Private Philanthropy Needs To Step Up, Bridge ₹7.7L Cr Spending Gap: Report

India’s public sector accounts for 95 per cent of the total funding on social sector but private philanthropy can plug the growing gap in social spending, the India Philanthropy Report 2023 has said. 

The annual report, a collaboration between Bain & Company and Dasra, added that social spending by the public sector grew by 35 per cent last year.

Social spending, as a whole, grew from ₹11.1 lakh crore in 2016-2017 to ₹22.6 lakh crore in 2021-2022. The report, however, noted that there is a ₹7.7 lakh crore gap in social spending in India.

“India is still significantly short of NITI Aayog’s estimation of the total annual funds needed (about 13 per cent of the GDP) to achieve Sustainable Development Goals (SDGs) commitments by 2030,” the report said. 

With healthcare expenditure declining after the Covid-19 pandemic, the report argued that the gap in social sector expenditure may reach ₹12.4 lakh crore by 2026-27.  

“Private Philanthropy Needs To Step Up” 

Private philanthropy, which includes donations by families via Ultra High Net-worth Individuals (UHNIs) and corporations (through Corporate Social Responsibility and trusts), remained stagnant in 2021-22 at ₹1.05 lakh crore. 

Social spending by UHNIs contracted by five per cent from 2020-21 despite a nine per cent increase in cumulative UHNI net wealth in 2021-2022, the report noted. In absolute terms, total spending fell to ₹4,230 crore in 2021-22 from ₹11,811 crore in 2020-21.  

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

“Giving levels have not kept pace with the increase in wealth. It’s crucial to invest in strengthening the philanthropy infrastructure, provide a range of fully designed and investment-ready vehicles for giving,” said Neera Nundy, Co-founder and Partner, Dasra.  

Private philanthropy, however, has the potential to support the public sector and supplement social spending in India, with the report arguing that the growth in public funding may level out to pre-pandemic levels.

The report added that private philanthropy in India is expected to expand at 11 per cent annually over the next five years, primarily through CSR and family philanthropy.  

Robust Growth In CSR Spending  

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

CSR spending grew at 13 per cent since 2017, reaching ₹27,000 crore in 2021-2022, with healthcare and education sector cornering the lion’s share of total funding.  The report added that CSR spending could reach ₹52,000 crore by 2026-2027. 

More often than not, corporate spending on CSR has breached the government’s two per cent mandate. In 2021-22, BSE 200 companies contributed an additional ₹1,200 crore over the two per cent mandate.  

However, despite the buoyant numbers, CSR activity has not been evenly distributed in India. “About 50 per cent of state-specific CSR spending is directed towards just a few states, namely Maharashtra, Gujarat, Karnataka, and Tamil Nadu,” said Ms Nundy.  

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

Family Philanthropy – The X Factor?  

Family philanthropy grew at 12 per cent over the last five years, reaching ₹29,600 crore in 2021-22. 

Excluding the contribution of billionaire philanthropist Azim Premji, family philanthropy accounted for a third of the total private contribution in India and is expected to grow at an annual rate of 12 per cent till 2026-27. 

The report said that family philanthropy can provide more flexible capital and help fund the spending gap. Moreover, it can make donations more effective, disruptive, and focused towards the underserved segments, the report noted.  

Suggesting a positive shift in family philanthropy, the report noted that now-generation (those with first-generation wealth) as well as inter-generation donors are increasingly focusing on underrepresented causes. 

“There’s an increased need to focus on underrepresented causes and adopt an intersectional lens on Gender, Equality, Diversity, Inclusion (GEDI) and climate action to build a transformed and resilient India where no one is left behind,” said Jishnu Batabyal, Partner, Bain & Company, and Co-author of the report.