Private Philanthropy Needs To Step In, Bridge ₹7.7L Crore Spending Gap: Report

New Delhi:

India’s public sector accounts for 95 percent of total funding on the social sector, but private philanthropy can bridge the growing gap in social spending. India Philanthropy Report 2023 Where is it?

The annual report, a collaboration between Bain & Company and Dasara, said social spending by the public sector increased by 35 per cent last year.

Overall social spending to increase from Rs 11.1 lakh crore in 2016-2017 to Rs 22.6 lakh crore in 2021-2022. However, the report states that there is a gap of ₹7.7 lakh crore in social spending in India.

“India still falls well short of NITI Aayog’s estimate of the total annual funding needed to achieve Sustainable Development Goals (SDG) commitments by 2030 (about 13 per cent of GDP),” the report said.

With the decline in health care expenditure following the Covid-19 pandemic, the report argues that the gap in social sector expenditure could reach Rs 12.4 lakh crore by 2026-27.

“Private Philanthropy Needs to Step Up”

Private philanthropy, which includes donations by families through ultra high net-worth individuals (UHNIs) and corporations (through corporate social responsibility and trusts), remained steady at ₹1.05 lakh crore in 2021-22.

The report states that despite a nine per cent increase in cumulative UHNI net assets in 2021-2022, social spending by UHNIs declined by five per cent from 2020-21. Total expenditure reduced from Rs 11,811 crore in 2020-21 to Rs 4,230 crore in 2021-22.

Compared to the United States, the United Kingdom and China, Indian UHNIs continued to donate less as a percentage of their total assets in 2021-22.

Neera Nandi, co-founder and partner at Dasara, said, “The level of giving has not kept pace with the increase in wealth. It is important to invest in strengthening philanthropic infrastructure, designed and investment-ready for giving Providing a range of vehicles is important.”

Although private philanthropy has the potential to support the public sector and supplement social spending in India, the report argues that the increase in public funding may be limited to pre-pandemic levels.

The report states that private philanthropy in India is expected to grow at 11 percent annually over the next five years, mainly through CSR and family philanthropy.

Tremendous increase in CSR spending

Corporate Social Responsibility (CSR) is helping corporates contribute to the social sector owing to the two per cent mandate set by the government.

CSR spending to grow at 13 per cent since 2017, to reach ₹27,000 crore in 2021-2022, with health and education sectors capturing a major share of the total funding. The report states that CSR spending could reach Rs 52,000 crore by 2026-2027.

Corporate spending on CSR has often violated the government’s mandate of two per cent. In 2021-22, BSE 200 companies contributed an additional ₹1,200 crore over and above the two per cent mandate.

However, despite the booming numbers, CSR activity is not evenly distributed in India. “About 50 per cent of state-specific CSR spending is directed towards certain states like Maharashtra, Gujarat, Karnataka and Tamil Nadu,” Ms Nandi said.

On the other hand, per capita CSR spending remains low in economically weaker states such as Meghalaya, Bihar, Madhya Pradesh, Uttar Pradesh and Jharkhand.

Family Philanthropy – The X Factor?

Family philanthropy to grow at 12 per cent in last five years, to reach ₹29,600 crore in 2021-22.

Excluding the contribution of billionaire philanthropist Azim Premji, family philanthropy accounts for one-third of total private contributions in India and is expected to grow at an annual rate of 12 percent through 2026-27.

The report notes that family philanthropy can provide more flexible capital and help bridge the spending gap. Furthermore, it can focus donations towards more influential, disruptive and underserved segments, the report said.

Suggesting a positive shift in family philanthropy, the report notes that now-generation (first-generation wealth holders) as well as inter-generational donors are increasingly focusing on under-represented causes.

Jishnu Batbyal, Partner, said, “There is a need to focus on under-represented causes and adopt an intersectional lens on gender, equality, diversity, inclusion (GEDI) and climate action, where one can build a transformed and resilient India. Not far behind.” Bain & Company, and co-author of the report.