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).
- Governments are the principal actors in the social sector and spend crores on education, health, etc.
- 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.