What a difference a year can make. In March 2008, when we published the last billionaire rankings, India’s wealthiest citizens were flying high, buoyed by a soaring stock market and a booming economy. Cumulatively, they were Asia’s wealthiest, with a collective net worth of an astonishing $335 billion.

But India’s economy, although driven by domestic demand, hasn’t been immune to the global slowdown. In the quarter ending December 2008, gross domestic product grew by 5.3%, down from 9% the previous year.

Not surprisingly, India’s richest are facing a major reality check. A volatile stock market that dropped 44% in the past 12 months and a depreciating rupee, which fell about one-fifth against the dollar, sent their fortunes tumbling. Only 24 of last year’s 53 billionaires made the cut this year, and everyone but the Singh brothers, who sold their generic drug firm Ranbaxy at its peak, lost money.

In Pictures: India’s Billionaire Drop-Offs

As a result, mainland China for the first time has more billionaires than India. Still, the Indian survivors, with a combined net worth of $107 billion, are a lot richer than their Chinese counterparts, who are worth $44 billion.

Four Indians were among the world’s top 10 richest in 2008, worth a combined $160 billion. Today, that same foursome is worth just $54 billion. Mukesh Ambani and Lakshmi Mittal still managed to hold on to their spots at Nos. 7 and 8, respectively. The same can’t be said for Anil Ambani, who lost $32 billion this past year, more than any other billionaire in the world, or K.P. Singh, briefly the world’s richest real estate baron, who lost $25 billion and is now ranked No. 98, worth $5 billion.

Singh is in much better standing than fellow property developer Ramesh Chandra. His cash-strapped Unitech lost half its market capitalization in one day last October; now Chandra is poorer by an estimated $9 billion from the $9.6 billion he was worth in 2008. He was the highest-ranked billionaire from 2008 to drop off the list.

At least he has plenty of company. The 28 other drop-offs include a number of well-known businesspeople. Among the notables is flamboyant liquor and airlines tycoon Vijay Mallya, whose UB Group acquired Scottish distiller Whyte & Mackay for $1.2 billion in May 2007 to become the world’s second-largest spirits group. He could probably use a stiff drink right about now, as his various booze companies lost between half and 90% of their values. Despite financial troubles, Mallya paid $1.8 million at a recent New York auction to acquire memorabilia of Mahatma Gandhi’s that he will gift to the Indian government.

Also gone from the billionaires’ club are Jignesh Shah, whose listed financial software firm Financial Technologies dropped by 75%, and Sameer Gehlaut, who was India’s youngest billionaire briefly before the stock price of his Indiabulls Financial Services and Indiabulls Real Estate both tanked 80% in the bear market. India’s wind-power man, Tulsi Tanti, and his brothers lost an estimated 90% of their combined fortunes amid reports of poor quality of Suzlon’s wind turbine blades.

The winds of wealth can change quickly, as this year has illustrated. They may yet again blow favorably in the direction of these tycoons.

The World’s Billionaires

Billionaires List
Up in Smoke

On the evening of Jan. 5 Adolf Merckle, Germany’s fifth-richest man, opened the door of his modest home in Blaubeuren, Germany and stepped out into the frigid air. The 74-year-old outdoorsman was keen on taking long walks to clear his head. But when he hadn’t returned home a few hours later, his family called the police.

Merckle had a lot on his mind. The secretive industrialist, who by our count had a net worth of $9.2 billion a year ago, was in financial straits. His holding company, VEM Group, had reportedly accumulated more than $6 billion in debt against its three biggest holdings: Phoenix Pharmahandel, the $28 billion (sales) pharmaceuticals manufacturer that had roots in a chemical company his grandfather founded in 1881; Ratiopharm, the generic drug maker Merckle had built from scratch; and cement producer HeidelbergCement. VEM was bleeding cash, and HeidelbergCement’s share price was falling at an alarming rate. It became harder to manage his debt payments.

Hoping to make some quick cash, Merckle began gambling on risky short positions. In October he bet against Volkswagen–and lost an estimated $500 million when the shares quadrupled after Porsche revealed that it had amassed a controlling stake in the carmaker.

A month later he approached German bureaucrats in Baden-Württemberg and begged them for a $200 million bridge loan in a bid to save Phoenix Pharmahandel and Ratiopharm. They turned him down. Talks with banks continued. In early January his creditors gave him a $500 million loan. In exchange for the face-saving loan, he relinquished control of his empire. Trustees were appointed to oversee his assets.

Instead of taking a walk that cold night, Merckle drove to the suburb of Weiler, parked his car in the Ratiopharm lot and walked a few hundred yards to the train tracks that run past the plant. At 5:30 the conductor on an express train going from Ulm to Sigmaringen felt a bump and alerted authorities to investigate. Merckle’s mangled corpse was found two hours later. The note he left behind reportedly read, “I’m sorry.”

Like the rest of us, the richest people on the planet have endured a financial disaster. This year there are 793 people on our list of the World’s Billionaires, a 30% decline from the 1,125 we counted up a year ago. Of the 752 who kept their ten-figure fortunes, 87% saw their personal balance sheets falter (6% gained; 7% held steady). Today the world’s billionaires have a collective net worth of $2.4 trillion, down $2 trillion from a year ago. Among the billionaires on both lists, the collective wealth is down $1.4 trillion.

It was hard to avoid the carnage, whether you were in stocks, commodities, real estate or currencies. Even people running fine businesses could have been killed by frozen credit markets, weak consumer spending or fraud.

“It’s going to get worse,” says David Geffen, who watched his net worth fall 25% to $4.5 billion as real estate and art prices softened. “I don’t think we’ve hit the bottom. It wouldn’t surprise me if the Dow fell below 6000. Unemployment is now 8.1%, which means it’s really 13.1% after you add 5% for part-time workers and people who are no longer on the employment rolls. I think it will reach 15% or 16% by the end of the year.”

Geffen claims he pulled his investments out of the market in 2006 and has sold off a third of his multibillion-dollar art collection. “It seemed that it was awfully easy to make money,” he says. “There’s something seriously wrong when it isn’t extremely difficult to make a great deal of money. There were billionaires who could not qualify for The Forbes 400. That was one of many warning signs for me to get out.”

The biggest loser in the world this year, by dollars, was last year’s biggest gainer. India’s Anil Ambani lost $31.9 billion–76% of his fortune–as shares of his Reliance Communications, Reliance Power and Reliance Capital all collapsed. Ambani is one of 24 Indian billionaires, all but one of whom are poorer than a year ago. Another 29 Indians lost their billionaire status entirely. India’s stock market has fallen 44% in a year, global equity prices 39%.

Donald Trump, we estimate, has seen nearly half of his net worth disappear. His casino company is in bankruptcy–again. His $1 billion hotel and condo tower in Chicago hasn’t closed enough previously agreed-to sales and can’t find new buyers. Evidently having some difficulty making timely repayments of $640 million in unguaranteed construction loans from Deutsche Bank, he sued the lender last fall (but recently took the lawsuit off the table). As cranes stand idle above half-built residential real estate projects around the world, Trump’s ability to profit from licensing his name and marketing expertise to other developers has become impossible to gauge–despite his popularity. “We’re not going down; we’re going up,” says Trump. “We’re buying things we couldn’t have dreamed of buying two years ago. And we have a lot of cash.”

The Donald always makes a few shrewd moves. Last May Trump sold a Palm Beach, Fla. house to Russian tycoon Dmitry Rybolovlev, who was worth $12.8 billion last year, for $100 million. In the months that followed, shares of the new homeowner’s publicly traded fertilizer outfit, Uralkali, cratered, erasing three-quarters of his fortune. Trump dumped some of the cash he made into a few golf courses put on the block by their cash-strapped owners.

Rybolovlev was one of the lucky Russians who kept their billionaire status. Russia became the epicenter of the world’s commodities bust, dropping 55 billionaires. Among them: Dmitry Pumpyansky, an industrialist from the resource-rich Ural mountain region, who lost $5 billion as shares of his pipe producer, TMK, sank 84%.

Last year Moscow overtook New York as the billionaire capital of the world, with 74 tycoons to New York’s 71. Today there are 27 in Moscow and 55 in New York.

Picture Credit: Clockwise From Bottom Left: Reuters / Landov; Guenter Schiffmann / Bloomberg News; Brendan Smialowski/ Bloomberg News; Lester Cohen / Getty Images; Jewel Samad / AFP / Getty Images; Tom Shaw / Getty Images; Graham Barclay / Bloomberg News; Halldor Kolbeins / AFP / Getty Images

Wall Street’s damage spread wide. Last March British investor Joe Lewis lost $1 billion when JPMorgan Chase & Co. agreed to buy Bear Stearns for $2 a share. Six months later AIG needed a U.S. government bailout, wreaking havoc on Maurice (Hank) Greenberg’s $1.9 billion fortune. Last year there were 39 American billionaire hedge fund managers, this year 28. Asked by e-mail to confirm our estimate of his net worth, one money manager replied, “We’ve gone out of the business of responding to this kind of inquiry. It’s so ‘07.”

The flight from junk debt brought to an end the golden age of private equity. Leon Black’s Apollo Management, which went quasi-public in 2007 on a secretive Goldman Sachs exchange, lost 93% of its value between August and January after several deals backfired. Last May Apollo let household goods retailer Linens ‘n Things lapse into bankruptcy. Months later Apollo and affiliates agreed to pay Huntsman Chemical $1 billion after backing out of a $6.5 billion merger that, Apollo argued, would render the combined company insolvent. Black’s net worth is down 68% to $1.1 billion; he’s a billionaire because of his valuable art collection.

Apollo’s merger quagmire was contagious. Kenneth Griffin, who runs hedge fund outfit Citadel, blamed part of his fund’s December losses in a letter to investors on “exposure to Huntsman.” Citadel’s flagship fund, Wellington, finished down 55% in 2008. Griffin’s net worth fell with it, from $3.7 billion last fall to $1.5 billion in February.

Also bleeding: Blackstone’s Stephen Schwarzman, who lost $4 billion, and KKR’s Henry Kravis, who lost $2.5 billion. Twelve American private equity tycoons dropped out of the billionaire ranks.

The government of Iceland was forced to nationalize its three largest banks after they lent out over $100 billion–more than five times the nation’s gross domestic product. Among the banks nationalized was Landsbanki, owned by Bjorgolfur Gudmundsson, whose $1.1 billion fortune was wiped out in the process. Gudmundsson is now liquidating his holding company, Hansa, and is searching for a buyer for his U.K. soccer team, West Ham.

Leverage got the best of many. Oleg Deripaska, Russia’s richest man last year, was forced to sell two valuable holdings. In October Deripaska paid back a $1.2 billion loan made by a BNP Paribas-led syndicate against which he pledged his 20% stake in Canadian auto parts company Magna International; the banks exercised their right to reclaim the shares after they dropped 40% below his purchase price. A month later he had to sell his 10% stake in German construction company Hochtief to Commerzbank. The selloffs, plus falling aluminum prices, cut Deripaska’s net worth 88%, from $28 billion to $3.5 billion.

In October Sumner Redstone, 85, sold stock in Viacom and cbs worth $233 million after the companies’ shares dropped 43% and 52%, respectively, in six weeks. The falling prices put Redstone in violation of debt covenants, forcing him into negotiations with creditors over the $1.6 billion owed by his holding company, National Amusements. Redstone also gave away his 87% stake in Midway Games–once valued at $800 million–for $100,000, generating a capital loss that he used to offset taxes on his Viacom and cbs sales.

Last month Redstone restructured his debt. He promised to pay off $140 million immediately; the $1.46 billion balance of the loan must be paid back by the end of next year, and he’ll likely have to sell off some of National Amusements’ movie theaters. Redstone was barely a billionaire when we locked in stock prices for our list on Feb. 13; he was worth $6.8 billion last year.

At least seven billionaires fell prey to Bernard Madoff’s alleged $50 billion Ponzi scheme. Among them: director Steven Spielberg, art collector Norman Braman and real estate developer Mort Zuckerman, who says one of his charitable trusts lost $30 million invested with Madoff. The loss didn’t impact his net worth (but the 58% decline in his Boston Properties stock knocked off $650 million).

R. Allen Stanford’s role in an alleged “massive, ongoing fraud” cost the money manager his billionaire status. Stanford was charged last month by the SEC with orchestrating an investment scheme that promised “improbable” interest rates on $8 billion worth of certificates of deposit. The regulators have seized Stanford Financial Group’s assets; he has not been criminally charged.

Proud and feisty gambler Sheldon Adelson has seen $25 billion vaporize as shares of his Las Vegas Sands, which owns the Venetian and Palazzo resorts in Nevada and the Sand Macau and Venetian Macau casinos in China, fell 97% to $2.30. In the fall Adelson, who was America’s third-richest man in 2007, kept LVS afloat by injecting $1 billion of his own cash into the company to help cover a debt payment. The firm’s debt has forced it to halt its multibillion-dollar expansion in Macau and focus on completing its $5 billion casino resort in Singapore, scheduled to open later this year.

“One day our stock will trade at $100 a share again,” he boasts. “We will make all of our debt payments, we will open our resort in Singapore, and we will complete our vision for Asia. I’ve been fighting people who have told me I couldn’t do things my way all my life. I can’t wait to prove them wrong again.”

That may take a while.