In the last couple of years, so many stories came to the forefront where people were going out of their way to aid in the COVID relief measures. Every individual was seen embracing philanthropy as per their means and capacity. However, a new report has revealed that despite a rise in net worth over the last six years, India’s super-rich has dramatically curtailed their philanthropic contributions.
State of Individual Philanthropy in India
According to the India Philanthropy Report 2022, which was released on Tuesday, ultra-high net worth individuals (UHNIs), or persons with a net worth of more than 1,000 crores, reduced their philanthropic contributions by approximately 40% to $12,000 crore in the six years leading up to March 2021. However, the number of retail contributors, or those who donate less than 1.5 lakh per year, has increased, both in terms of the number and size of donations. All in all, Individual contributions increased by 33% from 21,000 crores in the fiscal year ending March 2015 to 28,000 crores in FY21.
According to the research, the number of people with wealth surpassing 1,000 crores climbed by nearly 20% from FY20 to FY21, while their cumulative net worth increased by over 50%, from about 6 trillion to about 9 trillion. In addition, the wealth of UHNIs with a net worth of more than over 5,000 crores increased by almost 80%.
Increase in CSR Expenditure
In the same time period, corporate social responsibility (CSR) contributions from India Inc. increased, helping to keep the pace of private domestic philanthropy growing.
According to the analysis, overall private philanthropic funding in India will expand at a rate of 12% per year for the next five years, reaching 1.8 trillion by FY26, up from the flat growth of 8-10% recorded in recent years.
Bain and Company and Dasra, a non-profit venture philanthropy fund, collaborated on the paper to provide an overview of social sector finance and the contributions of diverse players.
Although UHNI spending on philanthropy has increased in absolute terms in the last two years, the allocation has decreased in comparison to their increase in net worth, according to the report. The sole exception is Azim Premji, the former chairman of Wipro. Giving through family foundations established by UHNIs and HNIs has similarly decreased to a third of total private contributions, falling from 37% in FY15 to 11% in FY21.
“In the last two years, during the pandemic, there was a feeling or a subjective sense that a lot of giving was happening. Everyone has been trying to help either at the community or the individual level. So, I would have expected a far more significant increase (in numbers),” said Neera Nundy, co-founder, Dasra.
Radhika Sridharan, a partner at Bain, said the contribution from UHNIs has been fluctuating every year, showing a lack of consistency. “We have seen a lot of fluctuation in giving year-on-year in this space. The funding allocation goes from close to ₹2,000 crores a year to ₹20,000 crores; that’s the kind of deviation the category has seen from individuals over the last six years. The category comprises about 100 UHNIs,” said Sridharan.
Reasons for Decline in Philanthropic giving by UHNIs
The reason explored for this is that people have a tendency to give a significant sum of money all at once and then forget about it. Because UHNIs donate in significant quantities, on average $5 crore every year, they may give one year and then disappear for a year or two. “There is no consistency in who gives and how many people give.” Every year, the amount they donate can be fairly different “Sridharan remarked. About half of UHNIs have been steady in their donations, while others “come in and out” of the programme “, she continued.
There is also a disparity between giving as a proportion of net worth, which is especially pronounced given that most UHNIs’ net worth has increased significantly over the last six years. “We haven’t observed significant increases in giving numbers in accordance with increases in net wealth,” Sridharan added. Each of the ten UHNIs donates between Rs. 50 and Rs. 100 crore every year, while the remainder gives an average of Rs. 15 crores per year.
Predictions for the future of giving
Despite the fact that individuals may not be donating as much as they should, the survey expects a 13 per cent yearly growth in family philanthropy until 2026. Tech entrepreneurs and NowGen philanthropists, as well as individuals from multigenerational philanthropic families, are poised to lead this charge.
In terms of total philanthropic donation as well as the amount, CSR contributions increased to 23% in FY21 from 12% in FY15. The government’s 2014 2 per cent legal mandate, which requires all corporations to devote 2% of their average net profit made over the previous three years to CSR, has played a significant part in this.
Over 70% of businesses gave less than Rs. 50 lakh each, despite a 15% increase in the number of businesses in this category. In FY20, only 3% of the population contributed more than ten crores each. According to the research, by FY26, CSR will account for 19 per cent of total private giving and 32 per cent of overall private giving.