The State of Philanthropy in India

According to a research paper by Thomas Piketty and Lucas Chancel, income inequality in India has been at its highest level since 1922. A study by OECD stated that India has a ‘heavy concentration of wealth’ and has ‘become less equal over time’. Another report by Oxfam stated that India’s richest 1% now hold 58% of the country’s total wealth, which is higher than the global average of 50%. In such unequal times, India could make good use of philanthropy. Philanthropy can roughly be defined as a charitable giving towards a social cause on a large scale. It differs from donating by being a long-term and strategic effort to increase social welfare through willfulness of personal individuals or groups. Thus, it redistributes resources in the economy between the richest and the poorest and consequently narrows existing income disparity in countries like India. Although philanthropic activities are generally carried out by private players, the state can often intervene to facilitate, promote or mandate such activities.

The socio-economic factors in India have traditionally put significance in the act of giving. A working paper by Caroline Hartnell states the importance of values and religion in giving in India, with the prevalence of concepts of dana (giving) and dakshina (alms) in Hinduism, bhiksha (alms) in Buddhism and sadaqaat (voluntary offerings) in Islam. Pushpa Sundar, in her book ‘Giving with a Thousand Hands: The changing face of Indian philanthropy’, states that India is not behind in terms of charity, but widespread informal giving doesn’t find its way into surveys; she also states that India is lagging behind in terms of philanthropy.

However, the Director of CSIP at Ashoka University, Ingrid Srinath, stated that the bulk of philanthropy in India is still religious and goes to locals and ethnic groups, with ‘substantial sums’ being used for ‘faith-based work’ and ‘welfare of particular communities.’ This creates a paucity of resources for large-scale and long-term projects. She also believes that despite being a developing country, ‘we certainly have the ability to increase our quantum of giving at higher and mid-income levels’. Apart from individuals, the corporate sector has been giving too. Radhika Ralhan, an adviser at CAF, India, states that corporate philanthropy has long been incorporated in the Indian culture, with transactions being guided by philanthropic principles prescribed in religious and ancient texts and often by leaders like Gandhi, who propagated trusteeship. This meant informal giving practices by the business class, along with employee volunteerism and workplace giving.

Later, the Indian Companies Act 2013 was amended to mandate spending at least 2% of the average net profits under CSR (Corporate Social Responsibility) every year by companies that earn net worth and profits above a particular value; they also had to set up a CSR committee and disclose all CSR activities. The mandatory nature of the policy did increase expenditure by many companies, while some had already been donating the floor amount. Out of all sectors, education and healthcare comprised of the maximum CSR expenditure. Despite this compliance, however, the relative share of corporate contributions to philanthropy has fallen from 30% to 15% while individual donations have seen a six-fold increase in 2011, indicating a change in the characteristics of philanthropy in India. Hari Menon of the Gates Foundation states that many of the new givers are first-time entrepreneurs, who bring intellectual, social and financial capital with them.

Sonvi Khanna, a manager at Dasra, too believes that attitudes towards CSR are changing; in family businesses, younger generations are questioning their parents’ take on philanthropy. The law is motivating them to give away more personal capital and corporate philanthropy is being increasingly perceived as a strategy to lever social impact rather than a tax liability. However, she also believes that an “impact-oriented, strategic and sustainable philanthropy outlook” still needs to be incorporated while planning and executing CSR. Why is the current structure unable to do so?

The problem lies in the fact that companies don’t necessarily have incentives to see CSR as a philanthropic measure that must facilitate actual social impact. Therefore, even though the mandate makes them spend on social causes, the incentive to assure the translation of this expenditure into actual social impact is absent. After having worked with companies that now have to spend on CSR due to the mandate, Sumitra Mishra says, ‘Companies hate the law; they can’t believe the audacity of asking them to spend 2% of their money they have worked so hard to earn. How do you excite people to think of this as an investment?’ Although this argument cannot be generalized, it cannot be ignored either.

The 2012 CAF report had suggested that philanthropy has become more efficacious due to the application of innovative approaches of the business sector, with focus on scale, efficiency and impact measurement. Given these positive changes, an additional personal incentive to ensure impact can gravely and promptly address social hindrances in India. This incentive can be brought about by introducing new policies, such as impact investment, social and developmental impact bonds and venture philanthropy.

Should the government be involved in philanthropy actively? Hari Menon from the Gates Foundation states that ‘the government has the most dominant presence in terms of service delivery and the biggest pocket of resources’ in India. Thus, he rightly believes that working with the government is necessary to have a long-term social impact. The private sector in India, according to Menon, has improved philanthropic connectivity and distribution but lacks collaboration amongst sectors, which is a defeatable problem if the government, private sector and non-profit bodies work inclusively in tandem.

Thus, the ongoing change in the nature of philanthropy in India must be catalyzed by the private sector through effective facilitation and fund collection, by the government through better social and philanthropic narratives and use of existing structures for efficient distribution, by non-profit organizations through recognition of existing hindrances and enabling of long-term planning and by each individual through more donation and holding accountable the aforementioned bodies for measurement of tangible change. Apart from aiming to achieve substantial and sustainable social impact, income inequality must be reduced from the only to one of the many concerns of philanthropists in India.

Picture Credits : gordonfischerlawfirm

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