Philanthropy Could Help Unlock India’s Vast Economic Potential : Daily Current Affairs

Date: 23/08/2022

Relevance: GS-3: Investment, Economic Development

Key Phrases: Philanthropy, Economic Growth, Inclusive and Sustainable Growth, Social Sector, Carnegie, Rockefeller, Public Service, Freedom Struggle

Background

  • The gross domestic product (GDP) of India has grown from about $420 billion to $3 trillion, and the poverty rate has dropped to around 10%, we are still far from becoming a developed country.
  • Considering our rapid growth since 1991, India will reach a per-capita income of some $15,000 by India at the rate of 100 in 2047.
  • Philanthropy can play a vital role in accelerating an inclusive and sustainable economic growth.

What is Philanthropy?

  • Philanthropy is defined as promoting and attempting to bring about social change by majorly making generous financial contributions.
  • A philanthropist is someone who decides to invest in a social sector a portion of their wealth, time or knowledge for a cause that they believe in.

What was the role of philanthropy in India during the freedom struggle?

  • Philanthropy has long been embedded in the fabric of Indian society and contributed heavily to the creation of modern-day India.
  • Pre-industrial India saw business families giving away a proportion of their income to local charities.
  • Industrialization and the freedom struggle in the 19th and 20th centuries morphed giving into what we consider modern-day philanthropy.
  • Industrialization enabled rapid wealth creation; business leaders like Sir Jamsetji Tata voiced their opinions on using wealth for social good, donating vast amounts to create exemplary institutions.
  • As India’s Independence movement began, Mahatma Gandhi encouraged businessmen to contribute their wealth for the betterment of society.
  • Industrialists like Jamnalal Bajaj and G.D. Birla supported Mahatma Gandhi’s initiatives during the freedom movement while pursuing their own philanthropic interests.
  • With prominent leaders at the forefront, Indian philanthropy was thriving.

Why are the major challenges faced by Indian philanthropy in the present days?

  • Despite India’s history of giving and rapid wealth creation in the last few decades, there are three major challenges that have inhibited Indian philanthropy:
    • Trust deficit: budding philanthropists haven’t yet come to fully appreciate the good work being done in the impact sector;
    • Parochial nature of giving, which risks some of the poorest parts of the country being ignored;
    • Programmatic giving which doesn’t add up (example: several foundations and NGOs work on school education, yet learning outcomes have not improved).

Rise of Modern Philanthropy

  • Wealthy individuals have been spending large sums on good causes for centuries, but the modern philanthropy began in the way we know from the Gilded Age (a period of flashy materialism and overt political corruption in the United States) of the early 20th century.
  • The rise of industrialism had created a major wealth divide between the workers at the bottom and the so-called robber barons at the top.
  • In a bid to address this imbalance, several of the wealthiest industrialists chose to give away almost all of their fortunes.
  • The movement's pioneer was Andrew Carnegie, the Scottish-born businessman who became the richest man in the world after selling his steel company in 1901.
  • Carnegie believed that successful entrepreneurs were morally obligated to spend their fortunes helping others. In an article titled "The Gospel of Wealth," in 1889 he wrote, what became a guiding philosophy for philanthropists: "He who dies rich, dies disgraced."
  • He built impressive institutions (like Carnegie Library and Carnegie Mellon University), but also inspired (and instigated) the rich.
  • Another great philanthropist was John D. Rockefeller, a hard-nosed monopolist, who eventually donated large amounts of money to systemic reforms, especially to improve the education system.
  • The Rockefeller Foundation also developed the vaccine to eradicate yellow fever.
  • Both Carnegie and Rockefeller became role models, inspiring generations to give away their wealth to improve society.
  • They also established a norm that was propagated through society, much like Jamsetji Tata’s belief that if you’re rich, you must donate money and do good.

What are the prospects of philanthropy in India?

  • Indian philanthropy is now poised to take off, despite the challenges.
  • Azim and Yasmin Premji, and Nandan and Rohini Nilekani have led the way. Beyond committing to part with a majority of their wealth, they’re showing the world a new model of selfless public service and philanthropy.
  • Mukesh Ambani, Gautam Adani and Ajay Piramal have made big commitments, along with the start-up founders inspired by people like Sridhar Vembu and the Kamath brothers.
  • It is expected that wealthier people will give more, give sooner and give better.

What are the ways through which emerging philanthropists can create outsized impact?

  • Build institutions
    • India needs collective philanthropy to build new universities.
    • IIT and IIM alumni could fund research centres to help improve their rankings.
    • Donors can fund think-tanks and build area-specific (e.g. on energy transition) or geography-specific (such as eastern Uttar Pradesh) institutions.
    • For example: The Tata family continued Jamsetji Tata’s tradition of philanthropy and has been a pioneer in building institutions like the Indian Institute of Science in Bengaluru, The Energy and Resources Institute (TERI), Tata Memorial Hospital, etc. These institutions have transcended generations and made a deep impact on Indian society.
  • Fund risky R&D for the government
    • Governments are the principal actors in the social sector and spend crores on education, health, etc. However, the government is a behemoth and can’t experiment or innovate continuously; state capacity is also limited.
    • Philanthropists can fund innovative models and test new ideas through non-profits by building evidence, advocating for policy change and supporting government implementation.
    • For example, Nandan Nilekani built an innovation ecosystem which supports the government in developing a best-in-class digital architecture for India (Aadhaar, UPI and eKYC).
  • Support governments to improve delivery
    • Partnering with the government as a philanthropic entity is the most effective way to make a scalable and sustainable impact.
    • For this, philanthropists need to change their orientation from funding programme delivery through NGOs (like funding mid-day meals in schools) to initiatives which improve the government’s system of delivery.
    • For example The Piramal Foundation is supporting the Aspirational Districts collective; Veddis Foundation is funding initiatives to improve the evidence base and outcome orientation of governments.
  • Enable economic growth
    • We all want India to be a $30 trillion inclusive and sustainable economy by India at the rate of 100. This will create resources for the government to fund development programmes and social security for those who might be left behind.
    • Traditionally, philanthropy has focused on the social sector and left economic growth to markets and government.
    • However, our wealth creators use their wealth and experience to advocate policies, support the improvement of enabling conditions for investment, exports and job creation, and help transform our economy.

Conclusion

  • The old model of charity was to create immediate change in one’s backyard.
  • Modern-day philanthropy, beginning in the 19th century, has shown the power of strategic transformative giving.
  • India’s golden era of philanthropy is emerging.
  • Turning our sights to India at the rate of 100, we can accelerate philanthropic giving and challenge it to help us unlock our economic potential and enable us to be a developed nation in the next 25 years.

Source: Live-Mint

Mains Question:

Q. How can philanthropy contribute to the inclusive and sustainable economic growth of India? (250 words).