24 October,2020 10:35 AM IST | Mumbai | IANS
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India and China are the only two major countries that remain insulated from the erosion of wealth due to the Covid-19 pandemic.
Wealth per adult in India stood at $17,300 at the end of 2019 after a year of moderate growth and was $17,420 at end-June 2020, showing some growth despite the pandemic. Wealth growth is expected to be strong through the remainder of 2020 and 2021, as per the Credit Suisse Global Wealth Report 2020.
"While average wealth in India rose by only 0.7 per cent in the first half of 2020, we estimate that the full rise for 2020 will be 5 per cent-6 per cent and 2021 will see growth of about 9 per cent," it said.
"The most adversely-affected region was Latin America, where currency devaluations reinforced reductions in gross domestic product (GDP) to result in a 12.8 per cent decline in total wealth in US dollar terms. The pandemic eradicated the expected growth in North America and caused losses in every other region, except China and India. Among the major global economies, the United Kingdom has seen the most notable relative erosion of wealth," Urs Rohner, Chairman of the Board of Directors Credit Suisse Group, in the introduction of the report.
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The report said that total household wealth in the world dropped by $17.5 trillion between January and March.
From March onward, stock markets have rebounded and house prices have soared, and the data available for Q2 2020 suggests that household wealth is roughly back to the level at the end of last year, Rohner wrote.
Lower economic growth for some time and changes in corporate and consumer behaviour will result not only in lost output, but also in redundant facilities as well as sectoral changes that may restrain household wealth accumulation for many years. "Thus our authors believe that household wealth will, at best, recover slowly from the pandemic throughout 2021," Rohner said.
"Without the pandemic, our experts' best estimate of global wealth per adult would have risen from $77,309 at the start of the year to $78,376 at end-June. Instead, the pandemic has caused average wealth to drop to $76,984," the report said.
The report notes that over the last two decades, India's wealth has grown impressively, despite a setback in 2008 due to the global financial crisis and some currency fluctuations. Annual growth of wealth per adult averaged 9.7 per cent over 2000-19, using current exchange rates, and 12.1 per cent with constant exchange rates.
Household wealth in India is dominated by property and other real assets, although financial assets have grown over time, now forming 22 per cent of gross assets.
With an adjustment for survey underreporting, average debt was $1,080 at the end of 2019, which is just 6 per cent of gross assets. "Thus, although indebtedness is a severe problem for many poor people in India, overall household debt is relatively low," it said.
The Covid-19 pandemic affected India with some delay, as in much of the developing world. While daily cases and deaths hit peaks in March or April in many high-income countries, this did not occur in India, which saw a rising incidence of infections and deaths through June and beyond.
Wealth inequality remains quite high in India, the report notes. There is considerable poverty reflected in the fact that 73 per cent of the adult population had wealth below $10,000 at the end of 2019. At the other extreme, a small fraction of the population (2.3 per cent of adults) had a net worth over $100,000. The country has 907,000 adults in the top 1 per cent of global wealth holders, which is a 1.8 per cent share.
"By our estimates, 4,600 adults have wealth over $ 50 million," Credit Suisse said.
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