Why aren't wealthy Indians ready to loosen purse strings?

In this time of global financial crisis, when so many are suffering financial hardship, most countries have increased their number of dollar millionaires. These ‘High Net-Worth Individuals’ (HNWI), according to a report by Capgemini and Merrill Lynch Wealth Management, have more than doubled in India. In 2008-09, India had 84,000 HNWIs. This year it rose by 50 per cent (1,26,700), the biggest increase of all countries.
In the worldwide list of dollar billionaires, India ranks third with 69, behind China (128) and the US (403). According to Forbes, however, the wealthiest 100 Indians are collectively worth $276 billion, while their top 100 Chinese counterparts are worth $170 billion. The three richest Indians together had more wealth the top 24 Chinese billionaires combined.

You don’t have to look very far for evidence of their wealth, with more than 30 luxury skyscrapers springing up in Mumbai. For the rich occupants, the taller, the better, to escape from the reality of India below — the railway tracks, low-rise tenements, choking traffic and the 55 per cent of the city’s population who live in slums.

People are paying nearly two million dollars for a designer apartment, built in complexes with private cinemas, swimming pools, floodlit tennis courts and high-level security. Developers believe each year Mumbai can absorb between 30,000 to 40,000 more homes in the one million dollar-plus category.

Such extreme wealth doesn’t go unnoticed. In the UK, people are questioning the decision to keep giving India some $460 million of aid annually, which makes India the largest single recipient of British aid. Many ordinary Brits are asking if it can be right that the downtrodden British taxpayer gives such sums to a nation that boasts such wealth (albeit highly concentrated).

Perhaps the most damning comments recently came from French author Dominique Lapierre, whose book royalties from ‘City of Joy’ fund projects for the underprivileged in India. He is frustrated by the greed and corruption that he encounters here.

Lapierre’s non profit organisation, City of Joy Aid, runs a network of clinics, schools, rehabilitation centres and hospital boats. It operates 14 projects in India, most in the Sunderbans area. However, 90 per cent of free medicines get stolen in the journey from Delhi to Kolkata, and the project is thus forced to buy them at high prices from the market.

Three years ago, Lapierre set up in Delhi a trust which offers a tax-deductible certificate for all donations. With more than a hint of disappointment, he notes the foundation still does not have any funds from affluent Indians who seem reluctant to help their fellow country-folk.

According to the global management and consulting firm Bain, philanthropic donations amount to just 0.6 per cent of India’s GDP. This is very poor when compared to giving in the US and UK, for example, but is better than rates in other developing countries like Brazil and China.

Charitable gifts
In the US, individuals and corporations are responsible for 75 per cent of charitable gifts. In India, individual and corporate donations make up only 10 per cent of charitable giving. Some 65 per cent comes from India’s central and state government, and the remaining gifts are provided by foreign organisations.

In India, giving does not rise with income and education. As a percentage of household income, donations by the wealthy actually decrease. From an analysis of 30 HNWIs in India, Bain noted that they contribute, on average, just around one-fourth of one per cent of their net worth to social and charitable causes. Will this change if laws and taxation policies are reformed to encourage a more supportive climate for potential donors and charitable organisations?

All of this is not meant to imply that philanthropy is absent in India. Vineet Nayyar of Tech Mahindra’s  recent Rs 30 crore gift to the Essel Social Welfare Foundation is a high-profile example of philanthropic giving. Over the years, Rohini Nilekani has donated $40 million to numerous causes that tackle the root causes of social problems and not merely the symptoms. Her biggest contribution has been to Arghyam, a Bangalore foundation that promotes clean water and hygiene, which now has projects in 800 villages.

Of course, what is really required is a proper redistributive system of taxation, effective state planned welfare provision and genuine economic democracy to help address inequality and poverty. In the absence of such things, wealthy ‘philanthrocapitalists’ will have a major say in deciding which problems are addressed and how, and some will be highly selective.

For instance, critics of Bill Gates say his foundation often ends up favouring his commercial investments. The argument is that, instead of paying taxes to the state coffers, he donates his profits where it is favourable to him economically, such as supporting GM crops in Africa or high tech patented medicines. Arguably, ‘giving’ may often act as a smokescreen for ‘business as usual’.

Given the current neo-liberal system that legitimises and produces gross inequality, many nation states have been obliged to largely abdicate their financially redistributive role, resulting in the poor and disadvantaged too often having to rely on charity and private philanthropy to fill the gap. Unfortunately, for these people, the evidence suggests that India has some way to go before a widespread culture of visionary philanthropy takes root.