India’s Wealthy Consumers Continue to Spend Despite Weak Economy

India’s ultra-high-net-worth individuals (HNIs) have not curtailed their spending on luxury items given the current economic slowdown, but they have turned cautious in their investments, according to a study by Kotak Wealth Management and CRISIL Research, Rapaport reports.
“The second edition of the 'Top of the Pyramid' report has thrown up some interesting trends in various behavioral aspects of the ultra HNIs,” said C. Jayaram, the  joint managing director of Kotak Mahindra Bank Ltd. “While, overall, this segment seems to be relatively unaffected by the slowdown in Indian economy, their patterns in spending, investing and savings present huge opportunities…”
The number of Indian ultra-high-net-worth households (HNHs) is estimated to have grown by 30 percent year on year to around 81,000 in 2011 and is expected to triple to around 286,000 over the next five years, the report stated.
Consequently, the net worth of HNHs is estimated to surge five-fold from an estimated $1.17 trillion (INR 65 trillion) in 2011 to $5.73 trillion (INR 318 trillion) by 2016, the report said. More than 50 percent of  HNHs reside in the four main metro cities, while the next top six cities account for around 12 percent.
The study noted that apparel and accessories showed highest increase in purchases followed by vintage spirits/liquor, jewelry and diamonds, luxury watches and household electronics.
It also revealed that the destination weddings were the in-thing in 2011 but these appear to have lost their appeal  this year since the trend was catching up among other sectors of society. Instead, throwing lavish parties for ad hoc events such as business success or launch parties has become a new area of spending. Some HNIs also cut down their spending on charity in order to maintain their lifestyle.
CRISIL defined an  HNH as one having a minimum average net worth of $4.5 million (INR 250 million) essentially accumulated over the past 10 years and according to its analysis has a minimum income of $630,517 to $720,590 (INR 35 million to INR 40 million).
The survey, which took place between December 2011 and April 2012, interviewed about 150  HNIs. The respondents were spread across Mumbai, Delhi, Bengaluru, Hyderabad, Chandigarh, Ahmedabad, Vadodara, Chennai, Pune, and Kolkata.