MUMBAI: A close to 29% jump in equity investments has pushed up the average wealth of households, measured in terms of gross financial assets, by 14.5% in 2024, which though on an annualized basis is up only 20 bps from 14.3% in the previous year, even as the household debt ratio climbed to 41, up 8 percentage points over the last decade, and does wealth inequalities, according to a report.
It can be noted that over the past two decades, the real per capita financial assets of households have surged fivefold, marking one of the most impressive wealth growth trajectories among emerging markets, according to a report by the German financial powerhouse Allianz Group, which is also one of the world’s largest insurance and asset managers.
Similarly, wealth inequality remains stark despite rapid growth. In 2004, the richest 10% controlled 58% of the country’s wealth. Two decades later, their share has climbed to 65%, the report said.
Securities led the charge with a 28.7% increase, while insurance and pensions, holding a larger portfolio share of 32.5%, grew by 19.7%.
Bank deposits, still the dominant asset class at 54%, rose by 8.7%, the report, adding net financial assets advanced by 15.6% reaching $2,818 per capita, Allianz said.
Adjusted for inflation, financial assets grew a robust 9.4%, lifting purchasing power by 40% above pre-pandemic levels. This is commendable as in Western Europe, it was just 2.4%, below 2019, the report said.
According to the report, the country’s expanding middle class continues to reshape global wealth dynamics, contributing significantly to the rise of emerging markets in the global middle wealth segment.
Liability growth of households moderated to 12.1%, in line with long-term averages, though the household debt ratio climbed to 41, up 8 percentage points over the last decade as net financial assets advanced by 15.6%, reaching $2,818 per capita, the report said.
Meanwhile, wealth inequality remains stark despite rapid growth.
In 2004, the richest 10% controlled 58% of the country’s wealth. Two decades later, their share has climbed to 65%, highlighting the growing concentration of wealth, the report said.
The gap between the average and median wealth has also widened, with the ratio rising from 2.6 to 3.1 over the same period, a sign that prosperity is not evenly distributed.
At the same time, overall wealth has soared. Net financial assets per capita are now 13 times higher than they were in 2004, outpacing even China, where wealth rose twelvefold. This surge places India among the world’s fastest wealth-growing nations.
Owning securities, particularly stocks, is key to asset growth. In this respect, especially during the past two years. In both 2023 (11.5%) and 2024 (12%), securities grew almost twice as fast as the other two asset classes: insurance/pensions (6.7% and 6.9%, respectively) and bank deposits (4.7% and 5.7%, respectively).
But in terms of penetration, it’s only 13% as Indians mostly depend on bank deposits. As against 59% of North Americans who invest in securities, the figure in Western Europe stands at around 35%.
Over the past 10 years, the financial assets of American households have grown in line with the global average. But in 2024, their growth was even higher.
This is in stark contrast to Western Europe and Japan, where growth lagged the global average by over 2 percentage points and just under 4 percentage points per year, respectively, the report said.
In 2024, half of the growth in global financial assets was generated in the US alone. Over the past decade, this figure stood at 47%.
China, on the other hand, accounted for 20%, while Western Europe accounted for 12%. In terms of financial assets at least, the idea that other countries have taken advantage of the US is unfounded, the report concluded.