Rise of India’s rich amid Moody’s upgrade

The Moody’s rating upgrade of India after a 13-year long hiatus is a small mercy by the global rating firm. It comes after an unprecedented number of fresh foreign investors -- more than 4,500 - registered themselves with the stock market regulator in the last 18 months up to September 2017, and stock indices hit their respective highs with 19% jump in 2017 so far. With or without Moody’s upgrade, foreign investors, mostly left with fewer options at hand, are flocking to India, and have invested a cumulative Rs 12.84 lakh crore (as on November 19, 2017) in India’s capital markets, with a Rs 1.28 lakh crore investment in equities and debt in 2017-18 till date. On the other hand, Indian companies are already borrowing cheaply from global markets. Hence, Moody’s rating upgrade from Baa3, just above 'junk status', to Baa2, one notch up, and its outlook from 'stable' to 'positive' barely stirs up stock markets.

Moody's expects the real gross domestic product (GDP) growth to moderate to 6.7%, but foresees a rise to 7.5% in 2018-19 as the disruption fades.

More foreign investments into the capital market will help bloat promoters’ kitty while risking the creation of bigger asset bubbles. On the foreign direct investment front, most inflows are directed at taking over existing companies or facilities, helping promoters cash out and barely creating any new assets. The largest FDI in 2017 has been by a consortium led by the Russian government-controlled Rosneft that took over the Indian assets of Ruias-run Essar Oil in a $12.9 billion deal.

While Moody’s upgrade couldn’t have come at a better time for the Modi government, which is toiling to explain the slowdown in economic growth and employment creation, what added to Indians’ curiosity are two reports. The first one is Credit Suisse’s latest annual Global Wealth Report that said India is home to 2.45 lakh dollar-millionaires (people having more than Rs 6.4 crore). The top of the wealth pyramid has 760 Indians who have more than $100 million (Rs 640 crore), while the $50 million (Rs 320crore) club has 1,060 Indians.

The other report is Forbes' list of 50 richest families in Asia. The 18 rich Indian families make it the biggest elite club on the list, followed by Hong Kong with nine families. For the first time, a family from India has snatched the top honours – Mukesh Ambani's--dethroning the Lees of Samsung. The Ambanis' net worth has risen $19 billion in one year to $44.8 billion, owing to the leap in profits and stock prices of Reliance Industries (RIL), and the success of its telecom start-up Reliance Jio.

At the 11th spot in the list is the Premji family (with $19.2 billion), followed by the Hinduja family on the 12th rank ($18.8billion). While the Mittal family is at 14 ($17.2bn), Mistry family stands at 16 ($16.1bn), followed by the Birla family at 19 (14.1bn) and Godrej family at 20 ($14bn). The other families on the list, entry to which is restricted by $5 billion-mark, are the Bajajs, the Jindals, the Burmans, the Lals, the Bangurs, the Sehgals, the Wadias, the Singhs, the Patels, the Piramals and the Munjals.

What is interesting is that their total wealth is pegged at $217.14 billion. The spectacular rise of India’s rich will leave a billion-dollar question on the rising wealth disparity in the country.

The writer is editor, DNA Money. He tweets @AntoJoseph