New Delhi: New information presented by consulting firm Bain and Co. at the India Philanthropy Forum, reveals that while high net worth individuals (those with approximately $1.5 million) in India have grown at about 11% per year since 2000 to over 115,000 currently, charitable giving in India is still pitifully low. According to Bain, charitable giving amounted to just 0.6% of the India GDP in 2009 or $7.5 billion.
Bain partner, and presenter at the India Philanthropy Forum, Arpan Sheth points out that India’s wealthiest “have the capacity to be more active givers.” For one thing, in India the wealthiest one percent of the population controls about 16 percent of national wealth. For another, according to Sheth, generosity does not necessarily rise with income and education. India’s wealthiest have the lowest level of giving compared to other economic classes surveyed, at just 1.6% of household income.
As opposed to the US, where 75% of charitable giving is from individuals and corporates, in India this figure stands at just 10%. Most donations — 65% — come from the Indian government and foreign organizations. Only 10% comes from individuals and corporates.
Sheth points to what he believes are the three major factors constraining charitable giving in India. The first relates to a belief about new wealth: “Today in India, many of those with hard-earned new wealth are not eager to part with even a small amount of their money. As a society, charitable donations do not necessarily win social recognition. Instead, many of the newly wealth view increased material wealth as the key to improving their social standing,” says Sheth.
A second factor relates to donor worries that support networks are not professionally managed and hence their contributions will be misused. Finally, Sheth also points to the fact that since many businesses are family run in India, the line between corporate social responsibility (CSR) and individual giving is blurred, individuals believing that CSR initiatives are extensions of their own giving.
Solutions Sheth outlines include helping to increase the functioning of donation-support networks as this will in turn strengthen donor confidence, as well as establishing private foundations — these have proved to have a significant impact on poverty alleviation in other countries. He also underscores the need for nonprofits to become more transparent and effective in their functioning, and highlights the role of government in removing obstacles that discourage philanthropy- such as the current tax deduction structure and the cumbersome bureaucratic process required to obtain tax exemptions.