth eroded by $1 trillion even assuming a constant exchange rate. At current exchange rates, European households were $10.9 trillion poorer in mid-2012 than a year ago. This accounted for the bulk of the total global loss of $12.3 trillion. As a result, European households’ net worth is now just $1.2 trillion more than their North American counterparts.

The Asia-Pacific (excluding India and China) was the other big regional loser, shedding $1.3 trillion, with Africa and Latin America also seeing household wealth eroded. In contrast, North American wealth shot up by $880 billion and Chinese households’ net worth rose by $560 billion.

Self-made billionaires

One of the interesting findings of the study was that only 44 per cent of the individuals in India’s billionaire club were self-made, in sharp contrast to the world average of 69 per cent. Globally, 842 out of the world’s 1,226 billionaires are self-made, though this figure is inflated by the 209 billionaires from China, Russia and other Eastern European countries, out of whom only two are not self-made.

The report also highlights that the number of Indians figuring in top 10 per cent of the world’s wealthy shrunk 12.6 per cent during the period under review to 36,16,000 in mid-2012. The Credit-Suisse report highlighted that while the lower half of the global population owns barely 1 per cent of global wealth, the richest 10 per cent of adults own 86 per cent and the top 1 per cent accounts for 46 per cent of the total.

> arvind.jayaram@thehindu.co.in

Published on October 11, 2012 16:31