Photo: PRAKASH SINGH/AFP/Getty Images
Despite the tradition being deeply rooted in Indian culture, philanthropy in India has not yet come of age as compared to the United States, the United Kingdom, and even some Asian countries. Nevertheless, there is a glimmer of hope: philanthropy has continued to grow in India, fueled by an upsurge in family donations, even during the Covid-19 pandemic. While keeping in mind the imbalances in the Indian philanthropic space and leveraging global best practices, there are opportunities for course correction to improve the quantity and quality of giving and enable India to address its social fault lines. Let the Covid-19 crisis be the wake-up call.
Currently the world’s third-largest economy by purchasing power parity, India is poised to become the second largest worldwide by 2050. However, this contrasts with another reality confronting India: its abysmally low per-capita GDP (nominal), which is ranked 144 out of 213 countries. There was an 8.7 percent drop in India’s per-capita GDP during 2020–21, largely due to a rise in unemployment and wage cuts driven by the pandemic. As per the Centre for Monitoring Indian Economy, India’s unemployment rate as of July 27, 2021, was 6.9 percent, with urban areas faring worse at 8.1 percent.
Experts say that the Covid-19 pandemic has been the biggest humanitarian crisis India has faced since its partition in 1947. As Covid-19 and accompanying lockdowns wreaked havoc on the economy and job market, 230 million Indians were pushed into poverty in the past year.
Per India’s Economic Survey 2020–21, the combined social sector expenditure by the central and state governments was 8.8 percent of the country’s GDP. In total, this represents almost $215 billion. Public expenditure on education and healthcare represent 3.1 percent and 1.26 percent of India’s GDP respectively, the lowest among developed countries, as well as the BRICS nations (Brazil, Russia, India, China, and South Africa). India’s ranking on the Human Development Index dipped from 129th to 131st in 2020. Its performance on the human development front remains poor due to the glaring gaps in its education, healthcare, and quality of life indicators. With huge unsatiated demands, India undoubtedly needs to substantially increase its social sector outlay.
The Sustainable Development Report 2021 ranked India 120th out of 165 nations. It slipped from 117th last year, largely because India’s performance against goals such as no poverty, zero hunger, good health and well-being, decent work and economic growth, and reduced inequalities suffered due to the pandemic. Fault lines that already existed in India’s social sector were accentuated during the Covid-19 pandemic. The Indian government announced the first relief package of $22.8 billion under the Pradhan Mantri Garib Kalyan Yojana in March 2020. If it weren’t for the government’s direct cash transfer schemes for the poor, the situation on the ground could have been far worse.
Family philanthropy is embedded in Indian culture and dates back to its ancient scriptures. Among the foundational principles of the prominent Indian industrial conglomerate Tata group, treating the community as the rationale behind the existence of business was prominent. According to a Hurun Research and the EdelGive Foundation compilation, Tata group founder Jamsetji Tata was listed as the world's top philanthropist of the last century, with donations totaling $102.4 billion, outgiving philanthropists like Bill Gates, Warren Buffet, and John D. Rockefeller.
As captured in Revealing Indian Philanthropy, industrialists like Jamnalal Bajaj and Ghanshyam Das Birla contributed substantially during India’s independence struggle led by Mahatma Gandhi. This trend continues today with similar such industrial families donating either directly or through their family foundations. Azim Premji, Ratan Tata, Shiv Nadar, Mukesh Ambani, Kumar Mangalam Birla, Anil Agarwal, Nandan Nilekani, and Ajay Piramal are among the top Indian philanthropists. A snapshot of the sector is captured in the Philanthropy in India database, while the Bold Philanthropy in India report provides insights into eight Indian social change initiatives.
According to Bain & Company and Dasra's India Philanthropy Report 2021, philanthropy grew in India despite the GDP contraction during the Covid-19 pandemic. It is quite encouraging that private sector philanthropic giving rose 23 percent in 2020 compared to 2019, reaching $8.6 billion. Philanthropic donations in India come from four sources: domestic corporate social responsibility (CSR) funds account for 28 percent, smaller retail donors give 28 percent, overseas corporations contribute 24 percent, and family donations total 20 percent.
The Companies Act, 2013, and Companies (Corporate Social Responsibility) Rules require firms with a net worth of over $67 million, turnover of over $134 million, or a net profit of over $670,000 during the immediately preceding financial year to spend 2 percent of the preceding three years’ average net profits on CSR activities. Domestic CSR funding in 2020–21 suffered due to decline in profitability. Given the stringent Foreign Contribution Regulation Act rules, overseas funding remains a challenge in India despite easing of rules during the pandemic. Contributions from small retail donors may not increase given the decline in India’s per-capita income. On the other hand, while it may seem like the smallest contributor, family philanthropy has been the fastest-growing segment and has served as a balm during the pandemic-induced humanitarian crisis.
According to Edelweiss’s Family Wealth Report 2018, India has 150,000 ultra-high-net-worth individuals (UHNIs) and families with an aggregate net worth of $2 trillion. About 95 percent of family-business owners have philanthropic interests in India. Looking at the rapidly rising income of India’s rich, this group is estimated to grow to 400,000 families by 2025 with a net worth of $5 trillion. This donor segment’s giving is expected to continue growing at the fastest rate, provided India creates and nurtures an appropriate ecosystem for philanthropy to thrive. Organizations such as Accelerate Indian Philanthropy have been set up to educate and enable philanthropic capital in India, especially among UHNIs, to significantly improve the quantity and quality of giving.
In the Indian philanthropic space, the dialogue and coordination among donors, nongovernmental organizations (NGOs), and the government has been minimal, and therefore, donor funds are poorly deployed to address the complex social issues. Efforts are duplicated for some beneficiaries whereas others remain deprived of assistance. Wheels get reinvented often with lack of learning from one another and inadequate replication of best practices. Metrics collection for the philanthropic sector remains scant of any meaningful analytics. As a result, empirical studies to gauge impact with reasonable accuracy are few and far between. India’s nascent philanthropic support system needs substantive augmentation.
While India complains about lack of donor funds, the truth remains that it does not have many nonprofits with sufficient capacity to roll out large programs. While most prominent nonprofits have excellent pilots with exemplary social outcomes, they have not been able to scale up for higher volumes without diluting quality. Many philanthropic foundations and nonprofits lack managerial capacity. What they need is a combination of business rigor and robustness, along with social sector sensibilities.
Education makes up almost half of all family philanthropic funds in India and healthcare accounts for a little over a quarter. As a result, much smaller spending takes place in areas such as gender issues, ecology and the environment, drug abuse, labor migration, undernutrition, arts and culture, and heritage conservation. Gender issues in particular tend to be lumped with larger sector-specific spending areas, considerably reducing their centrality and artificially increasing spending. There is a need to undertake course correction on this front.
Three-fourths of India’s UHNIs are concentrated in Mumbai, Delhi, and Bangalore. This results in the inequitable distribution of donor resources among states. Deprived states like Uttar Pradesh, Bihar, Madhya Pradesh, Chhattisgarh, Jharkhand, and Odisha, as well as northeastern states, most aspirational districts, and remotely located tribal villages continue to suffer. The variance in social sector outcomes in these neglected geographies is a direct reflection of unequal distribution of governmental and philanthropic resources.
Substantive philanthropic funds are locked up in religious trusts in India, which are largely private in nature. This is admittedly a complex space to enter and something of a black box. There is potential to unlock this value and leverage it for key nation-building initiatives in the social sector. The top two reasons that individual giving in India is low are because people prefer to donate to religious organizations, and because there is a lack of tax incentives for donations to NGOs.
India ranks a poor 82nd in the World Giving Index, as it is still undergoing transition like the United States did in the early twentieth century when it saw significant wealth creation. U.S. p hilanthropy, ranked first worldwide, has been a major source of funding for domestic healthcare, education, fine arts, performing arts, and religion. The Rockefeller Foundation, Ford Foundation, MacArthur Foundation, Getty Foundation, Lilly Endowment, and many others have been leading examples for a very long time. Bill Gates and Warren Buffett have set examples by donating almost half of their assets to philanthropic causes. In comparison, philanthropists in India and the United States donate 0.5 percent and 3.4 percent of their net worth, respectively. One reason for this is that the United States offers tax advantages to philanthropists by way of estate and inheritance taxes, whereas such incentives are not as strong in India.
Indian-Americans donate around $1 billion annually for promoting the arts, furthering higher education, combating homelessness in their communities, and advancing the humanitarian agenda. The American India Foundation was set up to channel Indian diasporic wealth and talent toward humanitarian needs in India. The India Philanthropy Alliance mobilizes people and funding in the United States (and elsewhere) for development and poverty reduction programs in India. A few U.S. philanthropic foundations are notable examples of diasporic philanthropy in India. Founded by Silicon Valley entrepreneur Romesh Wadhwani, the Wadhwani Foundation works toward accelerating economic development in emerging economies by driving job creation—with a focus on India—through initiatives in public policy, entrepreneurship, small business growth, innovation, and skills.
Recently, there has been a shift in the United States from foundations to limited liability corporations (LLCs) as a route to pursue philanthropic goals, referred to as philanthrocapitalism, which provides a leeway to avoid legal hurdles foundations face. In addition, LLCs are also allowed to fund for-profit firms to achieve their charitable mission.
U.S. donors give higher amounts early in their lives. If India approaches U.S. family philanthropy levels, it can garner additional annual donations of $8.06–$13.40 billion, doubling its overall philanthropic contributions.
When making philanthropic decisions, most Indian families in India go by their past experiences, are generally risk-averse, and consult close friends rather than consultants. The concept of a family office in the United States is an institutional framework in which the affairs of a family can be managed by way of wealth restructuring, philanthropy, succession planning, and mentoring. This concept is still in its infancy in India.
The Indian diaspora is quite well placed in many countries like the United States, the United Kingdom, Canada, Australia, and Singapore. Silicon Valley, New York, London, Chicago, Toronto, Singapore, and Melbourne are major clusters. Some in the diaspora have been donors for Indian causes dear to their hearts. However, there is an opportunity to tap these funds in a more organized way, perhaps through aggregator platforms, so that their donations are put to better use.
CSR accounts for 28 percent of all donor funds in India. Barring a few exceptions, its usage is often based on the beliefs and perceptions of corporations. CSR funds during the Covid-19–induced economic crisis have shrunk due to lower profitability in 2020–21. A portion of these funds has gone to Covid-19 relief, including the Prime Minister’s CARES Fund. Grants to NGOs have decreased in the last year. With CSR being the single largest component in India’s philanthropic mix, greater professionalism is required in its management to enable the country to fully actualize its potential.
Aside from some online platforms, India has not yet successfully attempted to target retail or smaller-ticket individual giving, which could constitute a mass market in the philanthropic space. Aggregators with credibility could better leverage the tremendous latent potential inherent in this vertical. “Unicorn” businesses in India have shown an immunity against the Covid-19 pandemic; the country is home to 48 such companies as of July 2021. Unicorns and several other super successful start-ups need to be tapped for philanthropic funding.
There is a strong need for evangelization to encourage philanthropists to donate early in their lives, commit bigger sums, and contribute strategically. Similarly, rather than giving grants for specific social sector programs on a periodic basis, philanthropists must make long-term commitments to enable nonprofits to undertake serious capacity building. There must be far greater dialogue and coordination among donors, nonprofits, the government, and advisers for cross-leverage and optimized deployment of donor funds.
The Doing Good Index 2020 by the Centre for Asian Philanthropy and Society highlights factors that drive or hinder private philanthropic capital flowing toward nonprofits operating as social delivery organizations. It indicates that registering a nonprofit takes longer in India than the average in Asia (180 and 94 days, respectively), and that there are more inhibitors on receipt of foreign funds in India as compared to the rest of Asia. Tax deductions are mostly allowed for up to 50 percent of donations with a limit of 10 percent of adjusted gross total income for corporates and individuals in India, which is lower than the Asian average. Naturally, these rates are insufficient to encourage donations in India.
Nonprofits in India find the processes for government procurement from the social sector to be less transparent than the Asian average. One-third of nonprofits in India see their funds declining even though crowdfunding has seen a significant increase. India is also characterized by a low level of individual donations compared to Asia. Indian NGOs have lower corporate sector participation on their boards, which does not bode well from a governance perspective. Indian nonprofits believe there is a perception that nonprofit employees should be paid significantly less than employees in for-profit companies, impeding hiring and retention.
Sectoral and geographic allocation of philanthropic funds need greater equity. In addition, nonprofits must expand their delivery capacity to roll out large programs on the ground. India also needs a robust metrics program for philanthropy, which would enable superior studies, better impact assessments, and focused research. India must direct its philanthropic focus toward structural and systemic problems. As the country addresses these imbalances progressively, philanthropy is poised to thrive, become more vibrant, and strategically address India’s gravest social sector challenges, including the pandemic-induced social fault lines.
Jayant Krishna is group CEO of the UK India Business Council and a senior fellow (non-resident) with the Wadhwani Chair in U.S.-India Policy Studies at the Center for Strategic and International Studies in Washington, D.C.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
© 2021 by the Center for Strategic and International Studies. All rights reserved.
