A philanthropy report has found that India’s super-rich has sharply reduced their philanthropic contributions despite a surge in net worth in the past six years, from the financial year 2015-16 to the financial year 2020-21. The tally of retail contributors, or individuals who give less than ₹1.5 lakh annually, has, however, swelled both in terms of their count and the size of contributions.
The report by consulting firm Bain and Company and Dasra, a non-profit venture philanthropy fund, gives an overview of social sector funding and the contribution of various stakeholders. In its executive summary, it aptly captures the gaps that remain.
Thanks to the huge economic growth in the past decade, India has become the fifth-largest economy in the world, but not all this growth has been inclusive. The gap between the top 1st percentile and the bottom 50th percentile has continued to widen. The Covid-19 pandemic has added to the woes, with more than 200 million Indians pushed into poverty. While social sector funding in India, primarily driven by the government, has grown by about 12 percent annually from about ₹10 lakh crore to about ₹17.5 lakh crore over the past five years, corporates must do more to help India dedicate about 13 percent of its GDP to social causes—almost double the current average of about 7 percent—to achieve its United Nations (UN) Sustainable Development Goals (SDGs) commitments by 2030.
The latest philanthropy report finds that people with a net worth of more than ₹1,000 crore or ultra-high net worth individuals (UHNIs) have scaled down their philanthropic contributions by about 40 percent to ₹12,000 crore in the last six years through March 2021. A major reason for this decline as a percentage of net wealth (excluding Azim Premji) is the steep increase in the wealth of UHNIs following Covid-19, says the report. The amount, meanwhile, has increased in the past six years, climbing 33 percent from ₹21,000 crore in the fiscal ended March 2015 to ₹28,000 crore in the fiscal ending in 2021.
Rich and Ungiving
The latest philanthropy report acknowledges the financial gains of the country in recent years. It found that the number of people with wealth of more than ₹1,000 crores has increased by about 20 percent from FY20 to FY21, while their cumulative net worth expanded by about 50 percent, from about ₹6 trillion to about ₹9 trillion during the period. The cumulative wealth of UHNIs in ₹5,000 crore plus bracket increased by about 80 percent.
The good news is that contributions by India Inc. under corporate social responsibility (CSR) mandates, meanwhile, rose during the period. The news will prevail, as total private philanthropic funding in India is forecast to grow at 12 percent every year over the next five years to touch ₹1.8 trillion by FY26, up from the flat growth of 8-10 percent seen in the last few years.
While total UHNI philanthropy spending has grown in the last two years, the allocation in comparison to their rise in net wealth has fallen, the report said. The only exception is former Wipro chairman Azim Premji. Family philanthropy, or donations through family foundations of UHNIs and HNIs, has also dipped to a third of total private contributions, from 37 percent in 2015 to 11 percent in 2021.
The authors of the study point out that the contribution of UHNIs’—comprises about 100 individuals—has been inconsistent every year, varying from close to ₹2,000 crore a year to ₹20,000 crore, over the last six years. The reason is individuals’ tendency to donate a large chunk of money at one go, and not follow up subsequently. About half of UHNIs have been consistent in their giving, while others “go in and out”, say the report authors.
In addition to being consistent, Indian philanthropists need to become bolder, lead with trust and look for new areas to fund, says senior philanthropist Rohini Nilekani. In 2020-21, Nilekani donated about ₹70 crore in her personal capacity, up from ₹58-odd crore the previous year, says the Rohini Nilekani Philanthropies website. In 2017, she with her husband Nandan Nilekani, co-founder of IT services major Infosys, signed the Giving Pledge, committing to donate half their wealth towards philanthropy.
Each of the 10 UHNIs, surveyed by Bain and Company and Dasra, donates between ₹50-100 crore a year, while the rest, donate ₹15 crores each per year on average. UHNIs from the technology sector were more generous with about 35 percent of total donations. This percentage is in stark contrast with their numbers in the total base, as they made only 8 percent of the total UHNI wealth in FY21.
One such philanthropist, Nikhil Kamath, in an interview, says that philanthropy makes sense in today’s world, as the wealth disparity among people widens. The co-founder of stock brokerage company Zerodha and India’s youngest philanthropist—according to the Edelgive Hurun India Philanthropy List 2021—has committed to donate a quarter of his wealth and ₹750 crore over the next three years along with his brother Nithin, another co-founder of Zerodha. “We are in a position to effect change, so philanthropy is prudent and necessary for us to undertake,” says Kamath.
On a global scale, the relative contributions of Indian UHNIs or giving as a percentage of net wealth ranged between 0.1 percent and 0.15 percent. This is far lower than the contributions of UHNIs in other countries such as China, where it has ranged between 0.5 percent and 1.4 percent. The figure ranged between 0.2 and 2.5 percent in the US and 0.5 and 1.8 percent in the UK.
Serve the Social Sector
The report found that India’s social sector expenditure as a percentage of GDP is less than neighbouring countries and other BRICS countries, and behind Organisation for Economic Co-operation and Development (OECD) countries (see Figure 1).
The research by Bain and Co. and Dasara (see Figure 2) has found that overall private giving (domestic and foreign) has stayed relatively flat over the past five to six years (low single-digit growth), even before the Covid-19 pandemic struck. Private foreign giving has contracted (from approximately a 26 percent share in overall private giving in FY 2015 to about a 15 percent share in FY 2021), while private domestic giving has grown at a moderate pace (8-10 percent growth year on year), aided primarily by CSR contributions.
Retail giving has grown marginally, but its overall share remains 25-30 percent in total private domestic giving. It is largely unorganised (peer-to-peer or community based) and, although growing overall, has the potential to become more organised.
Possible Growth Areas
The report predicts a 13 percent annual growth in family philanthropy till 2026, likely to be led by tech entrepreneurs and NowGen philanthropists or those from multigenerational philanthropic families.
CSR is another area where consistent growth is expected. The CSR contributions have already grown from 12 percent to 23 percent in the last six years, thanks to the government’s 2 percent legal mandate. in FY21 from 12 percent in FY15, in terms of total philanthropic contribution as well as the amount. The 2 percent legal mandate introduced by the government in 2014 has had a huge role in this with all companies now legally bound to give this percentage average net profit over the last three years to CSR.
The survey found that over 70 percent of firms gave less than ₹50 lakh each, though there has been a 15 percent increase in the number of companies in this bracket. A minuscule 3 percent contributed above ₹10 crore each in FY20. In 2015, the contribution of BSE 200 companies was more than 50 percent. It’s reduced now, with a greater number of smaller companies contributing to the CSR pie, said the report. The contribution from CSR is expected to touch 19 percent and form 32 percent of total private giving by FY26.