History

Philanthropy in India is as old as the spiritual foundations of the country. The Rig Veda, the ancient Hindu scripture, dating back more than 5,000 years, has a chapter devoted to charity. The concept of 'daan' (giving or donating) is also centuries old, its practice taking many forms, including volunteering and giving food or clothing.

India’s population embraces all of the world’s major religions, which has helped shape the pattern of its charitable giving. Although major changes are afoot in Indian society, most giving still takes place through the country’s temples, mosques, gurdwaras and churches − and many Indians still give in accordance with the tenets of their religion. Furthermore, with a weak government infrastructure for social welfare, many Indians and the Indian diaspora have often given informally to those in need in their extended family, staff and workers in their business and even to those from their villages or communities. These type of informal gifts can amount to substantial sums and continues today.

In the 19th and early 20th centuries more organised forms of giving began to appear. In 1860, for example, under the British Raj, the Societies Registration Act was passed, allowing seven or more people in any literary, scientific or charitable association to register as a society.The Sir Ratan Tata Trust, one of the country’s first grant-making public foundations, was established in 1919. Other family foundations – including the Godrej, Birla and Bajaj foundations – were set up before the country’s independence in 1947.

After independence, the Indian republic’s socialist policies meant that government initiatives, rather than private efforts, were expected to provide for the needs of citizens. Philanthropy developed less rapidly as a result.

Yet during this time the Indian diaspora played an important role in contributing to Indian society through philanthropy, particularly in establishing hospitals, schools and colleges around the country. Many were established to express their gratitude to the country of their birth and to share their good fortune.

A relaxation of tax levels since the 1990s, together with an economic boom, laid the foundations for the growth in Indian philanthropy over the past two decades. Indeed, 62% of all foundations in India have been founded since 1990[1].

The current landscape

Giving in India today

“A nascent sector, with enormous room for growth and tremendous promise”[2].

While economic growth may have slowed of late, India’s rapid expansion over the past decade has led to a significant increase in personal wealth. According to the CapGemini Asia-Pacific Wealth Report 2015[3] Asia-Pacific is now home to the world’s largest population of high net worth individuals (HNWIs), with 4.7 million, having overtaken North America. India’s HNWI population boomed to 198,000 in 2015, with total wealth of over $785bn.  

There has also been an increase in giving among the wealthy. As Bain’s Philanthropy Report 2015 revealed, India’s donors are contributing more and donating to a larger pool of non-profit organisations. More than a third of donors indicated that they expect to increase their donations in the next five years[4].

Bain’s research found that in 2009, only 14% of the adult population across India donated cash, and some 12% donated time – by 2013, this had increased to 28% and 21% donating money and time respectively, which means that more than 100 million Indians were contributing.

The research also highlighted that India is ahead of comparable developing countries in terms of the proportion of its population making charitable donations. India is now ranked 69th on the World Giving Index, having moved from the bottom to the middle of the pack[5].  

Who gives and what do they give to? 

And it’s not just the very wealthy who give. According to the Charities Aid Foundation (CAF) World Giving Index 2014[5], more Indians donate money to charity in a typical month than anywhere else in the world, with 249m Indians giving in 2014 overall.

Reflecting India’s steepest development challenges, the most highly supported causes are health and education. Donors in two recent reports[6] gave these two areas top billing, while in one[7] there was also a marked increase in the provision of even more basic items, like food and clothing.

Corporate giving

Corporate giving is a growing source of Indian philanthropy. Until recently, only public sector undertakings (PSUs) were legally obliged to set aside a percentage of their profits to invest in the social sector. The government, while seemingly wanting to encourage greater corporate social responsibility (CSR), tended to be reluctant to impose this obligation on the private sector.

However, the country’s Companies Bill 2011[8], which became law in August 2013, imposed CSR duties on companies that meet three criteria:

-         a net worth of more than  INR 500 crores ($82,950,000)

-         net profit of more than INR 5 crores in a year ($829,500)

-         turnover of INR 1,000 crores ($165,900,000)[9]

Every company that meets these criteria over a financial year now has to form a CSR committee, comprising of three directors of the company’s board. In addition, they must spend a minimum 2% of their last three years’ average net profits on CSR policy. Only CSR activities conducted in India are considered eligible and companies should also give preference to their local area[10].

If a company fails to meet these duties, the board must provide detailed reasons why in its annual report. Some argue that this offers companies a way out. But the government, which has been urged to close this loophole, is reluctant to make the 2% mandatory, countering that the broad objective is to instil the spirit of CSR in the corporate sector.

With provisions from the new law having taken effect from 1 April 2014, corporate giving looks set to boom. Some reports have suggested that it could increase corporate donations by INR 8,000-10,000 crores (US$132,750,000 – US$165,900,000) in the financial year 2014–15. Reports issued in 2016 will begin to provide details on how this is developing. However, there are concerns in some quarters that the legislation may result in a concentration of CSR funding around Indian business centres such as Chennai and Mumbai, and potentially neglect more rural areas.

· Family-owned businesses and philanthropy 

Like many other countries, family-owned businesses dominate the corporate landscape in India. Business families typically adopt one or more of the following approaches to their philanthropy, depending on their primary goals.

· Establish a family foundation, managed by the family

In addition to making a difference to the causes they care about, the foundation can also help achieve family objectives, such as providing a forum for the family to discuss and live their values, preparing the next generation for wealth and working together in the business, and enhancing the family’s legacy and reputation. The family foundation can also provide important roles for family members not working in the business. These foundations are typically funded by dividends received by the promoter family.

· Channel philanthropy through CSR activities

This approach to philanthropy, funded by the business, tends to be focused on making a difference to the communities that are important to the business, enhancing staff morale and helping the firm’s workers and their families.

· Combine family and corporate CSR activities

This hybrid model, which is becoming more common in India, combines both family and business objectives, where the promoter family may establish a charitable foundation or trust which is funded by profits from the business. Charitable activities supporting causes dear to the family and the business are led by members of the promoter family and managed by staff from the business.

There is no one right model. The decision over which one to implement is largely determined by the objectives of the business family and the source of funds.

The future

Trends and opportunities for Indian philanthropy

"There are risks in every action. Every success has the seed of some failure. But it doesn't matter. It is how you go about it. That is the real challenge."
Ela Bhatt, a pioneer in women’s empowerment and grassroots development, founder of the one-million-strong Self-Employed Women’s Association in India.

Although India and Indian philanthropy have both made rapid strides over the past ten years, much remains to be done. The country still faces many development challenges.

· 22% of India’s population remains below the poverty line with incomes of less than $1.25 a day[11].

· India ranks as 167th in the world for government spending on healthcare with an allocation of only 3.9% of GDP, behind all other BRICs countries (Brazil, Russia and China)[12].

· More Indians have a mobile phone (53.2%) than have lavatories in their home (46.9%), according to a recent government census[13].

Although giving in India has increased at a faster rate than in any of the other BRIC economies – with 3.1% of income donated in 2011 – the potential for philanthropy to grow and develop further among wealthy Indians remains significant. There are a number of encouraging trends and opportunities worth noting. These include:

Emergence of philanthropic leaders

Indian cultural norms regard philanthropy as something to be done privately – publicising your philanthropy is often frowned upon.

But a number of philanthropists are beginning to change this tradition. The more people that become comfortable with speaking publicly about their causes, the more this will inspire others to become philanthropists.

Another encouraging trend is the interest from the Indian media, which is writing about the work of individuals, the impact they make and the new approaches to philanthropy. This development, together with the emergence of awards for philanthropists that recognise their contributions, is also encouraging donors to be more open.

Increased collaboration among philanthropists

There are significant benefits to be gained from philanthropists communicating and working with each other. In 2010 Dasra launched the Indian Philanthropy Forum, which has increased discussion among philanthropists and created opportunities for collaboration through its giving circles.

A Dasra giving circle is made up of ten Indian Philanthropy Forum members (based in India or the UK) who pool their funding of INR10 lakhs ($16,590) each annually, for a period of at least three years, and collectively decide on grant disbursements to a non-profit organisation.

Meanwhile, diaspora organisations such as the British Asian Trust offer philanthropists new forums in which to come together and make a collective difference to specific causes.

Improving research and information about NGOs 

India has a vibrant civil society and there are a vast number of NGOs – one estimate puts it as high as 3.3m. These organisations undertake an array of activities to improve the lives of the most vulnerable Indian citizens.

But not all NGOs are the same. Some are effective, accountable and well managed, while  others are not. The challenge is that there is no single reliable source of information on NGO activities. This makes it difficult for philanthropists to decide which organisations are trustworthy and effective, or even to find out which ones are working in their areas.

Donors in India value transparency, impact and low overheads above all else when it comes to non-profit organisations, and they are increasingly cause-oriented – which means they provide consistent funding to the organisations they support and become involved beyond the giving of funds[14].

Almost two thirds of NGOs surveyed by the India Philanthropy Report 2015 felt that there was a need for greater collaboration among different stakeholders in the philanthropy space, leading to greater efficiency and the sharing of best practice.  

Developing a more strategic approach to philanthropy

According to Dasra, more than half of India’s private philanthropy is informal and given from individual to individual or through unregistered community organisations. But encouragingly, while reactive or more emotive philanthropy will always be important, strategic impact-focused philanthropy is emerging as a key characteristic of India’s developing philanthropy landscape.  

With a developing ecosystem of advisers, researchers and commentators, Indian philanthropists are becoming more aware of the role they can play in solving problems and making a difference.

Some characteristics of strategic philanthropy include funding ‘upstream’, where philanthropists look to tackle some of the root causes of any given problem. Other characteristics include collaboration between funders, enhancing the sustainability and impact of organisations supported, and establishing formal structures and endowments.

Establishing foundations and building endowments

As philanthropists become more thoughtful or strategic in their work, they also tend to establish more formal structures for their philanthropy. More than 40% of charitable foundations in India have been established in the past ten years or so, according to a study on family philanthropy in Asia[15].

Looking ahead, we anticipate that many philanthropists who want their philanthropy to be significant in scale and conducted over a number of years – perhaps even in perpetuity – will consider establishing an endowment for their foundation. The Coutts publication In perpetuity or limited lifespan: how do charitable trusts and foundations decide? (available on request) provides more insights about decisions associated with establishing endowments over different timeframes.

Growing philanthropic leadership among younger philanthropists 

A younger generation of philanthropists is emerging, both in their own right and in established family philanthropy foundations. They are seen to be driving many of the current changes, tending to adopt a strategic approach and often bringing greater professionalism to the sector, among both donors and recipients.

They are also partly behind the growing attention to understanding the impact of philanthropists, the rise of online giving and the increasing amount of information available on the non-profit sector.

A developing social enterprise sector and opportunities for social investment

A social enterprise is “a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners,” according to the DTI, 2002[16].

The social enterprise sector is a huge area of growth in India. Around a third of families (36%) interviewed in a recent study consider social entrepreneurship the most important trend for the future[17].

The sector is young and dynamic. According to the Social Enterprise Buzz website18, nearly half of the country’s social enterprises have been operating for less than two years. They are also generally small: the annual revenue for over 90% is $500,000 or less. Over the past decade, the scope of social enterprises and impact investors in India has expanded beyond financial services and agriculture to include sectors such as renewable energy, sanitation and health.

The development of social enterprise in India also brings with it opportunities for social investment, also known as ‘impact’ investing. Broadly speaking, social investment involves proactively investing in organisations that seek to generate financial, social and/or environmental returns. So in addition to the provision of grants, some philanthropists are seeking to provide alternative forms of finance, where appropriate, to organisations, including loans, equity or patient capital.

Although social investment in India is still in its early stages, it is gaining ground, especially as the number of investment-worthy social enterprises grows.

Broadening the scope of causes supported

There will always be causes that are deemed more popular than others. For Indian philanthropists these tend to be education, health, water, faith-based causes and basic needs like food, as they are not contentious and can produce tangible results.

On the other hand, issues such as human rights tend to be neglected as they can be deemed too risky. But there are indications that philanthropists are beginning to consider a wider range of causes in response to growing donor interest in India and among the diaspora on rights-based subjects such as violence against women and the trafficking of children.

[1]    Article: Philanthropy Impact, Myths and Magic: philanthropy impact in India 2013 (12                 March 2013)

[2]    Arpan Shenth (March 2012) India Philanthropy Report 2012, Bain & Co. 

[3]    The World Wealth Report 2012, Capgemini and the Royal Bank of Canada

[4]    Arpan Shenth, Dinkar Ayilavarapu and Anant Bhagwati, India Philanthropy Report 2015,             Bain & Co.

[5]    CAF World Giving Index 2014

[6]    Bain & Co, op cit (2012),  UBS-INSEAD Study on Family Philanthropy in Asia, 2011

[7]    Bain & Co, op cit (2012

[8]    Ministry for Corporate Affairs, Corporate Bill 2011

[9]     INR – USD exchange rate used 1 INR = USD 0.016590 (17/06/2014)

[10]    Ministry for Corporate Affairs - CompaniesAct Notification 2 2014

[11]    UBS-INSEAD Study on Family Philanthropy in Asia, UBS 2011

[12]    CIA World Factbook, 2012

[13]    CNN International, 18 September 2012

[14]    Bain & Co, op cit (2015)

[15]    UBS-INSEAD op cit

[16]    Department for Trade and Industry: A progress report on social enterprise. October 2003.

[17]    UBS-INSEAD op cit

[18]    www.socialenterprisebuzz.com/exploring-indias-social-enterprise-landscape