The Wealth Report

Just how wealthy are Indians now? And what sets the wealthy apart?

Of all the things hard to fake that can be counted, money arguably evokes the strongest and most varied responses. Glee, euphoria, greed, fear, panic, envy… the list is endless. In a country that shares a vexed relationship with money, this range of responses ought to be wider still. Yet, 20 years after a shift in economic policy made it clear that ‘to get rich is glorious’ in India too, the mature response to wealth is coming to converge on curiosity: how rich are India’s rich?

Dribs and drabs of information are in common circulation. Mukesh Ambani’s towering presence, be it atop a billionaire list or nose-in-the-air skyscraper home, is hard to escape. One hears of a businessman who lost a cool Rs 32 crore of his own to an investment fraud, a loss he said he could survive… but nailing the guilty was a point of principle for him. And now that random tele-marketers, skillfully trained in the art of how to chase trends and infuriate people, have started calling to ask for a ‘modest’ sum of Rs 1 crore to sign up for their latest investment scheme, gulping just won’t do anymore.

It’s time to come to grips with what’s going on. Well, India sold as many as 70 Rolls-Royce cars last year, many of them the Rs 4.5 crore Phantom. But the real hotseller was Porsche, over 300 of which were taken possession of. In all, some 15,000 luxury cars—priced above Rs 20 lakh apiece—rolled onto Indian roads: BMWs, Mercedes’, Audis and other such gleamers that were a rarity in India until only a few years ago.

So, how wealthy are India’s Wealthy? According to Credit Suisse’s Global Wealth Report 2010, India has some 170,000 High Networth Individuals (HNIs) in all. These are people who may not be aware of it, but are dollar millionaires at the very least: with saleable assets minus debts valued at Rs 4.5 crore or more. According to the report (see ‘India’s Wealth Pyramid’ overleaf), India now has 25 dollar billionaires and 35 near-billionaires (with wealth in the $500 million–$1 billion range). And they are just the ones on top. Wealth, do note, is less easily assessed than income. So let’s look at earnings first.

Broadly, the top of India’s Income Pyramid now has 3 million households that are classified as ‘Rich’ by the Delhi-based Centre for Macro Consumer Research of the National Council for Applied Economic Research (NCAER), which, in the country’s largest exercise of this kind, has used an all-India sample of over 63,000 homes to gather data for this estimate. The 3 million Rich at the top are households whose annual earnings exceed Rs 17 lakh, and are home to about 16 million individuals.

At one level, that’s a lot of people. Yet, the so privileged would form only 1.3 per cent of India’s population, a sliver small enough to slip through the census cracks. And it’s quite sobering to think that there were only 1 million Rich homes just a decade ago, though the cut-off was lower back then. “It is in some sense an arbitrary criterion,” says Dr Rajesh Shukla, director of NCAER’s Centre for Macro Consumer Research, “but if you look at qualitative indicators like occupation and education, at least income is more meaningful than those.”

Moreover, as the cliché goes, the rich are different. They have more money, of course, as the old quip has it, but also much more to spend than a simple income comparison would have you think. The Rich have an outsized share—15 per cent—of India’s disposable income, which is leftover cash after all the routine must-pays are taken care of. Three-quarters of them live in urban India, and most of their baguette-winners are self-employed. You know the type. These are typically men who run their own businesses, consultancies, clinics, law firms, design studios, etcetera, and often have wallets bursting with cash at odd hours in odd places.

No surprise there. But the trend of the zips has been the salaried breaking into the ranks of the Rich. If you recall, it was sometime in the early zips that the ‘salaried’ tag stopped attracting tsk-tsks at snob gatherings. Credit for this reform in etiquette must go to corporate India’s puffy pay packets for top managers; in particular, to owner-CEOs of closely held companies who invariably find themselves burdened with the onerous task of squeezing time out of their busy schedules to set their own pay.

Last year, Naveen Jindal’s pay packet was by far the puffiest: over Rs 69 crore, as disclosed by his firm Jindal Steel & Power in fineprint as part of a mandatory section of its annual report. Kalanithi Maran’s pay was Rs 37 crore, as reported by Sun TV; he shares second spot with his wife Kavery, who has the same pay.

From these numbers, it would seem that vocational variety can work wonders for corporate careers; both Jindal and Maran are active with their political interests and are paid vastly more than the 1,000 odd business executives who got anything above Rs 1 crore in 2010 by way of reported remuneration. Another 2,000 are reported to have got above Rs 50 lakh. Eye-popping as these salaries are, don’t forget that such figures are disclosed only by publicly listed businesses, a small fraction of the total. What all this means is that the really rich effectively have no cap on their earnings. And this puts them in sharp contrast with the salary-bound Middle-class, who make up the next slab of 31 million households in NCAER’s Income Pyramid. “Also, their lifestyles are vastly different,” says Dr Shukla, who uses the analogy of an aeroplane to outline the difference in class dynamics: “Most of India’s 240 million households are on the ground, a large number ‘Deprived’ at the bottom of the pyramid. The Middle-class are on a steep incline after take-off, actively aspiring to earn more and lead better lives, spending heavily on education, cars and whatever else goes into that. The Rich have already attained altitude, have stability of income, and now, free to unbuckle their seatbelts, are concerned mainly with managing their money.”

Actually, the rich and middle-class are quite alike, contends Santosh Desai, CEO, Future Brands. That’s  because they are mostly nouveau riche; art patronage and philanthropy are peripheral to their idea of the good life. “The newly wealthy have a very limited imagination in spending,” he observes, “So, it’s ever bigger, higher, etcetera… bigger cars, higher residential towers, it’s a question of having to top the level of whatever constitutes scale. You’ve got a jet, done the international circuit, then what? Fine wine, vintage car, what else?” There’s a reason for this syndrome that does not invoke Freudian symbolism. “For them, the language of money is a new language,” says Desai, “Also, you need generations of wealth to believe it is permanent, so there’s a sense of anxiety amongst them. They need constant affirmation that they deserve their wealth.”

Luckily for the Rich, the Middle-class rarely fail to oblige them with lusty cheers as they go about stacking themselves higher and higher with riches. This partly explains why Shukla sees the Middle-class as India’s “social safety valve”. As disparities widen, it is the Middle-class who act as a link between the rich and poor, conferring on one the desired social legitimacy while helping the other understand what’s in it for them by way of jobs et al. With an economy cruising along at 9 per cent or so, it helps that the Middle-class are a restless bunch. They are restless to join the ranks of the Rich. It could happen sooner than you think. In fact, NCAER expects the count of Rich homes to be 26 million by the year 2025-26. The Middle-class would have a good 114 million homes by then, all the better to play mediator between India’s Have-nots and Haves.

Haves’ is an appropriate term. It is not income, after all, but wealth that stops people mid-sentence and makes them blink and gawk (and occasionally nauseous). It figures. What you earn every year may have little bearing on what you have to your name. By way of saleable assets. Your uncle’s abstract art may not qualify, but that vintage car in the old garage might. Also, income is just another household measure, while wealth marks individual status that can hit your testosterone levels in utterly unpredictable ways. The only quibble is that India’s Wealth Pyramid is hazy in comparison with its Income Pyramid. It’s a snapshot formed by the statistical equivalent of capturing a reflection of a reflection in the shimmer of a mirage in the midst of a dust-storm. But at least we have a snapshot to marvel at.

The most reliable picture is to be found in Credit Suisse’s Global Wealth Report 2010, which goes by assets that can be liquidated overnight, such as shares and bonds, as well as other assets like real estate. Critics argue that this all-asset count artificially enlarges the list, but since Indians are not too sold on financial assets, it makes sense for India.

Just how much HNI wealth is real estate? “It’s difficult to provide an exact estimate,” says Toral Munshi, head of research, private wealth management, Credit Suisse India, “but relative to developed countries, we have large landholdings here. Also, gold is a significant asset that is mostly undisclosed.”
In any case, even financial-asset millionaires have been victims of dismissal a la Shania Twain (That Don’t Impress Me Much), lately. That’s because there are 24 million millionaires worldwide, which could be the population of a small country. Also, of the 170,000 in India, 147,400 have assets in the $1–5 million range, which is—ahem—modest by global standards of wealth these days.

Yet, on matters of money and the like, HNIs are one of a kind. “Many of them run their own businesses, and tend to evaluate things from a return-on-investment perspective,” elaborates Munshi. They are habituated to think in terms of risk versus returns. “Overseas, they use sophisticated tools, here it’s mostly subjective evaluation, but yes, there’s a clear difference in attitude.”

Think alike they may do, but they are still lonely. Move further up the Wealth Pyramid, and the way it tapers is truly spooky. Crack into the Ultra-HNI zone, with wealth just above $50 million, and the air up there starts turning hallucinogenic if not genocidal. There are only 1,140 such individuals in India, including billionaires (and near-). It can play strange tricks on one’s mind. “Over a period of time, the wealthy start believing that their blood is turning blue,” says Desai, “In their past-life regressions, they all turn out royal. And with each telling, their success story starts acquiring an aura of retrospective inevitability.”

At the very top, acquiring one sort of aura or another is almost a rite of passage. Even the US dollar bill has one, ironically, atop a pyramid. It seems half poetic that almost all the dollar billionaires at the apex of India’s own Wealth Pyramid are fabulously famous, some of them honoured with hagiographies that have been committed to memory by thousands of their employees in moments of lumbering loyalty. And let’s not forget the 35 near-billionaires, many of whom make the billion dollar cut whenever the Bombay Stock Exchange Sensex undergoes one of its bull frenzies. And given that the world only has a little over 1,000 adult billionaires in all, India’s record on this score is astounding to say the least.

The downside of auras is that hiding from public gaze is nigh impossible for billionaires. In fact, the easiest way to count them is to take business bigshots and assess the stockmarket value of their holdings in companies. Sure, share prices tend to bob up and down all the time, and so who’s in and who’s out of the billionaire club can change minute to minute. Still, the last direct count done this way was by Business Standard: on the basis of December valuations, India has 45 dollar billionaires. This is reasonably consistent with Credit Suisse’s estimate.

The trouble, says Suhel Seth, CEO, Counselage, is that none of this is really consistent with India’s idea of itself. “We have created an economy of valuations,” he seethes, his voice verging on the operatic, “We have sacrificed value at the altar of valuations. And the tragedy is that the wealthy have gained hugely from their share valuations going up thanks to persistent investment in the stockmarket by middle-class folk who’ve got left behind along with everybody else. The wealthy have let India down.”

Alarming as this sounds, it’s a widely shared response in scam-scarred India nowadays. “Earlier, there was money that inspires,” sighs Seth, “Now there is money that mocks.” A pity, really.

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