Giving as good as you get

Bill Gates' and Warren Buffett's visit to India, to encourage the country's richest people to pledge 50 per cent of their wealth to philanthropy, has shone a new spotlight on Indian philanthropy. In the US, 57 billionaires have followed Gates and Buffett in this "Giving Pledge" and signed away half their wealth. A recent visit by the duo to China apparently met with great success, with a small group of the ultra-rich Chinese making some "very generous" gifts.

After their visit to India, only G.M. Rao of the GMR group has committed Rs 1540 crore ($340 million) to his GMR Varalaxmi Foundation. Unless many more follow suit, the inevitable questions will be raised: Why do more of the Indian rich not give to philanthropy on the scale of Gates and Buffett, considering that there are some 69 Indian billionaires among the world's wealthiest?

It is undeniable that our wealthy can, and should, give much more than they do. According to a Bain and Company report, India's giving in 2006 totalled close to $5 billion which translates into $7.5 billion in 2009 based on gross domestic product (GDP) figures, assuming the rate of giving has remained steady. This is only 0.6 per cent of India's GDP. By contrast, Americans gave more than $307.75 billion or around 2 per cent of GDP to charity in 2009, in spite of the recession, a drop of only 3.6 per cent over the previous year. More notably, corporate giving actually rose in 2009 to $14.1 billion, as did giving for international causes (by 3 per cent, to $8.89 billion).

However, to compare our philanthropy, dollar for dollar, to the American way is simplistic. Firstly, US philanthropy is exceptional and outstrips that of other developed countries. Secondly, philanthropic giving is not just a matter of writing multi-digit cheques, it is complex. Large-scale philanthropy, unlike individual charity, is a function of several factors history, the socio-economic-cultural environment, the political and ideological underpinning of governance, fiscal policies, pressure from civil society and the opportunity for large-scale philanthropic investment. Our context, motivations, and philanthropic preferences are substantially different.

India, in fact, has a rich history of giving. One has only to look around our cities to realise how much has been contributed by our wealthy to society, in the shape of endowed institutions and social infrastructure of all kinds. Jamsetji Jeejibhhai was perhaps the only businessman in India's history on whose death Mumbai came to a standstill, with flags flown at half-mast in tribute to his munificence. More recently, many leading Indian business leaders have contributed generously to philanthropy, though the really substantial contributions in recent times have been to institutions abroad to Harvard and Yale Universities by Ratan Tata, Anand Mahindra, N.R. Narayanmurthy, and Nandan Nilekani of $50 milion, $100 million, $5.2 million and $5 million respectively. The only outstanding philanthropic contribution for Indian causes has been that of Azim Premji, of approximately $2 billion, to his foundation to promote education in India. However, even this awesome donation is estimated to be only around 10 per cent of his personal wealth.

The reasons for the disparity in scale between Indian and American giving have to be sought deeper. Americans have always valued private initiative, and have jealously guarded against encroachments by the state. Social provision through private initiative was thus both a need and an obligation, encouraged by the state through tax laws. With inheritance tax rates of nearly 46 per cent for large estates of more than $2 million, it made economic sense for wealthy individuals to endow private foundations for charity before their death. There has never been an inheritance tax in India.

The colonial government followed laissez-faire policies and easy taxation of the rich, and expected and encouraged the wealthy to make up the social deficit. The consequence was flourishing philanthropy for social reform and progress, to which the growth of nationalistic feeling and Gandhi's influence also contributed. But independent India arrogated the obligations of bringing development and an equitable society to the state. India's planned, mixed economy, steep taxation, and control of profit-making as well as profit-distribution precluded a large role for philanthropy as an engine of social progress.

However, even with the most encouraging of state policies, the rich in India may still not give away half their wealth during their lifetime, simply because our philanthropic preferences are different. Family and kin ties are stronger here than in America. Wealthy business families in particular tend to have joint families and extended kin networks. While many American philanthropists have publicly stated that they would rather that their children made their own way in life, wealthy Indians prefer to leave their wealth to their children. Add to this a feudal mai-baap or noblesse oblige culture, and a strong religious influence. Even distant relations, dependents, servants, or religious organisations are preferred to an impersonal organisation.

A desire to control their philanthropic resources, rather than to adopt the more arms-length philanthropy characteristic of American foundations, and the lack of suitable opportunities that can absorb resources on the scale envisaged are cited as other reasons for not giving as much as half of one's wealth to independent organisations.

Moreover, large-scale philanthropy has always been used by Americans to win friends and influence people internationally . It is only now, with globalisation of Indian business, that the Indian rich are making contributions abroad and partly, this is a branding exercise. Finally, as Gates and others have acknowledged, it takes at least two generations of wealth in the family to feel secure enough to give it away. Large-scale philanthropy from the new super-rich will, possibly, come later.

If we want our rich to part with their wealth for the larger society, we must give philanthropy the status and recognition it enjoys in America, and facilitate the giving of large sums to needy causes and organisations by creating an enabling environment and infrastructure.

The writer is founder and former director of the Delhi-based Sampradaan Indian Centre for Philanthropy

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