The emerging Indian economy has attracted much interest from analysts in recent times. A new study by Kotak Wealth Management and rating and research firm Crisil Ltd. on India’s super rich has examined their spending patterns. Luxury holidays topped the spending list of India’s most wealthy, followed by luxury watches, jewelry and electronics.
The study, which was released in Mumbai on Tuesday, involved speaking to 150 super rich individuals across major Indian cities. The individuals included in the study were spread across different jobs and industries and even included owners of art galleries and professionals heading global luxury brands.
In India, super rich refers to households that clocked a minimum net worth of Rs. 250 million ($5.6 million) in the last financial year. According to the study, India is currently home to 62,000 super rich families. Taken together these families have amassed a wealth of Rs. 45 trillion ($1 trillion). The study predicts that this will grow to Rs. 235 trillion ($5.3 trillion) in the next five years. This could have a huge impact on the domestic luxury goods market.
Already, the richest Indians are creating a lot of business for the luxury goods and services industry. In particular, they often splurge on international holidays with the family. Most often, the luxury holidays are planned well in advance. Next on their shopping list is diamonds and fine jewelry. The report values the current market for luxury jewelry at a whopping Rs. 229 billion ($5.1 billion).
Occupying the third position on this high-end shopping list is electronics. India’s super wealthy spend not only on top-of-the-line mobile devices and cameras, but also on top-end home entertainment systems. Many love to splurge on custom-built entertainment areas in their homes. Home automation is also becoming popular among this group.
However, the super rich in India differ from those in the United States in one way. The US super rich love to spend on swank luxury sports cars. In India, the wealthy classes are less likely to pay upwards of Rs. 2.3 million ($51,000) for a Ferrari. Indians who can afford luxury cars prefer to spend on brands like Honda and Toyota, and occasionally on Mercs and BMWs. Sports cars are largely regarded as “aspirational” vehicles.
While many do purchase art and fine writing instruments, these are largely regarded as impulse buys.
In recent times, destination weddings are fast becoming popular among wealthy Indians, as is owning aircrafts and yachts despite the lack of infrastructure.
One interesting finding from the Kotak-Crisil study is that wealthy Indians are less inclined to making big purchases online. They tend to avoid even online flight and holiday bookings for fear of credit card fraud. For these kind of transactions, they prefer using their corporate credit cards rather than their personal ones.
The study discovered that although most of the wealthy are entrepreneurs, in recent years, many professionals have entered this category, courtesy their big fat paychecks. On categorizing the surveyed individuals into “inheritors”, “self-made” and “professionals”, the Kotak-Crisil study found that each group had a somewhat different spending pattern. At 29 percent, professionals spend the most because leaving behind an inheritance is not a priority for them. Meanwhile, inheritors and the self-made entrepreneurs invest much of their income into business.