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  1. Wealth
March 13, 2013

Why Don’t India’s Rich Do More for Charity?

By Spear's

Philanth-rupee India’s wealthiest citizens may be rising forces in the new world order, but their charitable giving is lagging behind. Sophie McBain looks at the measures being taken to end this subcontinental thrift


India’s wealthiest citizens may be rising forces in the new world order, but their charitable giving is lagging behind. Sophie McBain looks at the measures being taken to end this subcontinental thrift
THE PURRING ANTIQUE wooden fans can coax the most stifling city heat into a cooling breeze, and there are a dozen uniformed waiters on hand to deliver sweating glasses of fresh lime soda or pots of tea, or to chase off opportunistic crows, and heavily cushioned rattan armchairs to sink back into.

Here, at the poolside cafe at the Taj Mahal Palace Hotel, it’s almost impossible to imagine that beyond the high garden walls lie the chaos and stink of downtown Mumbai.

The Taj has provided a haven for wealthy Mumbaikars for over 100 years, but in the two decades since India’s economic liberalisation the lives and fortunes of the country’s wealthiest have drifted even further away from those of ordinary Indians. The statistics are astonishing. In 2003 India’s billionaires owned around 1.8 per cent of the country’s economy, but by 2008 this had risen to 22 per cent.

This has since dropped to around 10 per cent as the stock market fell, but this still means that in a country of 1.2 billion people, 61 individuals control a tenth of national wealth. Among the major economies, only Russian UHNWs have a greater proportion of national wealth.

Mumbai’s Taj hotel is owned by Tata Sons, the bloated Indian conglomerate that has diversified into everything from Tetley’s tea to Jaguar Land Rover, and that makes up around 7 per cent of India’s stock market by market capitalisation.

In many ways, Ratan Tata, the group’s chairman until last December, represents Old Money and Old India. He was the fifth (and final) generation in his family to run the firm, and his fortune extends far deeper than India’s post-Nineties boom. At the same time, however, some hope that Tata has set an example for modern India.

He has largely eschewed the excess of his fellow Bollygarchs, and two-thirds of Tata Group is now owned by philanthropic trusts, making him one of India’s most prominent and celebrated philanthropists. As their ranks swell, there’s a growing realisation that Tata’s fellow Bollygarchs need to try a little harder at giving back.
CHARITABLE GIVING IS nothing new to India. Many have traditionally donated through their local temple or mosque, while successful family businesses — which even today make up around 70 per cent of India’s top 40 companies — have tended to channel money back into their local communities, including workers and their dependants, through family-run corporate foundations.

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It’s worth retaining a degree of scepticism when it comes to facts and figures on Indian charitable giving — informal cash flows can be hard to measure, and when it comes to family firms it’s not always easy to separate individual from corporate giving — but India’s wealthy do appear relatively stingy by international standards. According to a report by consultancy Bain & Co, Indian HNWs gave an average of 3.1 per cent of their income to charity in 2011, around a third of what wealthy Americans give away each year.

On the plus side, this does seem to be changing. Bain & Co also found that charitable donations increased by 50 per cent between 2006 and 2011. Alison Bukhari, a director of Dasra, India’s leading strategic philanthropy foundation, says she’s noticed a change in attitude in the past three years. ‘In 2009, we started to sense that things were changing a bit. The Bill Gateses of the world were in the news, philanthropy generally has become more on the agenda, and people have developed a more problem-solving attitude towards development,’ she explains.

High-profile movements like the Giving Pledge — where wealthy Americans including Gates and Warren Buffett vowed to give 50 per cent of their wealth to charity — are not only having an impact in the US. Gates has visited India several times, most recently in June when he held a private meeting on philanthropy with Ratan Tata and Azim Premji, the Indian software tycoon who has allocated $2 billion to his eponymous foundation, which focuses on education.

As well as giving more, an increasing number of Indian philanthropists are starting to think strategically about their giving and are becoming interested in measuring and maximising the impact of their donations.

This is particularly true among the younger generation of wealthy Indians, says Bukhari — many of whom are educated abroad and pick up ideas about philanthropy from the US and Europe. This next generation is taking an active role in family foundations, with Bain & Co finding that 69 per cent of HNW families report that ‘young members shape or spearhead the family’s charitable mission’.

It may also help that younger HNWs are more likely than their silver-haired counterparts to feel they are able to give. Dr Madhav Chavan, the co-founder and president of Pratham, India’s largest educational NGO, puts it like this: ‘My generation [Chavan is in his sixties] was still relatively close to poverty. Wealth in India has been increasing, so my children are less insecure than I was, and I was much more secure than my parents were. So as families are starting to get more secure, they are starting to think about charity as well.’

Rati Forbes, one of India’s emerging class of informed, hands-on philanthropists, heads up the corporate social responsibilty activities of her husband’s firm, the specialist engineering company Forbes Marshall, which in 2011 had a turnover of $150 million.

She talks to me about how important it is that her philanthropic activities — directed through both her family foundation and Forbes Marshall’s CSR arm in Poona — make a difference. ‘Rather than writing a cheque, you should question, “What are the right outcomes?” and these aren’t always what you think the community needs. You need to find out from the community what they think they need, too,’ she says.

She believes that the upsurge in philanthropy in India is a product of the country’s rising inequality: ‘In our country it’s hard to be completely cut off, or to pretend not to know about social issues.’ When I challenge her, she politely asks if I’ve visited India before. I have, and I see her point: even tinted windows permanently frame evidence of grinding poverty. One morning a stick-thin child in rags rapped on the car window, hawking counterfeit copies of Forbes and Vogue. Extreme wealth and poverty exist side by side here.
Illustration by Femke de Jong

ON THIS SAME trip to Mumbai, however, I spent a surreal evening clinking steins with the offspring of some of India’s most successful businessmen at Mumbai’s own ‘Oktoberfest’. Perhaps it was the beer, but few of the revellers gave the impression that their country’s poverty was a concern. Some ‘choose not to see it’, Forbes concedes: ‘It bothers me when educated people wear blinkers.’

Nowhere is this more obvious than at Antilia, the $1 billion private home built by Mukesh Ambani, India’s richest man. Thought to be the world’s most expensive private residence, the 27-storey, glass-fronted tower rises, like a middle finger, over a city where 60 per cent of residents live in slums. It would have afforded Ambani a bird’s-eye view of a recent slum fire that destroyed 300 homes.

One taxi driver muttered that ‘Ambani doesn’t do anything to help poor people’ as we drove past (this isn’t strictly true — his Reliance Industries does have a philanthropic arm), but the building doesn’t seem to be a target for any anti-wealth anger.

Will philanthropy become a reputational issue for India’s burgeoning class of billionaires, I asked Bukhari. ‘It could do,’ she says. ‘It’s starting to happen. There’s always been this “Oh yes, my NGO”, so it’s always been a part of dinner-party conversation, but I think now people are being challenged to have more knowledge, and to be able to talk more intellectually about it.’
THE PUBLIC OUTCRY following the gang rape of a 23-year-old student in Delhi in January also showed a shift in attitudes, with protestors and commentators appearing more eager to question the status quo.

There’s ‘an emerging class of people who are thinking about this much more seriously, who, rather than simply saying, “This is an outrage,” are trying to think, “Why is it an outrage, what is it that the government is not doing, what are we, as a culture, not doing?”’ says Bukhari. The wealthy could start to feel more vulnerable if this nascent, politically conscious, potentially activist class becomes more persistent in questioning whether the rich are paying their way.

You could equally argue, however, that India’s wealthy are so powerful that political risk isn’t really a motivating factor for philanthropy. Pratik Dattani, managing director of EPG Strategy and Consulting, which has researched social investment in India, makes the case strongly: ‘If you’re super-rich, and you have your own network and your own ability to generate additional wealth, it almost doesn’t matter who the government in power is or what’s happening around you…

‘You’re not constrained by anybody else, as long as you look after your company and your community.’ He cites the example of businessmen building roads and hospitals to support their factories and workers, circumventing government entirely.

At the same time, charitable giving itself can pose reputational risks for India’s wealthy. The sector has been tainted by a number of high-profile corruption cases, and such scandals ‘put ordinary people off giving to charity’, says Dattani.

The weakness of the charitable sector in India is a considerable challenge for philanthropists. It is estimated that there are around three million NGOs in India, or one for every 400 people. The lack of regulation and the fact that few charities possess proper documentation or accounting procedures can cause real difficulties for grant-giving organisations, says Rati Forbes.

This lack of transparency and professionalism in the sector has contributed to a tendency of giving hyper-locally, and often to charities run by close friends or relatives. There are ways around this: one charity that has managed to expand despite these trends is Pratham. Chavan attributes Pratham’s success to its organisational structure, as it relies on a vast network of volunteer fundraisers.

‘We don’t have a problem of mistrust, and I think that comes from being a very open organisation,’ Chavan tells me. ‘The ownership of Pratham is very broad-based, so I don’t go and raise money in the US or UK.’ Instead he relies on a wide network of volunteer fundraisers: ‘People who raise money in the US and UK pass on their trust of the organisation to their friends and peers, and that works much better, because if you believe in something, then your friend will, too.’

Similarly, Dasra is aiming to tackle this problem by supporting charities with capacity building, connecting philanthropists with charities at giving circles and producing research to increase potential philanthropists’ awareness of social issues and relevant organisations. In addition to Dasra, there are a few other organisations offering philanthropic advice, notably the Charities Aid Foundation (CAF) and Give India. As in the UK, the industry for philanthropic advice has lagged behind demand, but Bukhari says some banks are now also thinking of setting up advisory services.
FOR ALL THESE positive developments, however, almost everyone I spoke to agreed that the wealthy, overall, should be doing more. One of the factors holding philanthropists back is simultaneously one of the reasons philanthropy is so important in India. India’s problems can at times seem insurmountable.

According to research by Oxford University, there are more poor people living in eight Indian states than in the whole of Sub-Saharan Africa. Almost half of Indian households don’t have a toilet. In 2010, 56,000 Indian women died in childbirth — equivalent to one death every ten minutes.

Faced with problems of this scale, it’s little wonder that the wealthy feel that giving is hopeless. At the same time, however, the government’s ineffectiveness at tackling these vast social issues represents an opportunity for transformative philanthropists to come up with new ideas.

Pratik Dattani hopes that as India’s newly wealthy become accustomed to their fortunes, philanthropy will naturally become more compelling. ‘Because wealth is new and shiny, I think there will still be a period of ten to twenty years before the new crop of billionaires understand that along with financial success there’s also a social obligation that comes with it. But I think they have to come round to it,’ he says. ‘Once you have your shiny car, or the extension on your house — and it’s the same in India as everywhere else — you realise that all this has diminishing marginal returns. Then you need to find something more spiritually satisfying, and that’s when philanthropy comes in.’

There’s a less optimistic way of reaching a similar conclusion. The walls of the Taj Mahal Palace Hotel won’t hold out the rest of India indefinitely, nor can the nation’s wealth continue to concentrate in the hands of an elite few, while ordinary Indians wait for money to trickle down. It’s in the interests of the wealthy to think seriously about tackling inequality before their hands are forced. They may even enjoy it.
Read more from Sophie McBain

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