Picture the scene. Mumbai. September 2015.
There I was on my first trip to India’s financial capital, fresh from meeting a client and about 90 minutes into a two-hour drive (of only 40km, such is Mumbai traffic). As the car arrives into South Mumbai from the sea bridge, a strange sight appears in the distance. Part spaceship, part skyscraper, part pile of stacked books (or Lego), the sight in question can only be Antilia – The world’s most expensive home, rumoured to have cost US$1 billion, and owned by Mukesh Ambani of Reliance Industries.
Why do I start here? Aside from the fact that I actually find it an interesting building architecturally (I realize there are many, many detractors), it provides us with an opportune moment to discuss wealth creation in India. For one, India has been a strong engine of HNWI population and wealth growth over the past decade, and secondly, in the current market turmoil that has gripped much of Asia and especially China, India has come out looking relatively attractive – in stark contrast to where the picture was a couple of years ago when investor sentiment was at an all-time low due to a weak deficit, retroactive tax crackdowns, corruption, crumbling infrastructure and many other economic and political factors. While India still has some of these issues, it is hard to argue that the country is not on a more positive trajectory since the Modi government came to power in a landslide election win.
Now, it has been fairly well documented that Asia-Pacific HNWI wealth has been leading the way over the past several years. For example, since 2006, Asia-Pacific HNWI wealth has increased by 88%, accounting for 40% of the $19.2 trillion of HNWI wealth created globally through the end of 2014. What is less well documented is just how much India and China have been responsible for this. These two markets represent nearly 10% of global HNWI wealth, and accounted for 17% of the global increase in new wealth since 2006, adding US$ 3.2 trillion during that time through the end of 2014. India on its own has nearly doubled its HNWI population since 2006 and added $434bn worth of HNWI financial wealth. (data source is the Capgemini RBC Wealth Management Asia-Pacific Wealth Report 2015).What does this mean for the future? Well 2015 has been a notoriously volatile year in the region, with China in particular having experienced exceptionally large equity market swings (exacerbated by failed State intervention). Didn’t hear about that? The Shanghai Composite index did this in 2015…Yes that means the index:
- Rose 60% from January 1st to June 12th
- Fell 43% from June 12th to August 25th
- Rose 24% from August 25th to November 20th
These market factors, combined with a general slowdown in the Chinese economy at a time when the growth momentum behind India’s economy is accelerating, should allow India to emerge as a more equal rival to China as a long-term driving force for regional and global wealth. For your viewing pleasure, below is a chart I put together with a never-before-seen forecast for Indian HNWI financial wealth through the end of 2017.As you can see, while in absolute terms China remains the key market, nonetheless the region’s wealth should be strongly tied to the fortunes of India in the short to medium term, aided by the ongoing rise of the middle class and expanding domestic consumption. These factors should help spur robust economic and GDP growth, as well as strong equity market performance in the coming years as corporate earnings grow, providing a solid platform for HNWI growth.
The challenge is then on firms to craft a strategy to capture this wealth, spanning a presence offshore in places like Singapore (where Indian HNWIs often book wealth) but also with a presence “on the ground” to be able to attract and understand Indian HNWIs (an area many non-domestic firms have failed to crack).