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An overview of philanthropy in India

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Open HandsNEW DELHI: A huge charity gift by a high-tech tycoon has shone a harsh light on the philanthropic track record of India’s established and emerging billionaires. Azim Premji, who transformed a family-owned cooking oil firm into the software giant Wipro, announced earlier this month that he was giving $2bn to fund rural education.

The 100 wealthiest Indians have a net worth equal to 25 percent of India’s GDP and Premji’s donation – by far the largest ever made by an individual – was seen as a challenge to others in the ultra-rich club.

While charitable giving by the wealthy is widespread in countries like the United States, it is far less established in developing nations such as India and China.

Arpan Sheth, author of an overview of philanthropy in India by global consultancy Bain, says the charitable potential of the world’s second-fastest-growing major economy is huge.

“Should individuals (in India), particularly the well off, be giving more? And can they afford to make more and larger donations? The answer to both questions is, ‘Absolutely yes’,” Sheth said.

India’s booming economy – expected to grow 8.5 percent this year – minted 17 new billionaires in 2010, driving the national total to a record 69, according to Forbes magazine.

Two Indians, Lakshmi Mittal and Mukesh Ambani, currently figure in the top five on the Forbes list of the world’s wealthiest individuals.

But philanthropic activity has failed to keep pace, partly, Sheth believes, because the rapid accumulation of individual wealth is a still a relatively new phenomenon.

“We have a history of scarcity and so it takes a while to build confidence that the future will be better on a sustainable basis and let go of newly earned wealth,” Sheth said.

Ambani’s father was a rags-to-riches tycoon, who started off as a small-time textiles trader and went on to found and build Reliance Industries – now India’s largest private sector firm.

There is also a suspicion that charitable networks in India are not professionally managed and so donors fear their contributions “won’t be put to good use or are at risk of being misappropriated,” Seth said.

The Bain report noted that it normally takes 50 to 100 years for a culture of philanthropy to emerge, and Sheth stressed that charitable giving in India had yet to attain the same social cachet it attracts elsewhere.

Wipro’s Premji, known for his frugal lifestyle, said conspicuous consumption was common in countries climbing the wealth ladder.

“You see it in China, Indonesia, Singapore, Thailand. For the first few years, people want to show visibly they are very rich,” he said.

In India, individuals and companies account for just 10 percent of charity funding, compared with 75 percent in the United States.

Traditionally, so-called “old money,” embodied in the likes of India’s 142-year-old Tata Group conglomerate, has focused on promoting the welfare of workers, with healthcare and housing.

Other big Indian business houses gave money for building Hindu temples and other religious causes. Rich individuals also helped in their family villages by building schools and wells.

But according to philanthropy expert and former New York investment banker Deval Sanghavi, there are signs of donors widening their horizons and looking to tackle India’s education, health and other problems on a macro level.

Together with his wife, Sanghavi runs the Dasra (Enlightened Giving) foundation, helping donors pick charities which can use their money best.

Sunil Bharti Mittal, founder of India’s largest mobile company, has set up 237 schools to educate the poor, saying he wants to help children break out of the “generational poverty cycle.”

And global charities working in India, like Oxfam, have begun soliciting funds locally and not just overseas.

The need for charitable funding in India is self-evident.

Some 42 percent of Indians, or 455 million people, live on less than $1.25 a day, according to the World Bank and India’s statistics on health, infant mortality and malnutrition are worse than those for sub-Saharan Africa.

But there’s little sign yet of India’s rich taking “The Giving Pledge” — an initiative by Microsoft co-founder Bill Gates and billionaire investor Warren Buffet that asks the wealthy to donate half their fortunes to charity.

The duo organised a dinner for China’s mega-rich last September and say they may host a similar event in India early next year.

Billionaire Shiv Nadar, the founder of tech giant HCL who pledged in June to give $130m to education, believes India’s rich are still not ready to embrace the Gates concept.

“When it comes to giving, there aren’t many people who will happily give away even one percent” of their wealth, he said.

You can read the Bain Stury Please visit www.bain.com/bainweb/PDFs/cms/Public/India_Sheth_Speech.pdf

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Posted by on Jan 5 2011. Filed under Philanthropy. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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