Faster economic growth will help individuals’ wealth in India to more than double to Rs 514 trillion over the next five years, while growing at an annual rate of about 15 per cent, a new report said today.
Interestingly, almost half of the individual wealth is kept in physical assets including real estate and gold.
“Total individual wealth is expected more than double to Rs 514 trillion in FY19 from Rs 257 trillion crore in FY14, registering a CAGR of 14.86 per cent,” Karvy Private Wealth said in its report released here.
The study takes into account wealth held by individuals across financial assets and physical assets, including real estate, gold, diamond, silver and platinum.
The personal holding of gold in the country is around 22,000 tonne, the largest in the world.
As of end FY14, the total individual wealth stood at Rs 257.4 trillion, an increase of 27.5 per cent over the past year. The wealth held by individuals in financial assets has grown by 84 per cent during the past five years.
Total wealth of individuals in financial assets stood at Rs 134.7 trillion (52.3 per cent of the total) and in physical assets at Rs 122.7 trillion (47.7 per cent) as of FY14.
“Wealth with individual investors is expected to grow more rapidly in the next five years, riding on faster economic growth,” Karvy Private Wealth Chief Executive Sunil Mishra told reporters.
“The new government has undertaken a lot of initiatives to revive the economy and make it among the fastest growing ones in the world,” he added.
“Individuals’ wealth in financial assets is expected to double in the next four years at a CAGR of 18.3 per cent, while wealth in physical assets is expected to grow at a CAGR of 10 per cent in the next five years,” the report said.
Due to a slowdown in the economy in the last few years, the household savings rate was skewed towards physical assets such as real estate and gold. The ratio of physical to financial assets had reached an all time low of 31 per cent in FY12, it said.
“With the turnaround coming in the economy we expect this to return to 50:50 in the next five years,” the report said, while adding that India’s GDP is expected to grow at 7.5 per cent by 2018 and macroeconomic revival may see beginning of biggest bull run.
Direct equity will become the single largest asset class contributing to individual wealth in year ending March 2015, overtaking fixed deposits, Karvy said.
“We expect a 25 per cent CAGR on the equity markets and look at the Sensex touching 1,00,000 level by 2020,” the report said, adding in FY14, individual wealth held in bank FDs stood at Rs 27.91 trillion crore and has grown by 17 per cent as compared to FY13.
Total individual wealth in insurance stands at Rs 22.12 trillion in FY14, the report said, and pointing out that Indians allocate a lot less of their wealth to equity at 13 per cent compared to global allocation at 25 per cent.
“This is projected to increase with more retail participation seen in the equity market s flocking to reap the benefits of the long-term growth.