The shape of things to come- Indian philanthropy | Outlook Business
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The World's Greatest Philanthropists

The shape of things to come
While India's wealthy have done their bit for many years, philanthropy in the true sense is only taking form now

V Keshavdev

He may be 71 years old, but Raghunath Anant Mashelkar’s memories of his childhood are as vivid as yesterday. At three, Mashelkar and his parents left their hometown, Mashel in south Goa, to move to Bombay in search of a better job and higher income. But just three years later, his father died and his mother, who was uneducated, had to do odd jobs to make a living. Support from his maternal uncle ensured that the young Mashelkar made it to a local municipal school but, as the grades kept rising, so did the odds. In grade 8, he nearly had to drop out of school as his mother struggled to put together ₹21 for his fees. That was the first time Mashelkar got a taste of philanthropy — a maidservant, who resided in the same locality as the Mashelkars, paid his fees.

A few years later, his friends pooled in ₹200 for his college admission after he stood 11th among 135,000 students who appeared for their SSC exams in Maharashtra. But Mashelkar realised the true power of giving when he got a helping hand in the form of a Sir Dorabji Tata Trust scholarship, for ₹60 a month for six years. “I would have had to quit my education had it not been for the Tatas’ support,” he recalls.

This was more than a mere doleout. What followed was an intense session that placed emphasis on personality development.

“Having studied in a Marathi-medium school, my English was far from fluent. But an elderly Parsi lady, at behest of the Tata trust, helped me with the language. We [the awardees] were taken around several art galleries and museums to open our eyes to history, culture and literature. There were sessions for developing our debating skills. Being naïve, I would keep interrupting — I was the worst of the lot — but subsequent coaching and guidance helped me.”

Mashelkar paid back in spades that investment of time and money. An eminent scientist, he went on to become director-general of the Council of Scientific & Industrial Research, and is currently the president of Global Research Alliance, a network of 60,000 scientists from publicly funded R&D institutes from around the world. Life has come full circle: Mashelkar is now on boards of several leading companies — including those of the Tata group.

While Mashelkar may well be the poster boy of an endowment set up by the country’s oldest and most philanthropically-inclined business house, there are several others, both famous and not so well-known, who have made it big because of the large hearts of India’s philanthropists. Now, that picture may be slowly changing as a new breed of wealthy individuals takes philanthropy to scale, rather than stick ti individual acts of generosity. More on that later but first, take a look at what’s up with the pioneers of Indian philanthropy. 

The first movers

The early story of Indian philanthropy could well be the story of the Tata family (Humata, Hukhta, Hvarshta). India’s first family of industrialists started their good works back in the days of the Raj, beginning with Jamsetji Tata. His sons, Sir Dorabji and Sir Ratan, continued the practice of sharing their wealth for societal good and political causes, much to the chagrin of the British empire, which had knighted the brothers for their contribution to India’s economic and industrial development. 

In 1905, Sir Ratan Tata helped the Gopal Krishna Gokhale-led Servants of India Society, whose members worked for the social, political and economic welfare of India. Over a 10-year period that lasted till 1915, Sir Ratan gave away the then-princely sum of ₹1.1 lakh to the volunteer organisation. Mahatma Gandhi’s non-cooperation movement in South Africa between 1909 and 1913 also found support from him; he provided ₹1.25 lakh for the cause. 

Many industrialists of the time, including GD Birla and Jamnalal Bajaj, were influenced by the concept of trusteeship espoused by Gandhi and the need to invest in social development: in 1920, Godrej group founder Ardeshir Godrej gave ₹3 lakh to the Tilak Swaraj Fund for the upliftment of harijans. But it was only the Tatas who engaged in institution building, and do so till date. It was also members of the Tata family who pioneered vesting their personal fortunes in philanthropic trusts.

The other big Parsi industrialist family in India, the Godrejs, have followed suit. The family has vested 25% of its stake in group holding company, Godrej & Boyce, in the Pirojsha Godrej Foundation, which drives the family’s personal philanthropic initiatives. The holding is currently valued at ₹18,000 crore, but the trust derives its income mostly through dividends. 

The Godrejs’ contribution isn’t only in cash. In 1974, the family handed over around 1,000 acres of mangroves in Vikhroli, suburban Mumbai, to the Soonabai Pirojsha Godrej Foundation, to be maintained as a green lung in Mumbai’s concrete jungle. Keeping with the green theme, the family foundation has also built the Sohrabji Godrej Green Business Centre at Hyderabad, the first building outside of the US with a platinum LEED rating, a certification that recognises best-in-class building strategies and practices. The family also has a long-standing association with the World Wide Fund for Nature (WWF) — SP Godrej was its founder trustee and Jamshyd Godrej is the current president of the India chapter. “Environmental causes are not very common for philanthropy and foundation activities. We are an exception there,” says 72-year-old Adi Godrej, chairman, Godrej Group. 

Unlike the Godrej family, the Birlas’ philanthropy does not involve vesting their wealth in charitable trusts. Rajashree Birla, mother of Kumar Mangalam Birla and chairperson, The Aditya Birla Centre for Community Initiatives & Rural Development, has her own take on what trusteeship involves. “Like my grandfather-in-law, GD Birla, I have been a firm believer in the Gandhian philosophy. The welfare of the poor and the downtrodden remains our prime responsibility. Education was GD Birla’s main passion and he had started BITS Pilani and several schools,” says the 67-year-old, sitting in a well-decorated office in a multistoried building that’s hidden in the bylanes of Worli. Incidentally, the Birlas have also constructed over 45 temples across India, building on the patriarch’s view that education is a “great leveller” and temples a “great unifier”. 

Changing contours

Though old money remains as committed to philanthropy as ever, there are many who believe the strong momentum of the early decades of the last century was lost as a result of newly-independent India’s economic and financial policies.

“The socialist approach not only ruined the country, but with it, also the nascent philanthropy movement. High rates of income and wealth taxes meant that the rich were hardly left with surplus,” declares Godrej. Concurring with Godrej’s view is philanthropy foundation Dasra.

In its report ‘Beyond Philanthropy’, it mentions, “The role of the private sector in advancing India decreased [during 1960-1980] because strict legal regulations determined the activities of the private sector. The introduction of high taxes, quotas on production and bureaucratic licence systems imposed tight restrictions on the private sector and indirectly triggered corporate malpractices.” 

In fact, in the early 1970s, India earned the sobriquet of the highest taxed nation, with a peak personal income tax rate of 97.5%. Progressively, the rate of taxation came down to 50% in the mid-1980s, 40% in early 1990s and finally 30% since the late 1990s. 

Where government apathy towards the private sector was seen as a hindrance to wealth creation, this changed with liberalisation. Today, India boasts of 103 dollar-billionaires with a cumulative wealth of over $384 billion, according to the 2013 Wealth-X-UBS census report. Interestingly, nearly half (47%) of these are self-made billionaires, mainly first-generation entrepreneurs. And if you were seeking a direct correlation between wealth creation and philanthropy, try this out for size: the post-liberalisation wave of billionaire creation coincided with an increase in the number of registered trusts and foundations in India (see: Giving as you grow).

Giving as you grow

The post-liberalisation era produced not just more billionaires but also philanthropic organisations

While there is no nodal government agency that tracks India’s philanthropic sector, in early 2012, the Central Statistics Office (CSO) presented a four-year study, Non-Profit Institutions in India, which measured the broader non-profit sector.

The report revealed that the non-profit sector derives almost 70% of its income from private donations, offerings and grants. A total of 694,000 surveyed organisations earned ₹50,914 crore, or 70% of their total funding of ₹72,792 crore, from these sources. And while no one knows how big philanthropy is in India, a UBS report, titled Revealing Indian Philanthropy, hazards a guess based on the CSO study. “If we assume a similar level of funding per organisation and extrapolate to the 3.17 million societies and non-profit organisations in India, we discover a sector that could be as large as ₹331,810 crore, with donations and grants accounting for ₹232,083 crore. Interestingly, these calculations suggest a sector much larger than other estimates, reflecting our still inadequate knowledge.”

Those numbers may sound huge but left unsaid is that most of these donations are for religious causes or saving tax, not for tangible social causes. That continues to be the domain of the government, which still has the mammoth task of pulling 270 million Indians out of poverty. This, by the way, is the official poverty figure, so it’s obviously a conservative estimate. The government draws the poverty line at households that have less than ₹874 a month, while McKinsey Global Institute estimates that to avail eight basic services at an acceptable quality level, a household needs ₹1,336 a month. By that benchmark, an additional 34% of the population (413 million) continue to be vulnerable. And, the exchequer spending over ₹5 lakh crore on social causes, 46% Indians, on average, still don’t have access to basic services. Further, 50% of every rupee spent on basic services by the government fails to reach the people, thanks to inefficiencies in governance and execution. It is this huge gap that the new generation of philanthropists is seeking to bridge.  

The learning curve

While rich Indians are only just becoming sensitive to the growing inequity in society, the cause of choice for most of them seems to be education. According to the Dasra report, one reason for the disproportionate giving to education is because of the belief that contribution to education is the most sustainable strategy for uplifting not just individuals, but entire families from poverty. 

Indeed, that is why education is a priority for state governments as well, which are spending lavishly on everything from new schools and universities to free laptops for students. According to PRS Legislative Research, in FY13, the combined spend of all states at ₹2.6 lakh crore, marked a 13% increase over the previous fiscal. On average, education accounts for 16.5% of state budgets. 

Individual philanthropic efforts are, not surprisingly, no match for these numbers. Ramya Venkataraman, leader of the education practice at McKinsey India, says, “The education sector has already seen direct intervention by the government in terms of building infrastructure and addressing issues of access. There is no point duplicating government efforts. Instead, the focus should be on improving the qualitative aspect of education.” That area certainly needs work and that’s where a number of philanthropists are concentrating their efforts.  

We are different

The Nadars are a case in point. In 1994, Shiv Nadar, the founder and chairman of HCL Technologies, set up the HCL Foundation, which focuses on improving education in India. The foundation runs several not-for-profit initiatives such as universities and schools, which includes VidyaGyan, all in this sphere. At the four-year-old VidyaGyan, the focus is to bring high-quality education to rural children with an emphasis on all-round development, academics and other extra-curricular activities.

Students are transitioned gradually from Hindi medium to English with an emphasis on computers and technology. Nadar’s daughter Roshni Nadar, who runs the foundation, explains, “The focus is on leadership and not education. It’s the law of averages: hundreds of students graduate from Harvard and IITs but only a few become leaders. That is why instead of adopting a mass-based model, VidyaGyan is looking at creating 100 potential leaders each year.”

As part of this approach, in Uttar Pradesh, where VidyaGaan has two schools, the foundation shortlists toppers in grade 5 from underprivileged students from 75 districts. After two rounds of examinations that cover close to 200,000 students, 600 students make the cut. 

If Nadar is a first-generation entrepreneur for whom education is a subject close to his heart, for Ajay Piramal, philanthropic activities meant building on the initiative his grandfather had started through the Piramal Foundation. “The fact that you can get an education is a privilege. The fact that you can be wealthy is even better. Having both is a great combination. Therefore, to some extent, you have to give back to the society,” says the 58-year-old chairman of the Piramal Group.

“In the 1930s, Rajasthan was extremely conservative and there was a strong caste bias. In that era, my grandfather set up the state’s first school for girls. It was also the state’s first school to admit harijans.” In 2008, the Piramal Foundation raised the bar by launching the Piramal Foundation for Education Leadership (PEL), which aimed at improving the skill sets of school headmasters. Starting with 100 headmasters, currently, PEL is training over 700 heads of schools. In the same vein, the Azim Premji Foundation is focused on improving the quality and equity of rural education since 2001 (see: A Class Apart). 

Granted, most wealthy Indians are concentrating their philanthropic activities on education. But that doesn’t mean other initiatives aren’t being carried out. The Godrej group’s environment focus aside, Anand Mahindra has set up an NGO called Nanhi Kali — jointly managed by the KC Mahindra Education Trust and the Naandi Foundation — which provides academic, material and social support to underprivileged girls. The project is now being scaled up with 21 NGO implementation partners. Rohini Nilekani, wife of Infosys co-founder Nandan Nilekani, is working on improving domestic water and sanitation with the Arghyam Foundation. And Dr Reddy’s Foundation provides vocational training, while Sir Ratan Tata Trust focuses on improving rural livelihoods and communities. 

United we stand 

While some philanthropists prefer to stick to the old chequebook style of engagement, some are executing projects on their own and others want to nurture an initiative before scaling it up with the government. A survey was carried out by the Indian School of Business in association with FSG, a non-profit consulting firm, which covered individuals and families in India with annual income in excess of $20 million. According to that, many issues identified in the United Nation’s Millennium Development Goals as being critical for India, such as poverty, hunger, malnutrition and climate change, do not find favour with the donors. 

In other words, these problems require solutions that will involve the bigger philanthropists joining hands with the government. For example, Sir Ratan Tata Trust’s Integrated Fodder and Livestock Development project collaborates with the Uttarakhand government through the National Rural Employment Guarantee Scheme. Similarly, the Azim Premji Foundation works in close collaboration with district and state government agencies, besides building the capacity of the state education department’s policy planning unit. The Bharti Foundation adopts and runs primary and upper primary government schools in Rajasthan in addition to running senior secondary schools through a public-private partnership mode with the Punjab government. 

“Every single person that I met said, ‘Failure happens on my time, but success happens on the government’s time. So, let me try and invest in everything. But once I fund the right model, let me go and collaborate with the government and give it scale’,” points out Priya Naik, founder of Samhita Social Ventures, a leading social sector consulting firm funded by former Infosys co-founder NS Raghavan. 

That’s a thought echoed by Piramal. “Given the nature of government, it cannot have innovation. Innovation means there is also failure. No government can afford that since a hundred questions will be asked. So, innovation can only take place in the private sector. Once these solutions work out, you can present it to the government. That is our basic thinking,” he says. The Piramal Foundation is also developing market-based models that provide clean drinking water for the population at the bottom of the pyramid. 

The way ahead

Interestingly, philanthropists are increasingly seeing merit in routing CSR funds from the listed entity into initiatives that are being led by the promoter family. Accounting firm Ernst & Young estimates that the new CSR regulation will cover over 2,500 companies in India and generate over $2 billion of CSR spending in local communities. On the face of it, channeling funds to a cause that is up and running makes sense, but from a corporate governance perspective, it doesn’t read right. “If you as a promoter want to make CSR more inclusive for your organisation, then you should divorce it from what you personally engage in. CSR has to be inclusive of all its stakeholders’ opinion. If you isolate them from the process, you have not achieved the right thing,” points out Samhita’s Naik. 

For his part, Godrej is clear about drawing a line between personal philanthropy and CSR. “Philanthropy is done from an individual or family’s personal wealth, while CSR is the responsibility of a company to its stakeholders. These are clearly two different things.” Similarly, the Tata Trusts, too, have worked independently of the group’s CSR funding and initiatives for over a century. 

But not everybody thinks the distinction is required. “We believe it is effective to do it together because for us these are all important issues and all very good programmes. The amount of money you need is infinite… Even before the CSR rule came into being, we were working jointly on the programmes. So, for us, life has not changed one bit,” says Piramal. Ditto with the Birlas. “We cannot separate the trusts from the companies because both have donated for common initiatives. At the end of the day, what we are looking at is to actively contribute to the social and economic developments of the communities in which we operate,” says Birla. At Biocon, too, the corporate foundation also serves as the personal giving channel for chairman and MD, Kiran Mazumdar-Shaw.

Piramal believes that an amalgam of approaches best serves the philanthropic cause. “Each one has their own way of thinking. Some people want to do a little more than others. Some people want to have foundations that just give money; others want to be involved in running it. According to me, [philanthropy] is very personal because that is the only way it can be sustained over the years.”

That could well be true. For, the generosity of the Tatas has inspired and spurred Mashelkar to his own philanthropy: every year, he gives away ₹1 lakh to innovators who are making an inclusive difference to the society. Paying it forward is the best compliment.

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