The rise of “Hawks” – A new wealth paradigm

India’s wealth landscape has witnessed a dramatic transformation over the past two decades. With the emergence of approximately 200,000 ultra-wealthy families, India has entered a new era of wealth concentration and influence. These families, often referred to as the “Hawks,” are reshaping the economy through their consumption, investments, and increasingly global aspirations.

Unprecedented Wealth Creation: The Numbers Behind the Growth

India’s gross domestic product (GDP) has experienced a six-fold increase over the past two decades, growing from $607 billion in 2003 to a staggering $3.75 trillion by 2023. This economic boom has created an enormous surge in wealth, but it has been disproportionately concentrated in the hands of a small elite class.

According to a 2022 report by the Boston Consulting Group (BCG), the wealth of India’s elite grew by a staggering 15.8 times from 1999 to 2019, making India one of the fastest-growing wealth hubs in the world. Income tax data reveals that over 2.69 lakh individuals declared incomes above ₹1 crore in the 2022-2023 financial year, a significant increase from 1.8 lakh in 2018-2019. The rise in wealth among India’s top earners has created a new class of “crazy rich Indians,” who are influencing both domestic and global markets.

Two distinct wealth creation models have fuelled the rise of this elite class: the small-town entrepreneurial model and the big-city corporate model.

The Small-Town Entrepreneurial Model: Local Powerhouses Rising

In smaller towns and cities across India, entrepreneurial families have long played an influential role in the local economy. However, reforms like demonetization and the Goods and Services Tax (GST) have pushed many of these previously informal businesses into the formal economy, setting the stage for exponential growth.

These entrepreneurial families typically begin by establishing trading businesses, often securing loans to expand into industries such as cold storage, dealerships, or transport. Over time, their enterprises evolve into large, diversified groups with investments in industries like real estate, construction, and finance. As their wealth grows, so does their influence. Many of these families leverage their local dominance to establish political connections, enabling them to access lucrative government contracts and concessions.

This group of “Hawk” families has created an ecosystem where business, politics, and wealth are interlinked. By diversifying their investments and expanding their reach, they dominate entire regions, becoming powerhouses in sectors ranging from infrastructure to local services.

The Big-City Corporate Model: Dominating India’s Urban Markets

While small-town entrepreneurs are rising through diversification, India’s urban elite are generating wealth through a combination of corporate leadership, venture capital, and equity-based compensation. Executives in large corporations, venture-backed entrepreneurs, and owners of listed companies form the core of the wealthy urban elite. In fact, 1,161 individuals in India’s top companies earn annual salaries exceeding ₹1 crore​(Marcellus).

For example, firms like Titan, Kotak Mahindra Bank, and Eicher Motors have outperformed in the Indian stock market, largely thanks to their ability to cater to the spending habits of India’s wealthy elite. These executives and business owners have accumulated significant wealth through the concentration of market power in a few dominant firms, which have thrived in a booming economy. The concentration of wealth in India’s corporate landscape is staggering. Just 20 companies account for 80% of India’s corporate profits, demonstrating the outsized influence a small number of firms have on the economy​(Marcellus). 

Venture capital and start-up ecosystems in cities like Bengaluru, Mumbai, and Delhi have also played a critical role in wealth creation. Indian start-ups raised $35 billion in 2022, creating a new generation of unicorns and billionaires. Entrepreneurs who capitalized on technology trends and digital transformation have seen their fortunes skyrocket, as the demand for digital solutions surged in a post-pandemic world.

The Spending Habits of India’s Elite

The rise of these wealthy families has not only reshaped India’s economic landscape but also influenced global markets. This elite class is characterized by its insatiable appetite for luxury goods, real estate, and exclusive services. According to the World Wealth Report, India’s luxury market grew by 30% in 2022 alone, driven by demand for premium fashion, automobiles, and real estate. Brands like Gucci, Louis Vuitton, and Mercedes-Benz have reported record sales in India, with the ultra-wealthy leading the charge in luxury consumption.

The real estate sector, particularly high-end residential projects, has also seen a surge in demand from India’s wealthy elite. With increasing disposable income, these families are investing in luxury homes and properties in prime locations across India and internationally. Mumbai and Delhi, in particular, have witnessed a boom in luxury real estate, with multi-million dollar homes becoming increasingly common.

The rise of wealth in India is not limited to consumption but extends into investments as well. Private banking and wealth management firms have reported an uptick in demand for bespoke investment services, as the wealthy elite seek to diversify their portfolios into alternative assets, including private equity, venture capital, and global real estate.

Investment Implications: Tapping Into the Growth of Wealth

The rise of India’s wealthy elite presents significant opportunities for investors. Companies catering to the spending habits of this new class, such as luxury brands, private banks, and premium service providers, are experiencing robust growth.

The financial sector, especially wealth management and private banking, has been one of the key beneficiaries of this wealth surge. Firms offering customized financial solutions are growing rapidly, driven by the demand for specialized services from India’s super-rich. Additionally, sectors like high-end retail, luxury automobiles, and premium real estate are expected to see continued growth as India’s wealthy elite continues to expand.

Only 5% of Indian household wealth is currently in financial assets, while 95% remains tied up in physical assets like real estate. This gap represents a significant opportunity for the financial services industry to grow by converting physical assets into financial assets​(Marcellus).

In the coming years, the rise of “crazy rich Indians” is likely to further fuel the expansion of sectors that cater to exclusivity, luxury, and high-end experiences. For investors, this presents a unique opportunity to tap into the rapid growth of India’s new wealth class.

Note: The content in this blog post is for informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any specific securities. It does not constitute investment research or financial advice. Always consult with a qualified financial advisor or conduct your own research before making any investment decisions.