The wealth effect
Clifford Alvares May 14, 2008
If you were wondering when the Indian growth story will reflect in an increase in household wealth, here’s the answer. A new Household Wealth Index developed by Barclays Wealth and the Economist Intelligence Unit (EIU) says that India will move ahead of some developed countries to become the 8th largest wealth market over the next decade (see The Richie Rich Club below).
Indian households, for long, have been holding its wealth in the form of physical assets like land, houses, gold and even cattle. While Indians are the world’s largest consumers of the yellow metal, real estate comprises a large portion of household wealth here—Indians hold about 43 per cent of their overall household wealth in property.The report states that the Indian financial markets have expanded in recent years. The country’s financial assets stood at $1.8 trillion (Rs 72 lakh crore) in 2006, more than double its GDP.
Compared to other emerging markets, there’s a very strong allocation to the equity markets among retail investors in India.
Indians, however, have yet to embrace conventional ideas of risk and diversification.
Broadly, the report also says that the Indians are moving towards financial assets away from the traditional forms of physical assets. Says Bansal: “Managing assets becomes far simpler if it’s held in financial form.” It’s a sign of how global growth and its rising wealth is changing the way Indians view their investments.