India is now the world’s third largest economy. Despite the global financial crash in 2008, philanthropy in India has grown exponentially and improved in quality over recent years. This, believes Arpan Seth of Bain & Co, looks set to increase: ‘Current trends point to a sustainability in philanthropy in India. We are most certainly entering a new age and I predict that in the next five to ten years we will see tremendous growth. We are just at the initial part of the wave.’ The extent to which the changes in philanthropy are due to changes in the Indian economy is more open to question.
This article presents a snapshot of Indian philanthropy today, with comments from a group of experts with different perspectives on philanthropy. The last section of this article is based entirely on their comments.
Increases in giving
Corporate philanthropy increased fivefold between 2006 and 2011; in 2010 alone, $2.5 billion was committed by the top ten donors. In the same period, private giving increased by 50 per cent; of the country’s estimated 300 plus grantmaking and operational foundations, 62 per cent were registered after 1991. Large individual gifts, too, are becoming more common. Azim Premji recently became the first Indian to sign up to the Giving Pledge, and in March P N C Menon, founder of Sobha Developments, said to be worth $600 million, pledged half his wealth to philanthropy.
But these developments are far from catapulting India into the front rank of the world’s giving nations. India has a World Giving Index rank of 133, below Bangladesh (109) and Nepal (115). According to Bain & Co’s 2012 report on Indian philanthropy, private charity contributions as a percentage of GDP are only 0.4 per cent in India, compared with 1.3 per cent in the UK and 2.2 per cent in the US. Philanthropy in India clearly is on the increase, but its progress has not been headlong or all-embracing.
Sanjiv Phansalkar ‘I do not see the volume of voluntary giving going up so much. Bukhari and the Bain group seem to be optimistic.’
Venkat Krishnan ‘The bulk of our giving goes unreported, especially giving by givers who are themselves at the bottom of the pyramid.’
India’s big givers
So who are India’s big givers? They are divided between two generations. First, the generation of business leaders and entrepreneurs who have been building businesses and creating wealth since liberalization in 1991. Their interests are now moving in the direction of social responsibility and development. Shiv Nadar, speaking at the London School of Economics last year, said that in the 1990s and early 2000s the businesses and wealth of his generation were new and philanthropy was not on their agenda. Now they feel a new confidence in their wealth and in their ability to turn their skills and experiences to social development.
The other generation is the children of these and other wealthy Indians. Many of them have returned from studying in the West and have been influenced by philanthropy practices there. They are bringing a more strategic perspective to their family philanthropy. The first generation since liberalization are increasing the quantum, the next are refining the approach; as they take over the family businesses, they are likely to end up giving more. According to Bain & Co’s report, 66 per cent of the 400 philanthropists they interviewed plan to increase their giving over the next five years.
Venkat Krishnan ‘The most important piece that this report doesn’t cover is “retail individual giving”, ie giving by people who donate $50-$100, not the major donors. In any country, this amount is actually the larger share of philanthropy.’
Luis Miranda ‘I do not think that old rich India gives much even today – a lot of talk but not much giving, except for a few like the Tatas.’
‘The data of 2010 is skewed by a couple of big donations.’
Philanthropy becoming more strategic
A number of fundraisers claim to have seen a real change in attitude, particularly when it comes to funding difficult issues such as human rights and women’s empowerment, and it seems that the wealthy have a growing sense of responsibility and are shaking off the old notion that social welfare is the government’s domain.
The slight dip in GDP growth in India from an average of 7 per cent to around 5.4 per cent this year might also encourage a ‘value for money’ approach, and we are starting to see philanthropists taking impact assessment, evidence, research and advice more seriously. If they are going to increase their funding in a time of economic uncertainty, they want to be sure they are making the right decisions.
Safeena Husain ‘People are becoming very data- and report-driven. We see many donors acting in groups, working together to figure out the best way to have a positive impact with their money.’
Venkat Krishnan ‘There is a greater tendency, among UHNI philanthropists and corporate foundations, to “do it on their own”, that is, set up implementing organizations rather than make grants.’
A higher profile for philanthropy
There has been increasing public and media attention to the subject of philanthropy: Dasra’s Indian Philanthropy Forum and GiveIndia’s First Givers Summit are now annual events, and the Bloomberg channel has programmes on philanthropy and social entrepreneurship. This is partly a cause, partly a result of a willingness among philanthropists to talk about their philanthropy and to be seen as role models. The Bain & Co report speaks of India as a nation of ‘quiet givers’. As recently as 2010, Aditi Kothari, who runs her family foundation, said: ‘I feel the Indian media have paid little attention to the subject. Philanthropists are perhaps partly to blame. People in India are reticent to speak openly about their acts of giving. … How will others follow if there are no role models to set the course?’ These things are beginning to change, albeit slowly.
The discretion with which philanthropy used to be practised had a dampening effect on the sector’s infrastructure. Philanthropy was kept within the family or the company, advice was not sought, sector benchmarking was not prevalent and collaboration was minimal. With increasing publicity, there is a developing ecosystem: philanthropy advisers are emerging, and online portals such as GiveIndia, Samhita and GuideStar India are encouraging accountability and awareness.
These developments have also helped to combat the notion that NGOs are unreliable recipients of philanthropy. Between 2011 and 2012, the Bain report saw a drop from 70 per cent to 53 per cent of philanthropists who mentioned lack of accountability among NGOs as a reason not to give to them. This year’s report also concludes that there would be a 26 per cent rise in giving if recipient NGOs were to invest more in impact assessment.
Amir Khan ‘Indian newspapers carry international news on a page or two tucked away somewhere inside. International issues are not important and therefore the major foreign examples of giving were not discussed in popular media.’
‘The 65 per cent of businesses that are owned by families in India had never trusted professional managers even to handle their businesses. This distrust runs into charity too; that money must be given only to family and friends and tightly supervised so it is not wasted.’
Luis Miranda ‘There is more talk in the media about philanthropy and CSR (led by the CSR Bill in parliament). This will mean more domestic flows to this sector.’
Decrease in foreign funding
The balance between foreign and local funding in India has changed. Between 2006 and 2010, local private and corporate funding increased to around half of all philanthropic funding. With the decision to accept aid only from the G8 countries and Europe in 2005, overseas development aid began to reduce; the UK’s Department for International Development, for example, is to cease grant funding to India in 2015. In recent years, a number of the big multilaterals have decreased their funding, some starting with a reprioritization of states, pulling out of South India and continuing only in a few northern states such as Bihar and Uttar Pradesh. Overseas foundations, too, are tightening their belts.
The decrease in international funding will mean that, despite the upturn in local philanthropy, domestic NGOs that have been dependent on international aid will need to improve their fundraising capacity. Sports events are encouraging the ‘run for charity’ model, and a number of local offices of international agencies such as Oxfam have slowly started to launch relatively successful local fundraising strategies.
There is, however, a dearth of fundraising talent in India. The Government of India’s Planning Commission has realized this lack and has helped to steer a partnership between Indira Gandhi National University and the Association of Fundraising Professionals in the US to launch a professional fundraising programme in India. It is also rumoured that the government is finally looking at a number of governance issues in the sector, among them the current state of affairs where the social sector and non-profits fall under the jurisdiction of several ministries rather than of one.
Luis Miranda ‘Foreign donations will slow down further because of the slowdown in the West (especially in Europe) and the notion that India is now a richer country and doesn’t need aid like it did in the past. Also regulatory hurdles have hit foreign donations in sensitive sectors like human rights and transparency, for which it is extremely difficult to raise money.’
Venkat Krishnan ‘There is a change in the profile of international funders – moving away from the Fords and Macarthurs, who gave unrestricted grants and didn’t tightly monitor grantee work, to the Gates and Dell Foundations, Omidyar Networks etc, who are more hands-on and significantly more metrics driven.’
Jayant Sinha ‘I don’t see the withdrawal of overseas agencies as a big problem. There will be some short-term upheavals, with some NGOs and programmes having to be wound up, but India has the resources and the capability to address these problems from within and has now reached a point of wealth where we can take on these problems at scale.’
Corporate social responsibility
An estimated 65 per cent of businesses in India are family owned and run. One of the consequences of this is that it is often hard to differentiate corporate from private family philanthropy. However, more formal CSR has increased in India over the past few years. Companies have increased their allocations and hired CSR professionals, and industry bodies such as the Confederation of Indian Industry have embraced the topic. Despite this, much CSR is seen as greenwashing and PR-motivated.
A potentially big change is under way, however. Late last year India’s lower house (Lok Sabha) passed a bill stipulating that 2 per cent of a company’s profit should go to CSR. However, the upper house has yet to pass the bill and it is facing strong opposition from a corporate lobby. Nor are civil society organizations all in favour. Rohini Nilekani, for instance, founder and chair of water and sanitation foundation Arghyam, argues that government should not ‘outsource its governance’. She also feels that making CSR mandatory will ‘straightjacket [it] in a way that may not necessarily yield the best results’.
Initial estimates are that the new bill could direct approximately INR 10,000 crore (US$2 billion) to the social sector (international aid is currently $2.8 billion). At the moment, though, any speculation about the effect of the Companies Bill needs to be approached cautiously. One of the main issues is that the bill does not stipulate how the money should be spent, nor what will count as CSR activities.
Sanjiv Phansalkar ‘There will be a lot of “giving without really giving”; that is, reclassification of what companies are already doing as CSR spends, as well as making financial claims without significant changes. Secondly, there will be a scramble for “causes within sight” so to say. Corporates being located largely in Mumbai, Delhi and Bangalore, work around these cities will attract a lot of corporate attention. But these are not places where the philanthropist’s rupee is needed.’
Trends that are relatively recent in other parts of the world are also gaining ground in India. Rockefeller Foundation’s recent report on impact investing, for example, says that India is the second biggest market for impact investing after the US. Interest in this area is likely to increase as philanthropists demand more value for money and as they begin to feel that their funding should build sustainability rather than provide a short-term fix. This is part of a general tendency to prefer enterprise to charity; DFID and USAID are both shifting towards a focus on private sector development. The sector acknowledges that there is a place for market-based solutions and also for alternative forms of capital, but is cautious about seeing them as a silver bullet.
Safeena Husain ‘There is a growth in impact investing but as donors go for very specific targets (locality, gender, age group of beneficiaries, etc), it is often hard for an NGO to qualify. The interesting thing with impact investing is that it focuses on specific areas that need improvement. It will allow us to tackle major issues in the long run.’
Why is philanthropy in India changing?
The question remains as to why philanthropy is changing. The easy explanation that the growth of philanthropy has followed the growth of the country’s economy seems to be only partly true. Sanjiv Phansalkar, for example, believes any relationship is ‘marginal’ at most. He notes other factors: the changes in the Companies Act, described above; the ‘attraction of a few “high pay-off” impact investment opportunities’ such as microfinance and taking over defunct urban educational institutes for their real estate value; and what he calls ‘flying geese behaviour’ – ‘if Gates does it, so should I’.
To the extent that there is a connection, it seems to have more to do with the nature of new wealth than with the fact of economic growth per se. Jayant Sinha notes an important distinction between old and new wealth in India. The old wealth comes from older established business families going back several generations. Though they often build hospitals and schools, they tend not to give away large chunks of money because they see it as needed to maintain their business dynasty and, in a sense, as held in trust for future generations of the family. The obvious exception here is the Tatas. The new wealth, by contrast, is by definition first-generation wealth. Its owners have made it themselves and see a corresponding right to dispose of it as they like. Most of them, notes Sinha, have also made their money very quickly. They are in their forties and fifties and see philanthropy as the next chapter of their career. He mentions the stock market capitalization of India’s top 100 companies, which created some $500 billion of new wealth, much of it going to first-generation entrepreneurs, which means ‘a significant pool of capital that can be deployed for philanthropy’.
This is also behind the changing nature of Indian philanthropy, Sinha believes. Rather than creating an isolated school or hospital, new generation philanthropists are looking at issues like education and healthcare more broadly. The growing interest in venture philanthropy, he feels, is at least partly explained by newly successful entrepreneurs taking their fortunes, energies and capabilities and applying them to social problems. The new generation of philanthropists think India ‘not only can solve its own problems, but should’.
Venkat Krishnan agrees that growing wealth, especially among a new entrepreneurially minded generation, has been a chief contributor to the rise of philanthropy. However, he also suggests another underlying and longer-term reason, what he calls ‘the lag effect of a more educated population’. India, he points out, invested heavily in basic literacy through the late 1980s and 1990s. The resulting educated adult population, the much bigger ‘middle class’, has different attitudes and expectations, among which is the expectation that the wealthy should give back to society.
The pressure to give back may also come from within what Amir Khan describes as ‘the new wave of large businesses in the services sector, professionally run even if family-owned’. Usually answerable to shareholders in New York and London, ‘they must answer difficult questions on child labour, malnutrition and suicide deaths when they make fancy presentations about India shining and growing’. As India’s growth continues and takes on the external market, he says, this pressure will only increase.
Alliance would like to thank the following for their contributions to this article:
Safeena Husain Founder and executive director, Educate Girls
Amir Khan President, Glocal University. Formerly senior policy advisor, Bill & Melinda Gates Foundation
Venkat Krishnan Founder, GiveIndia
Luis Miranda Involved with Centre for Civil Society, SNEHA and Samhita Social Ventures
Sanjiv Phansalkar Program director, Sir Dorabji Tata Trust and the Allied Trusts
Jayant Sinha Managing director and partner, Omidyar Network India Advisors
Alison Bukhari is director, Dasra UK. Email email@example.com