The Challenge of Indian Philanthropy

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Bill Gates and Warren Buffet’s visit to India last week opened Pandora’s box on Indian Philanthropy. As they came to present their Giving Pledge, the two icons of American Philanthropy wrote in a letter to the Times of India that “[w]e do not come as preachers, but more like cheerleaders. And first and foremost, listeners.”

A few precautions taken to deter any repeated accusation of failure after their trip to China in 2010, and that have proven useful considering the lackluster welcomes high net worth Indians gave the Giving Pledge.

The only progress was GM Rao’s announcement last week that he would give all his shares, evaluated at $340 million, to the GMR Varalakshmi Foundation. Yet the CEO of GMR Groups, one of the biggest Indian infrastructure organizations, claims that this had nothing to do with Gates and Buffet’s trip, since he has already been giving for years – which throws us back to the core of the debates that has taken over Indian and American media in the past few days: are Indians philanthropists?

$246.5 billion in 2011

According to Forbes Magazine, India has 55 billionaires, with a combined growth of $246.5 billion in 2011. Two of them, Mukesh Ambani, CEO of Reliance Industries, and Lakshmi Mittal, CEO of ArcelorMittal, are in the top 10. And this wealth does not go unseen: a $78 million wedding for Mittal’s daughter at the Versailles Palace; a $2 billion residential skyscraper for Ambani and his family in Mumbai – a world record.

While there is a total of 400 million poor people in India who live with less than $1.5 a day, this lavish opulence raises hackles. Even more so since it seems that Indian billionaires do not make good philanthropists. According to a study by Bain & co from 2010, philanthropic donations amounted to 0.6% of India’s GDP versus 2.2% in the U.S. And the richest are those who give less, in an economic and political climate where, paradoxically, India’s richest are becoming richer.

A tradition of philanthropy

And yet, Indian philanthropy is not new. Giving is an integral part of Indian culture, with almost 50% of donations that goes to religious institutions. Also, Corporate Social Responsibility increasingly became the royal road for giving, with an old tradition of big family companies establishing foundations that are directly associated with the companies.

The most telling example is that of the Tatas: the CEO of a company that makes $55 billion in revenues, Ratan Tata isn’t on Forbes’ List of Billionaires. The reason? He only owns 1% of the shares of Tata Group, while 65.8% belong to two Charitable Foundations – Sir Dorabji Tata and Allied Trusts and Sir Ratan Tata Trust – that were both created at the beginning of the 20e century and which fund a number of NGOs in education and health, amongst other things.

But there are also numerous recent examples, with foundations that often bear the names of their benefactors and focus on education: the Bharti Foundation created in 2000 by Sunil Bharti, the telecom tycoon, the Azim Premji Foundation, established in 2001 by the CEO of Wipro Ltd, or even the Shiv Nadar Foundation founded by Shiv Nadar and which led to the creation of the SSN College of Engeneering in Tamil Nadu, as early as 1996.

A recent wealth

If, at 0.6% of their GDP, India beats Brazil (0.3%) and China (0.1%) in their giving, it’s still the quantum of giving that bothers. “We are at a different economic and cultural stage,” explains Rohini Nilekani, one of the most active Indian philanthropists. Indeed, a great part if India’s billionaires are newly wealthy and it is often rare that a recent wealth translates into high-level philanthropy. Even the Giving Pledge has failed to bring a big amount of new givers, since most of the signatories had been committed to give forward their wealth for a long time. “Warren Buffett only pledged to give away his wealth four years ago – and he’s been rich for longer than that,” comments Deval Shanghavi, who organized the first Indian Philanthropy Forum in 2010.

Indian philantrocapitalism

Thus, it is only recently that the newly wealthy are making bigger gifts. Azim Premji, India’s third billionaire and the CEO of one of the largest software companies that employs around 120 000 people in the world, committed to give $2 billion to his Foundation in 2010.

The same year, Ratan Tata and Anand Mahindra respectively made a $50 million and a $10 million gifts to Harvard University, which, despite some criticism that this gift didn’t directly benefit India, is widely seen as the sign that philanthropy is taking a new turn.

But the structure of Indian philanthropy seems to be changing too. Sanghavi is also the CEO of Dasra, an NGO created in 2000 that has been promoting strategic philanthropy, a philanthrocapitalism ahead of time: “ Accepting to give to NGOs that are outside their realm of friends has already been a strategic change. No more “oh, this is my Mama’s [uncle in Hindi] NGO, we have to support it” kind of behavior. In India, most of the family foundations would also run a school or a hospital from day one and the typical businessman thought he’d run it when he retired. That is also changing.”

After all, the recent debates seem to have focused more on the actual possibility of a Gates and Buffett-like philanthropy. Sanghavi adheres to this new philanthropy that takes the skills and methods of private equity funds – accountability, scalability, efficiency – and adapts them to the realities of the NGO world. “It is going to work – billionaires can relate to this model because they became billionaires by following it."

Far from an intrinsic aversion to philanthropy, the new high net worth Indians seem to be in a process of adapting to this new wealth, and of discovering different ways of giving. Gates and Buffett’s trip certainly helped further open up the debate on Indian philanthropy and the second edition of the Indian Philanthropy Forum in June 2011 will be the chance to see how quickly Indians want to break with their reputation.

Photo Credit : Meha Desai

This article was initially published on March, 30, 2011.

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