India's population of high net worth individuals shrunk 31.6 per cent in 2008, reversing a seven-year rising trend, a DSP Merrill Lynch and Capgemini report said on Thursday.
A HNWI is defined as one with net assets of at least $1 million, excluding his primary residence and consumables.
The report said India [ Images ], the world's second-fastest growing economy, saw the number of high net worth individuals decline to 84,000 from 123,000 in calendar year 2007.
"India's HNWI (high net worth individuals) population shrunk 31.6 per cent to 84,000, the second largest decline in the world, after posting the fastest rate of growth (up 22.7 per cent) in 2007," the World Wealth Report released by the two firms said.
The report said, "India, still an emerging economy, suffered declining global demand for its goods and services and a hefty drop in market capitalisation of 64.1 per cent in 2008."
India's market cap had risen 118.4 per cent in the previous calendar year. On a global scale, no region ended the year unscathed, showing the strong economic interdependence across the globe, DSP Merrill Lynch managing director, head - global private client, Pradeep Dokania, said, adding that statistics for India declined for the first time in the past seven years.
The world HNWI population, concentrated mainly in North America, Europe and Asia, dropped roughly by 14.9 per cent to 8.6 million in 2008.
"Their combined wealth fell 19.5 per cent to $32.8 trillion," the report said.
Global market capitalisation plummeted nearly 50 per cent in 2008, resulting in losses worth $30 trillion.
"Last year was about preservation and flight to safety. However, by 2013, HNWI wealth is forecast to grow to $48.5 trillion globally. Asia-Pacific is likely to overtake North America as the largest region by wealth," Dokania said.
With no safe havens, HNWIs ended up with significant amounts of cash in their portfolios, he added. "As markets recover, they will have the flexibility to readjust their strategies and reinvest in new, developing opportunities along the way," Dokania said.
In response to the crises, HNWIs poured more money into fixed income, cash-based investments, and real estate, the report said.
"Allocation to fixed income and cash-based investments increased six per cent from 2007, totalling 50 per cent of overall HNWI portfolios globally. All regions dramatically increased home-region and domestic investment in 2008," the report said.
"Primarily due to a loss of trust and confidence, more than 25 per cent of high net worth clients surveyed assets from a wealth management firm or left a firm altogether in 2008," Salil Parekh, Capgemini, CEO, financial services, India, Asia SBU, said.
"Seventy-eight per cent clients lost trust in regulatory bodies," he said. As a response to the crises, HNWIs significantly upped allocations in assets with possible long-term value.
"HNWIs significantly increased allocations in art and jewellery, gems and watches in 2008 compared to pre-crises levels in 2006, as alternative flight to safety," Parekh said.
In 2009, philanthropic giving has a mixed outlook, with Japan [ Images ] overwhelmingly forecasting growth and North America forecasting a large decline, the World Wealth Report said.