Global Wealth Report 2020 – Burning Issues

Table of Contents

What happened?

The pandemic and the subsequent lockdown may have had a devastating impact on people’s livelihoods and incomes globally,
But there has also been a paradoxical rise in household wealth in India,
According to the findings in Credit Suisse Group AG’s 2020 Global Wealth Report released last Thursday.
India and China are reported to have seen gains in household wealth in the first half of the year, up 4% and 1.6%, respectively.

Wealth measures the value of all the assets of worth owned by a person, community, company, or country.
Wealth is determined by taking the total market value of all physical and intangible assets owned, then subtracting all debts.
But in this report,
Net worth, or “wealth,” is defined as the value of financial assets plus real assets (principally housing) owned by households, minus their debts.

In 2019, total global wealth rose by USD 36.3 trillion and wealth per adult reached USD 77,309, up 8.5% versus 2018.
As a consequence, the world has been better placed to absorb any losses from COVID-19 during 2020.

Without the pandemic, the best estimate of global wealth per adult would have risen from USD 77,309 at the start of the year to USD 78,376 at end-June 2020.
Instead, the pandemic has caused average wealth to drop to USD 76,984.
The initial impact of the COVID-19 pandemic was felt through asset prices, causing global household net worth to decline by USD 17.5 trillion during January-March 2020, a 4% reduction.
Actions taken by governments and central banks then reversed this fall.
By June, global wealth was USD 1 trillion above the starting value.
However, reduced GDP and rising debt will result in long-term damage,
So wealth growth will be depressed for the next couple of years, and likely longer.

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 7% over 2000–19 using current exchange rates, and 12.1% with constant exchange rates
Wealth per adult stood at USD 17,300 at the end of 2019 after a year of moderate growth.
It was USD 17,420 at end-June 2020, showing some growth despite the pandemic.

Household wealth in India is dominated by property and other real assets,
Although financial assets have grown over time, now forming 22% of gross assets.

Wealth inequality remains quite high in India.
There is considerable poverty reflected in the fact that 73% of the adult population had wealth below USD 10,000 at the end of 2019.
At the other extreme, a small fraction of the population (2.3% of adults) had a net worth over USD 100,000.
The country has 907,000 adults in the top 1% of global wealth holders, which is a 1.8% share.

Q) Which of the following statements regarding poverty estimation in India is correct?

The official data on poverty is made available to the public by the National Sample Survey Organisation (NSSO).
It is estimated on the basis of consumption expenditure data collected by the Planning Commission.