The Transformative Shift Reshaping India’s Wealth Landscape

Holding on to the title of the world’s fastest growing major economy, which is backed by 260 billionaires and 1,300 millionaires, India is currently viewed as a bright spot amid growing global uncertainty. With a steady transfer of wealth from Baby Boomers and Generation X to Millennials and Gen Z, the country is currently on the brink a major financial transformation. Let’s try and understand how this is likely to play out.

Holding on to the title of the world’s fastest growing major economy, which is backed by 260 billionaires and 1,300 millionaires, India is currently viewed as a bright spot amid growing global uncertainty. With a steady transfer of wealth from Baby Boomers and Generation X to Millennials and Gen Z, the country is currently on the brink a major financial transformation. Let’s try and understand how this is likely to play out.

Considering a variety of factors relevant to India, such as population size, economic growth rate, and age demographics, experts from Boston Consulting Group have estimated that nearly $4.6 trillion in wealth will be transferred from one generation to the other between 2018 and 2027. This calculation isn’t far away from estimations made by other credible agencies, such as Credit Suisse and Edelweiss Securities, which have projected that this wealth transfer will be worth $3.5 trillion over the next decade and $4 trillion over the next 25 years.

As it unfolds, this wealth transfer will have a profound impact on both the Indian economy and the domestic wealth landscape, with massive changes in financial behaviors, investment patterns and consumer preferences.

To start with, this wealth transfer will lead to a huge influx of capital into the country’s financial system. As the next generation takes charge, it is likely to invest in new-age companies and modern infrastructure, supporting job creation and promoting new opportunities for growth. This will bode well for the country’s economy, which has to constantly keep up with the demands of its rapidly growing population. Further, there will be demand for exciting and fresh investment opportunities in innovative startups as new investors gain control, creating a fertile ground for indigenous innovation powering sustainable solutions.

In the last decade, there has been a big shift in the way wealth is managed in India, with rapid digitalisation and growth of bigtech making investing more accessible through innovative fintech platforms. Supporting this shift are factors, such as the emergence of robo-advisors, AI-driven investment strategies, and online trading platforms, which have lowered the barriers to entry in the financial markets.

This trend has enabled both the ultra high net worth individuals and the emerging affluent segment to engage more actively in wealth-creation activities ranging from investing in real estate to buying stocks. With the transfer of wealth, these activities are only going to gain momentum in the coming years.

One of the most remarkable changes triggered by this transition has been the shift towards global diversification. Today, young investors are not wary of diversifying internationally, particularly in certain specific sectors, such as healthcare, biotechnology, and renewable energy.

In the last few years, the global economy has created new opportunities for Indian UHNIs and affluent to invest beyond domestic shores, particularly in developed markets, where sectors like technology and healthcare have given attractive returns. Further, a right mix of transparent regulatory environment and tax reforms have only motivated big Indian investors to explore international markets.

As global trends continue to impact the growth of the Indian economy, new sectors are already gaining traction among big Indian investors. While the technology sector, especially IT services, remains dominant, renewable energy is quickly picking up, due to the growing buzz around ESG and heightened focus on sustainability.

Additionally, healthcare and biotechnology have gained prominence in the post-Covid world, indicating how the unanticipated pandemic has reshaped investment priorities, bringing sectors with social impact and sustained resilience into focus. Finally, edtech has also gained momentum in recent years, with the rise in demand for online learning platforms that can contribute in bridging the digital divide.

Amidst these changes, The UHNIs and emerging affluents in India have begun to understand that wealth planning and management are not just about enhancing wealth but about securing the values and legacies that define their social existence. That’s why, there’s a focus on a holistic approach, considering not only wealth protection and gains but also family governance.

With India standing at a crucial point in its wealth management evolution, the next decade will determine whether the country can successfully transition from wealth accumulation to sustainable wealth stewardship. For those involved in this process, this would mean identifying and embracing structured succession planning, investing in future-oriented ventures, and contributing towards the greater good.

Atul Singh is chief executive officer and managing director of LGT Wealth India.

Disclaimer: The views expressed here are those of the author, and do not necessarily represent the views of NDTV Profit or its editorial team.