Wise Wealth Advisors

D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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How many people in India are Rich?

Posted by Muthu on June 12, 2011

Here is the latest update on how many people in India are rich. 

This is a sequel to what I wrote last week on number of poor people in India. 

I touched upon this topic last year and planning to revisit the same when required. As rich are getting richer and more get into upwardly mobile class, this number would be dynamic. I think it would take a while for poverty numbers to start showing any meaningful reduction; actually and not statistically. 

The cream of mortals- dollar billionaires; people who have networth of around 4500 crores+ – we have 55 of them. There are 1210 dollar billionaires in the world; out of which nearly 5% live inIndia! 

The globally accepted definition of rich is those having investible assets of $1 million or more, excluding primary residence, collectibles, consumables and consumer durables. 

This means that other than self occupied primary residence, car, jewellery etc., one should have investible assets of around Rs.4.5 crores. This should be the networth – after adjusting for all outstanding debts. 

According to a Credit Suisse report of 2010, there are 1.7 lakhs dollar millionaires in India; 0.014% of our country’s population. 

Out of the above, Ultra rich– Rs.25 crores+ networth; around 70 thousand households in India are estimated to be under this category; 0.005% of our country’s population. 

The second layer of rich is those who have $100,000+ (around Rs.45 lakhs+) worth of investible assets other than self occupied primary residence. 

There are 4.5 million people in India who fall under the above category; 0.36% of the population. 

There are around 225 million households inIndia. NCAER (National Council of Applied Economic Research) estimates are based on total household income and not individuals. 

Families with annual household income of Rs.10 lakhs+ is the next category of rich; there are around 3.8 million households- with 20 million+ people; 1.6% of the population. 

We’ve been only looking at the real economy and not shadow economy (black or no.2 money). 

The unaccounted money held by Indians in Swiss banks is estimated to be around $1.5 trillion – Rs.70 lakhs crore – which is equivalent to our country’s total GDP! 

This money may probably belong to tens of thousands of corrupt people – politicians, businessmen, government servants and religious authorities- accumulated over the last few decades.

It is estimated that the shadow economy is about 50% of our GDP. This means 35 lakhs crores is the black money circulated in the economy every year. Out of this, 10% (Rs.3.5 lakhs crore) is estimated to move abroad through hawala route. 

We need to understand that it is not possible to have an official figure on black money! These are guesstimates which may at best serve as a pointer.

If we can have better regulatory frame work for real estate market as we have for financial services; it would significantly reduce the black money circulated in the economy, make the dealings and pricing in real estate more transparent and in all likelihood bring down the artificially pegged up real estate prices, making it affordable for atleast our middle class.

I don’t think the real and shadow economy would be water tight compartments. Many gentlemen may be present in both. Even if we extrapolate the real into shadow, the number of rich can be maximum twice the official figures (of the first two categories).  

Considering all the above categories and estimates, I assume there may be totally 30 million rich people in India; 2.4% of our population.

What about great Indian middle class?

Since anyone earning above Rs.600 per month is considered out of poverty, the middle class may look very huge. In reality, looking at present cost of living even for basic needs, this number would be misleading.

According to NCAER, the number of households having income between Rs 2 lakh and Rs 10 lakh per annum, which is close to the World Bank definition of middle class, which in my opinion is reasonable – is 28.4 million households – roughly 150 million people.

So there are 150 million people or 12% of our population can be classified as middle class. 

Interestingly, the number of people who are paying income tax in India is 35 million people or just 2.8% of the population.

If you consider rich and middle class, the number of people who have the ability to participate and invest in equity markets is around 200 million.

But with a figure of 8 million investors (efforts are being made by industry to arrive at the exact number. This is as per 2009 estimates.), it is just 4% of the investible population. I doubt even out of these how many would be investing for long term and reap the benefits of compounding which a high growth economy likeIndiacan provide. One or two million?

Considering the issues like around 90% of the volume in the markets are in trading derivatives, churning, selling in panic, entering in a frenzied market and exiting in a depressed market, mis-selling, very less average holding period; we have miles to go before people really participate and grow their wealth along with that of country.

This is the best way for an average middle class person and upwardly mobile class to achieve their financial aspirations. This is also an opportunity for rich people who want to diversify or build their wealth further.

For example, around a decade ago, the equity corpus managed by the mutual funds was around Rupees forty thousand crores. According to Economic Times, in May’11, the figure stood at around Rs.1.67 lakh crores, an increase of 4 times in 10 years. But if you probe little more, you would find that the market has multiplied by 6 times in the last 10 years. If we remove the mark to market effect, this segment has de-grown! This figure speaks for itself and we the retail investors have missed out one significant decade of wealth building opportunity.

My gut feel is that very few would have made it good in the last one decade through equity investing. With the kind of clients who come to us with long term conviction and emotional discipline, which I hope would be happening in the case of other good advisors as well, I feel that many Indians and not only FIIs (Foreign Institutional Investors) would start benefitting from India’s growth.

The market is like nature. It doesn’t care who gets benefitted by it and who doesn’t. It is in our interest to make use of the opportunities provided by the market.

Given our country’s growth potential in next couple of decades, all is not lost for those who missed it earlier. You would be helping yourselves well by having a long term, disciplined and emotionally balanced approach towards investing in equity markets.

For easy money or short cut to wealth; there are people who promise the same through all kinds of trading – stocks, derivatives, bullion, commodities, currency derivatives etc. If you are lucky 2%, you would end up making big money. If you are in the 98% category, you would come out with the ‘rich experience’ of what not to do with your money and with a firm conviction that easy money is a mirage. Please decide whether you need to loose money heavily to get this experience.

We also saw last week as to how there are only 4 million PPF accounts inIndia. Even out of the 45 million EPF accounts, 4 million may be really active and reap the benefits of this investment avenue as 90% of the people close their account with in 2 years of quitting employment.

TAM Media research estimates that total viewership of ALL the business channels in the country at more than one million.

The circulation of all the business papers in the country put together is also around a million with 75%+ coming from the pink newspaper.

We estimated that there may be 30 million people who can be classified as rich in country. Does this mean that hardly 3% of rich people view or read business media?

If we take the overall population, the reach of business media is just 0.08%.

Why I’m mentioning the above because there is a tendency for us to assume what we see or read or the people whom we across as the representative sample. This need not necessarily be true.

To illustrate further, many of our relatives, friends and colleagues may be tax payers. This means we interact with, know and belong to the top 3% of India!

7 Responses to “How many people in India are Rich?”

  1. Gurdial said

    I still find it hard to believe that out of around 1120 million only about 30 million can be classified as rich. The kind of money people splurge on luxuries these days, every third household seems to fall in rich category.

    • Tapos said

      Sir, if you move around people in Delhi, Mumbai Chennai and Kolkata, or places near to these Maha Nagaries, then you will not see poverty. Travel few hundred km from these places you will get to know that when a daily wage earner retutrns home with Rs. 150/- he knows he has food for at least 2 days.

      • Ven said

        Government of my state provides, free education, free medical facilities, very low cost grocery (<1USD) via local society , pension for old aged people, Free house built for homeless, and free house hold items. This are guaranteed for 5 years of time line at least. every five years things change But got. try to keep up with this . as a summary we have everything to live and what made you look at us that we are poor?? we have better life in our own stance, some people are very self centrist and think how they live is "GENERAL STANDARD OF LIFE"

  2. Prasenjit said

    Well, standard deviation between Government data & actual data can occassionaly be huge !!

  3. It’s in reality a great and useful piece of info.
    I’m happy that you shared this useful info with us.
    Please keep us informed like this. Thanks for sharing.

  4. Prachi said

    Is similar data available for 2014/2015? Are similar percentages valid now as well?

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