Pandemic keeps uber rich off charities, contribution drops to 11%

In spite of a massive jump in the number of the uber rich and rich becoming richer, their contributions to charity continued to decline during the COVID-19 pandemic when a whopping 200 million-plus were forced into poverty, says a report.

While CSR (corporate social responsibility) spends have increased from 12 per cent in FY15 (two years into mandatory CSR spends) to 23 per cent in FY21, charity by the uber rich slipped from 18 per cent of the total funding in FY15 to a paltry 11 per cent in FY21, says global consultancy Bain & Company and charity-focused domestic consultancy Dasra in their India Philanthropy Report 2022.

The report said that donation from private foreign companies has contracted from around 26 per cent in overall private giving in FY15 to around 15 per cent in FY21.

Donation by private domestic companies has grown at a moderate rate of 8-10 per cent annually during this period, primarily aided by CSR contributions.

The steep decline has left a social funding gap of Rs 8 lakh crore in FY21, which will further widen to Rs 10 lakh crore by FY26, as the rich continue to keep their purse strings tight, warns the report.

According to the findings, pandemic years have seen the rich/family offices driven charities falling while CSR spends helping overall funding towards the social sector investments, thus meeting the UN's sustainable developmental goals (SDG).

Funding towards social sector increased by 12 per cent annually between FY15 and FY21 to 8.3 per cent of GDP.

FY21 saw the funding jumping by 20 per cent to 8.3 per cent of GDP, but this is partly due to the increased government dole-outs amid the pandemic, and more because of the record 6.6 per cent contraction in the GDP.

The report categorises charities across three funder segments -- CSR, retail giving, and family philanthropies.

Total social sector funding in the country has seen a 12 per cent annual growth over the past five years ending FY21 when the fund inflows saw a sharp 20 per cent jump as a result of the increased government expenditure.

However, gaps remain, says the report, adding, with the total flow of funds at an average 7 per cent of GDP in recent years (8.3 per cent in 2021), "we are still short of Niti Aayog's estimate of annual funding needed to achieve the SDG commitments by 2030".

As a result, the deficit is of a whopping Rs 8 lakh crore in FY21, which will jump to Rs 10 lakh crore in FY26, if the same trajectory continues, warns the report which also notes that the two waves of the COVID-19 pandemic and the unplanned lockdowns have pushed more than 200 million into poverty.

Radhika Sridharan, partner at Bain & Company, said, though the macro indicators show the economic trajectory has been strong, the development story can hardly be called inclusive as progress and access to opportunities have missed the most vulnerable geographies and populations.

Private sector funding stems from two major sources -- foreign and domestic philanthropists. Domestic philanthropists include corporations (CSR and corporate trusts) and individuals.

Domestic individuals can be further categorised into family philanthropies (ultra–high net-worth individuals and HNIs) and retail, depending on their net wealth or income and donation amount.

CSR has grown both in absolute terms and in its contribution to overall private giving. Retail giving has grown marginally and constitutes between 25 and 30 per cent of total private domestic giving.

Family philanthropic donations have declined in their total contribution to private giving.

CSR, family philanthropy and retail giving cumulatively contribute about 84 per cent of the total private philanthropic capital in the country, "and they will act as three strong pillars as we move ahead", says the report.

According to Neera Nundy, co-founder of Dasra, total private philanthropic funding is estimated to grow at around 12 per cent annually till FY26 due to robust CSR growth, family philanthropy and retail.

However, CSR will continue to be the main driver, and is expected to grow at 19 per cent annually taking its share to about 32 per cent of total private giving by FY26.

Family philanthropy has contracted overall to about one-third of the total private giving from around 37 per cent in FY15, and is expected to grow at 13 per cent per year until FY26, while UHNI giving has contracted from its peak of 18 per cent in FY15 to 11 per cent in FY21.

Family philanthropy can generate an additional annual investible corpus of Rs 60,000-100,000 crore for the non-profit sector, and is expected to grow 12-14 per cent till FY26.

But compared to other countries, including China, England, and the US, "our rich donate substantially less across all wealth brackets barring the sole exception of young tech entrepreneurs", says the report.