India's wealth differences between top and bottom are huge, middle class wealth share is shrinking: Credit Suisse report
A new report, “Global Wealth Databook 2015” by top a global financial services firm based in Zurich, Credit Suisse, has found the existence of huge wealth differences in India. The report says that 755,563,000, or 95.4 per cent of adults in India, own wealth less than $10,000, while a minuscule 185,000, or 0.023 per cent of Indian adults, own more than $1 million.
The report has two other categories falling in between – those owning wealth between $10,000 and $100,000, and those owning between $100,000 and $1 million. While India’s 33,867,000 adults, or 4.28 per cent, fall in the former category, another 2,413,000 adults, or 0.3 per cent adults, fall in the latter category. In all, there are 790,022,000 adults in the country.
The report, which gives a new definition of the middle class by making wealth as the basic criterion, says that “to be a member of the middle class in 2015, according to our methodology, an adult needs at least USD 28,000 in Brazil, Chile and China; USD 22,000 in South Africa and Turkey; USD 18,000 in Malaysia, Russia and Thailand; and just USD 13,700 in India.”
Those with USD of 13,700 in India, or Rs 9.04 lakh under the present rupee-dollar rate or Rs 66 per dollar, form only 3% of adults having wealth above the middle class minimum, saying the “situation in Africa as a whole is almost identical.”
The report sharply disagrees with those who define middle class on the basis of income or consumption pattern. Based on the income method, in 2005, the World Bank had estimated middle class population at 264 million, using the median poverty line in 70 countries at the lower extreme ($2 per day), and the United States poverty line ($13 per day) as an upper extreme.
The other method, of using the consumption-based, criterion, (ownership of car or scooter, colour television, or telephone in households), found that India 20 per cent of population, or slightly over 200 million, belonged to the middle class.
Basing its calculation of the middle class on the basis of the ownership of wealth ($13,700 or more), the report finds that in India its share is 22.6% ($780 billion) of the country’s wealth. However, it finds that this share is declining over the last 15 years – it was 26.8 per cent in the year 2000, remained almost constant till 2007 at 26.4 per cent, but began declining to reach 24.9 per cent in 2008, 23.2 per cent in 2013, 23 per cent in 2014, and 22.6 per cent in 2015.
“Across regions, the middle class is most prevalent in North America, where 39 per cent of adults qualify, followed by Europe, where the proportion is one third. The share then drops sharply, to 15 per cent for the Asia-Pacific region (excluding China and India), around 11 per cent in China and Latin America, and just 3 per cent in Africa and India”, it says.
The other method, of using the consumption-based, criterion, (ownership of car or scooter, colour television, or telephone in households), found that India 20 per cent of population, or slightly over 200 million, belonged to the middle class.
Basing its calculation of the middle class on the basis of the ownership of wealth ($13,700 or more), the report finds that in India its share is 22.6% ($780 billion) of the country’s wealth. However, it finds that this share is declining over the last 15 years – it was 26.8 per cent in the year 2000, remained almost constant till 2007 at 26.4 per cent, but began declining to reach 24.9 per cent in 2008, 23.2 per cent in 2013, 23 per cent in 2014, and 22.6 per cent in 2015.
“Across regions, the middle class is most prevalent in North America, where 39 per cent of adults qualify, followed by Europe, where the proportion is one third. The share then drops sharply, to 15 per cent for the Asia-Pacific region (excluding China and India), around 11 per cent in China and Latin America, and just 3 per cent in Africa and India”, it says.
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| Wealth per capita overtime in India |
“The size and wealth of the middle class varies greatly across countries, ranging from 3% of the adult population in India to 66% of adults in Australia”, the report says, adding, “Surprisingly, only 38 per cent of adults in the United States qualify as middle class according to our criterion, a much lower percentage than the 50% to 60% figure found in most high income countries.”
Comparing China’s middle class with that of India, the report says, “In China the number of middle class adults grew by 38 million between 2000 and 2015, and their wealth rose by $5.6 trillion. As a consequence, there are now more global middle class members in China (109 million) than there are in the United States (92 million). In contrast, India added only 6.7 million adults to the middle class, and middle class wealth rose by just $1.2 trillion.”
It adds, “This divergence in experiences is partly due to faster overall wealth growth in China, and partly because the populous mid-portion of the Chinese wealth distribution is moving into the global middle class, whereas it is still far from doing so in India.”
Comparing China’s middle class with that of India, the report says, “In China the number of middle class adults grew by 38 million between 2000 and 2015, and their wealth rose by $5.6 trillion. As a consequence, there are now more global middle class members in China (109 million) than there are in the United States (92 million). In contrast, India added only 6.7 million adults to the middle class, and middle class wealth rose by just $1.2 trillion.”
It adds, “This divergence in experiences is partly due to faster overall wealth growth in China, and partly because the populous mid-portion of the Chinese wealth distribution is moving into the global middle class, whereas it is still far from doing so in India.”
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