Can India keep its wealthy from fleeing?
India is curiously defying a common law of economics. When foreign investors cool toward an emerging economy’s stock market, share prices usually fall. Not so in the world’s fifth-largest economy.
Foreign investors were net sellers of India-listed shares last month, accounting for more than $1 billion in outflows. Foreign inflows of $2.6 billion this year are a fraction of last year’s $22 billion. Yet the Bombay Stock Exchange’s benchmark BSE Sensex has risen 12.8% year to date, buoyed in large part by domestic mutual funds.
The stock market’s resilience reflects deeper changes in India, with implications beyond investor portfolios. Long a global byword for poverty, India now boasts a significant and rapidly growing cohort of relatively wealthy consumers and investors. Goldman Sachs estimates the country’s “affluent population"—those with an annual income of at least $10,000—will grow from approximately 60 million today to 100 million by 2027.
Blume Ventures, an early-stage Indian venture fund, estimates that about 30 million households, or roughly 120 million people, with an annual per capita income equivalent to $15,000 represent “the consuming class." These are the people largely responsible for India’s stock-market boom, as well as for the majority of domestic spending on everything from beauty products and restaurant meals to airline tickets and iPhones. In historical terms they are an anomaly. India has long been characterized by extreme wealth disparities—the old cliché of maharajas and snake charmers—but it has never had a well-off class this large.
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