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Role of Philanthropy in Accelerating Economic Growth

  • 19 Sep 2022
  • 5 min read

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).
  • 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.

Source: Livemint

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