beyondbrics

Indian policymakers increasingly worry about the emergence of two Indias: an increasingly affluent elite – with strong links to the global economy and a rapacious hunger for ever more conspicuous consumption – and a massive impoverished under-class, whose health, education and nutritional levels are on par with the darkest corners of sub-Saharan Africa.

New Delhi is struggling to bridge that gap through its own social welfare schemes, but many Indians say increasing philanthropic giving by wealthy companies and individuals will also be crucial if the country is to overcome its profound social problems.

On the face of it, India does not far badly on the philanthropy front. Bain & Co has recently estimated that Indians together donate 0.6 per cent of GDP to charities, higher than charitable giving levels in other emerging markets like Brazil (0.3 per cent of GDP) and China (0.1 per cent of GDP), but still far short of the 2.2 per cent donated in the US.

But the details reveal that wealthy Indian are rather parsimonious when it comes to opening their wallets for their more downtrodden brethren. According to Bain, 65 per cent of all charitable giving in India comes from the government itself, mostly in response to natural disasters. Another chunk comes from foreign organisations. Just 10 per cent of the funding for charities in India comes from Indian individuals or Indian-owned companies.

Bain argues India’s wealthy can easily afford to give more – and should “absolutely” be doing so. It notes that the top 5 per cent of households control 40 per cent of India’s wealth, and the top one percent controls 16 per cent of national wealth. But among these privileged elites, there’s little inclination for giving

In Indian society, “charitable donations do not necessarily win social recognition,” Bain said in a recent report on the issue. “Instead, many of the newly wealthy view increased material wealth as the key to improving social standing.” Indian tax laws also offer little incentive for charitable giving.

Some Indian tycoons and companies – like Sunil Mittal of Bharti Enterprises and Azim Premji of Wipro – have set up foundations, particularly focusing on the crucial issue of education. Yet India’s wealthy will have to be far more generous if the gap between the two Indias is to narrow and not widen.