The economics of charity

When the world's two richest men and the biggest philanthropists of their generation, Bill Gates and Warren Buffett, ask India's rising tribe of billionaires to open up their purse-strings, the appeal indeed carries weight. HT reports. Giving is a gift

When the world's two richest men and the biggest philanthropists of their generation, Bill Gates and Warren Buffett, ask India's rising tribe of billionaires to open up their purse-strings, the appeal indeed carries weight.

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Last year Wipro chairman Azim Premji decided to transfer 213 million shares worth Rs 8,846 crore to a foundation that is little-known despite its contribution in improving the education system in various states of the country.

Premji's act of philanthropy, the biggest in India, comes at a time when Indian corporates are facing increasingly harsh questions on their unwillingness to do something for the upliftment of their less fortunate brethren.

A rebounding stock market that gained two-thirds in the past year and an economy growing at more than 8.5% per anum has boosted the wealth of India's richest people. Last year, there were only 49 billionaires on Forbe's India Rich List. This year has half-a-dozen more names at 55 - a record. The number of so-called "high net worth individuals" in India has grown at about 11% every year since 2000, to more than 1,15,000 at present.

Yet these riches are apparently not enough for them to loosen their purse-strings for charity.

A drop in the ocean
Consider this: charity donations in India aggregated $7.5 billion (about Rs 33,000 crore) in 2009, according to a study by consulting firm Bain & Co - less than 1% of the country's GDP. Only 10 % of India's charity funds comes from individuals and corporates. The government accounts for 65%, and overseas aid agencies the rest.

But things may be changing.

GMR Group chairman GM Rao, who has pledged $340 million (Rs 1,540 crore) to the GMR Varalakshmi Foundation to serve the needs of the under-served sections of society, said philanthropy is changing in India.

"From my initial years in business, I have always believed we have a responsibility to give back to the society in which we thrive and to which we owe our success," he said.

Premji said the discussion with Gates and Buffett on Thursday "has been an excellent opportunity to discuss the part we can play in contributing to equitable and sustainable development of India."

"Speaking for myself, I am completely committed to supporting the larger ambition of catalysing social change that builds a better society," Premji said.

Giving till it hurts
Buffett has pledged 99% of his wealth in Berkshire Hathaway to philanthropy. Along with bridge partner and Microsoft co-founder Bill Gates, Buffett is coaxing America's richest to pledge half their fortunes to charity as part of "The Giving Pledge."

So far, 59 rich Americans have taken the pledge and the tycoons have said they want to take the campaign worldwide.