India is outpacing China in terms of growing its ultra-rich. But with high economic inequality, catching up on GDP will remain a pipe dream.
- At 39%, India has recorded the highest growth in the number of UHNWIs in the world.
- Bengaluru is leading the surge, with a growth of 40% in the number of UNHWIs.
- The number of billionaires from India stands at 106, compared to 121 during the previous year.
- Growth in the number of rich in India is attributed to strong economic growth and robust performance in equity markets.
Indians have one more reason to celebrate their growing economic heft in the world. In a recent report on the world’s richest by Knight Frank LLP, India has seen the highest yoy growth of 39% in ultra high net worth individuals (UHNWIs, net assets >/= US$ 30 million) thereby overtaking Philippines (38%) and China (35%).
Bengaluru is leading growth in the UHNWI population with a growth of 40%. It is the first among the top five “future cities in the world“. Others in the list are Hangzhou, Stockholm, Cambridge and Boston. These cities are chosen on factors that will boost wealth creation – innovation indicators, wealth forecasts, economic growth, infrastructure, etc.
Shishir Baijal, CMD, Knight Frank India, affirms:
“Despite a slide in the Indian rupee against the US dollar, India witnessed growth in UHNWIs due to heightened economic activity and strong performance of the equity markets. Not surprisingly growth has been observed in gateway markets of Mumbai and Delhi by 38%. However, Bengaluru is first among the top five eye-catching ‘cities of the future’ based on their future economic potential.”
The latest Forbes Billionaires List for 2019 pegs the total number of billionaires at 2,153, 55 less than one year ago. Out of these, 994 were poorer than last year. The greatest drop was in Asia Pacific led by China, with 49 less billionaires than a year ago. The list had 106 billionaires from India, led by Mukesh Ambani with a wealth of US$ 50 billion. Other notable names include Azim Premji, Chairman, Wipro; Shiv Nader, Co-founder, HCL and Lakshmi Mittal, Chairman & CEO, ArcelorMittal. In comparison, there were 121 Indian billionaires on the list in 2018.
The Tortoise vs The Hare
The relative growth in the number of billionaires mirrors the comparative trajectories of the Indian and Chinese economies. It’s now widely acknowledged that the Chinese economy is slowing down and the momentum is moving India’s way. Already, India has replaced China as the fastest growing major economy in the world. In 2018, India also beat China in FDI investments for the first time in 20 years. India recorded US$ 38 billion in inbound deals compared to US$ 32 billion for China.
Average incomes in China are expected to be at US$ 10,098 in 2019 according to the IMF, and the typical income range when countries enter the middle income trap comes at around US$ 11,000 or US$ 15,000 a year according to economic historian Barry Eichengreen. This is when countries generally get stuck in their growth trajectory rather than taking the next leap to prosperity.
The Chinese financial system is under severe strain at present with the fiscal deficit at around 10% of GDP. Stimulus measures to spur growth have further exacerbated the problem. But the real challenge for China is to move from input-led growth to productivity growth.
India’s average income is roughly around the level of China’s in 2006, and so is the economic size. On an average China’s economy has grown 2% faster than India since the 1990s.
But if you look at the other side of the spectrum, India’s income gap is extremely worrying. Around 87% of households in Odisha, for instance, had an average monthly income less than Rs 5,000 according to Census 2011.
According to an estimate, around 73% of increased wealth has been taken by 1% of the people. Social sector spends leave much to be desired. For instance, India’s investment in healthcare is at just around 1.2% of GDP compared to 6.36% for China. Low investments in social sector explain India’s poor rank of 130 in the UNDP’s Human Development Index 2018 compared to 86 for China.
The benefits of India’s GDP growth are clearly being felt
only by a chosen few. Unless this anomaly is addressed, India’s ambitions to catch up with China cannot be realized.
- Faster growth in UHNWIs in India compared to China also mirrors the growth trajectories of the two economies.
- While India has overtaken China in terms of GDP growth, the latter seems to be stuck in the middle income trap.
- However, India’s income inequality and low rankings on the Human Development Index show that the benefits of growth are only felt by a few people.
- India has to prioritise human development as well rather than just chasing GDP growth, else it will not be possible to catch up with China.
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