India's Smaller Towns are Getting Richer

No prizes for guessing which city has the most number of affluent families in India. Yes, it is Delhi, which has edged out Mumbai from the top slot in the Super Rich Households segment. According to a new study by the National Council of Applied Economic Research (NCAER), the country has 20,000 households in the super rich category - i.e. with annual incomes of Rs 10 million+. Of these, 5,085 families are located in the capital, New Delhi, while 4,439 are to be found in Mumbai. What comes as a surprise, though, is that many of the smaller towns like Nagpur, Surat, Jalandhar, Amritsar, Vadodara and Vijayawada have edged out metros like Kolkata and Chennai with their rising ranks of super rich households.

Take for instance Nagpur, which ranks No. 6 among the top cities that flaunt 'crorepati' households. NCAER's surveys show that between 1995-96 and 2001-02, the richest households of Nagpur have grown at the rate of 91% per year - taking their number from just 9 to 425. Surat, which is known for its diamond industry, is also among the top cities with super rich families. During the 1995-96 to 2001-02 period, the city's super rich multiplied at an annual rate of 87% taking their numbers from 3 to 146. In comparison, Delhi and Mumbai's growth rate of super rich households has been a sedate 28% and 41% respectively. Delhi has 1,904 crorepatis per million families with 1 in 500 families earning an annual household income of Rs 10 million a year. The figure for Mumbai is one in 800 families.

The smaller towns are becoming more prosperous. Consider this: Nagpur with a population of just 440,000 households and Surat with 620,000 are among the top cities with a growing segment of population earning Rs 1-2 million per year. The other cities that have shown spectacular growth in high income households are Vadodara, Vijayawada and Ahmedabad, though Gujarat's capital has witnessed a huge decline in growth in the 1998-99 to 2000-01 period. Nearly 2,000 of the country's richest families live in the rural areas while another 3,000 are residents of smaller towns. Of the 40,000 households earning between Rs 5 million and 10 million, 7000 live in rural areas and another 6,000 in the smaller towns.

Another key factor in the richness index is the density of rich people, i.e. the number of rich families per million population. The NCAER survey estimates that the density of rich people in states like Haryana is higher in the rural areas than in urban areas. Haryana has 340 urban crorepatis, compared to 482 rural ones, and 241 of the urban ones live in small towns. In terms of density, rural Haryana has 199 crorepati families per million families and there are 280 crorepatis per million families in small town Haryana. In contrast, Kolkata's density of crorepatis is 180, that for Hyderabad is 191 and Chennai is 291.

The good news is that the ranks of the high income households are poised to grow in the coming years. NCAER estimates that the number of crorepati households will go up by more than two and a half times by 2005-06 and by the end of this decade there will be 140,000 crorepati households. India's income demographics are all set to change dramatically as the upper income classes grow at a fast clip and the lowest income households (that is households earning below Rs 90,000 a year) shrink. In 1995-96, 80% of the country's population had an annual household income of Rs 90,000 or less than that. By the end of the decade this group will constitute about 52% of the population. The group earning more than Rs 1 million a year is expected to grow from 0.2% to 1.7% and the middle class - that is the group with household incomes of between Rs 200,000 to Rs 1 million - is expected to grow from 2.8% to 12.8% . Over a third of this middle class population is located in rural ares, while a sixth are to residents of towns with less than 500,000 people.

How do the states perform in the Richness Index? Punjab has fewer rich people in rural areas and towns than Haryana but the density - 293 crorepatis per million families - is similar to that of Haryana. In Gujarat and Maharashtra, the number of super rich families is smaller but the density is high. For instance, small town Gujarat has a density of 200 crorepatis/million families while in the case of small town Maharashtra, it is 350. The worst performance is that of West Bengal which has only 39 crorpepatis per million families. If Kolkata's figures are not considered, the number of rich households in the state declines by nearly 80 per cent.

The NCAER study titled, 'The Great Indian Middle Class', is based on a sample of over 300,000 households and is a part of NCAER's annual household survey. The report provides data from 1995-96, and all numbers have been computed at 2001-02 prices in order to make the trend comparisons meaningful. The report has been published in association with Business Standard.
ENDS