Mind the Gap: The Current State of Indian Philanthropy

India is, as they say, incredible. For all that we hear about India’s poverty, the country is also home to no less than 52 billionaires, and over 100,000 millionaires. Mukesh Ambani, one of India’s billionaires, is building a 27-story glass palace in Mumbai for his family. Lakshmi Mittal who, like Ambani, is one of the top ten richest men in the world, hosted a wedding extravaganza for his daughter a few years ago that cost an estimated US$60m.

India’s fast growing economy is ripe for cultivating billionaires. Today, as India’s rank on the billionaire list grows (currently #5 according to Forbes), the number of poor people also climbs. Where is all this money going? With each passing day, the shadow of Mr. Ambani’s house grows longer, but the poor remain. In a country where half of its children are malnourished, can the bottom of the pyramid ever hope to see the benefit of India shining? Why aren’t India’s Haves helping its Have Nots?

Do Indians Give?

Are Indians givers? This question has wildly different answers depending on who you ask. Anand Shah, Founder of Indicorps and CEO of the Piramal Foundation, contends that Indians do give, they just give differently. At the Indian Philanthropy Forum held in Mumbai in March, Shah explained, “When it comes to family and temple, we give large amounts of money and large amounts of time.” However, much of Indian philanthropy is not celebrated in public. Indians give, but often in unseen ways, and very often (30% of the time) for religious purposes. Indeed, there is a long tradition of giving, going back to the Buddhist concept of dana, meaning giving or generosity. The ancient Hindu text, the Bhagavad Gita, explicitly encourages giving in Chapter 18:

“Actions based on performance of sacrifice, charity, and austerity should never be renounced. Moreover, these actions should be performed as duty, renouncing attachment to fruitive results.”

In addition, in the last century, there have been a few notable Indian philanthropists, including Jamshedji Tata who set up the Indian Institute of Science a century ago. Yet, despite having a tradition of giving, Indians do not, comparatively, give as much as those in other countries. According to Bain & Company, in 2006 India’s total charitable giving was US$4.7bn—including foreign and government funds, corporate, and individual philanthropy. That is just 0.6% of India’s GDP –higher than Brazil’s 0.3%, or China’s 0.1%, but lagging behind the US’ allocation of 2.2% of GDP or the UK’s 1.3%. But, to write off India as just another developing country is too simple. In a March 2010 article in the International Herald Tribune about India’s widening socio-economic gap, contributor Tim Sebastian cited that over 60 million people in India have a higher living standard than France or Britain. Shouldn’t this wealth trickle down?

On the contrary, in India corporate and individual giving comprise only about 10% of total giving or US$470m. By way of comparison, the share of total giving from individuals and corporations in the US is 75%. It is this number that needs to grow, if India is to reduce the wealth gap.

Hurdles

Although Indians are making more frequent cameos on giving lists, their accumulation of wealth is a relatively recent phenomenon. The number of wealthy Indians has ballooned since the liberalization of the economy in 1991, but it will likely take several more decades for the earners of this new wealth to share it; history shows that it takes 50-100 years for a culture of giving to come about. In an interview with the Carnegie Council last year, Nandan Nilekani, founder of Infosys, explained the slow evolution of a giving culture: “If it’s my money, I can choose to give it away, whereas if it is inherited money then it is a lot more difficult to give it away because then you need to conserve it. So I think entrepreneurship and philanthropy are linked.”

It’s also important to acknowledge the role of culture and peer groups. In India, an increase in material wealth improves your social standing, whereas charitable giving has not yet taken onthe same cache. In many cases, successful business leaders see their businesses as extensions of themselves. They view their company’s foundation-arm or CSR projects as an extension of their own philanthropy. As a result, they don’t give beyond those bounds.

Another challenge is the proliferation of ineffective NGOs in India. It is estimated that there are between 2-3 million charities or NGOs in operation in India, but according to Arpan Sheth, Partner at Bain & Co., only 500 of them operate on a scale large enough to be effective (income over US$100,000). Michael Chu, a Senior Lecturer in Social Enterprise at Harvard Business School explained, “Most philanthropy is a waste because of the poor quality of many NGOs. There are far too many NGOs in India, but consolidation is very rare because of the markets in which they exist. There is no reward for combining or collaboration.” Without trustworthy, well-run organizations, potential philanthropists are going to continue avoiding NGOs and instead, funnel them into family businesses, family trusts, or temples.

Lastly, the current tax framework does not encourage giving. It is difficult for a charity to obtain tax exempt status; it is cumbersome to get a license (FCRA) to be able to accept foreign funds; and for donors, there is no tax deduction for donations of material goods, and only a 50% deduction on cash grants.

Mind the Gap

The market, the government, and social business all have a role to play in bridging the gap, but there is also a distinct need for philanthropy. The government, which consistently ranks low on lists that analyze efficiency and corruption, has proven that it has neither the transparency nor the efficiency to handle the depth of India’s challenges. In a 2009 study by the Political and Economic Risk Consultancy (PERC), India ranked least efficient in a survey of the 12 leading economies in Asia. Philanthropy can help narrow the gap.

Fixing the gap requires infrastructure in terms of improved legal structures, better networks to organize giving, and more credible, transparent, and accountable foundations and NGOs. There are several organizations making strides on these fronts.

Organizations like Dasra, in Mumbai, are working to professionalize NGOs by providing advisory services. In addition, the launch of the Indian Philanthropy Forum, initiated by Dasra, can do wonders in terms of educating potential philanthropists, and by connecting philanthropists with effective NGOs—two groups that often don’t mix socially. Campaigns like the Joy of Giving Week, organized by GiveIndia, help to cultivate a giving culture. And new launches like Samhita (see page 14) serve as a marketplace for foundations, companies and individuals to connect with the social sector.

An Opportunity with No Bounds

Recently, there has been talk of international aid agencies discontinuing their funding to India. The idea of an India that no longer needs hand outs is hopeful, but idealistic at best. In a March panel at the Indian Philanthropy Forum about the need for NGOs in India, Deval Sangvhi, Co-Founder of Dasra, stated an open challenge: “What are Indians doing for India? International taps of funding are running dry. It’s time we start funding our own growth.” In order to solve its deep-seated problems, India needs smart, strategic philanthropists to guide the way.