Role of Philanthropy in Accelerating Economic Growth

• 19 Sep 2022

For Mains: Philanthropy and major challenges inhibited Indian Philanthropy

Why in News?

Through philanthropy, India can reach a per capita income of USD15,000 by India@100 by 2047, accelerating inclusive and sustainable economic growth.

What is Philanthropy?

• Philanthropy refers to charitable acts or other good works that help others or society as a whole.
• Philanthropy can include donating money to a worthy cause or volunteering time, effort, or other forms of altruism.

What do we Know about Philanthropy in India?

• Pre-Industrial India:
  • 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 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.
• During Freedom Struggle:
  • Mahatma Gandhi encouraged businessmen to contribute their wealth to society as India's Independence movement began.
  • Industrialists like Jamnalal Bajaj and G.D. Birla supported Mahatma Gandhi’s initiatives during the freedom movement while pursuing their own philanthropic interests.

What is the Philanthropic Model in the United States?

• With prominent leaders at the forefront, Indian philanthropy was thriving, simultaneously, America was witnessing the Carnegie-Rockefeller era of philanthropy.
• Andrew Carnegie built impressive institutions (like Carnegie Library and Carnegie Mellon University), but also inspired (and instigated) the rich.
• The last line of his book reads: “The man who dies rich, dies disgraced."
• John D. Rockefeller, a hard-nosed monopolist, 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.

What are the Major Challenges inhibited Indian Philanthropy?

• A Trust Deficit:
  • Budding philanthropists haven’t yet come to fully appreciate the good work being done in the impact sector.
• Parochial Nature of Giving:
  • The parochial nature of giving risks some of the poorest parts of the country being ignored.
• Programmatic Nature of Giving:
  • The results of programmatic giving are unsatisfactory.
  • Example: a number of foundations and NGOs work on school education, yet learning outcomes have not improved.

What should be the Way Forward?

• Build Institutions:
  • In order to build new universities in India, collective philanthropy is needed.
  • To improve their rankings, IIT and IIM alumni could fund research centers.
  • Donors can fund think-tanks and build area-specific (say, on energy transition) or geography-specific (such as eastern Uttar Pradesh) institutions.
  • 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.
• 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 on a continuous basis, 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.
  • Example:
    • Nandan Nilekani built an innovation ecosystem which supports the government in developing a best-in-class digital architecture for India (think of Aadhaar, Unified Payments Interface 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.
  • 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:
  • Philanthropists can use their wealth and experience to advocate policies, support the improvement of enabling conditions for investment, exports and job creation, and help transform India’s economy.

Source: Livemint