---By Gayatri Vishwa Diwan
Indian billionaires grew well out of the deadly war against Covid, the shocks of the recession period in the global economy reeled under the stress of war, supply chain disruption and heightened borrowing costs. The cumulative wealth of Indian billionaires has increased by 9.4% while average wealth decreased by 1%. The number of individuals with wealth of more than Rs 1,000 crore increased to over 1,000 in 2020-21, from 828 in 2019-20.
India has the third highest number of billionaires, at 97, while China with 430 stands second behind the US. The year has been good for many others too, as 149 individuals entered the IIFL Hurun India Rich List of 1,103 – all of whom have a wealth of ₹1,000 crore or more. They cumulatively have a wealth of ₹100 lakh crore.
Nikhil Kamath, the co-founder of Zerodha says the sense of social service among billionaires is needed in today’s world because the wealth disparity among people is high and is constantly growing. India’s billionaires and the super-rich, however, seem to be some way off from reaching their philanthropic potential. As per the India Philanthropy Report (IPR) 2022 released by Bain & Company and Dasra, as the economic disparity among the top first percentile and bottom 50th percentile of people in India continued to widen, and Covid-19 pushed more than 20 crore people into poverty, overall family philanthropy [giving by ultra high net-worth individuals (UHNIs) and high net-worth individuals (HNIs)] actually contracted.
The expectation for social services largely comes for the UHNI segment which counts 1,000 in number in India in FY21, up from 828 in FY20. Their cumulative net worth increased by approximately 50 percent, from about Rs60 lakh crore in FY20 to about Rs90 lakh crore in FY21. The relative percentage contributions in wealth of UHNIs in India range from 0.1 percent to 0.15 percent, which is low in comparison with countries like the US, UK and China.
The fact got more highlighted at the time when India is facing a glaring deficit in social sector funding. India’s social sector funding stands at Rs17.5 lakh crore in FY21, of which 93 percent accounts of public funds (central and state social expenditure), while private funds contributed only 7 percent of total social sector funding, which is approximately Rs100,000 crore. This is lower than the 13 percent outlay that government think tank Niti Aayog estimates the social sector will need if India has to meet its United Nations Sustainable Development Goals (SDG) by 2030. The IPR plugs the deficit at Rs8 lakh crore in FY21 and Rs10 lakh crore in FY26 if the same trajectory continues.
Source - Bian & Company Report 2023
Regardless of the figure that the cumulative wealth of India’s richest grew by over 9% in FY2022, their contribution to the social sector shrank by 5% in this period. According to India Philanthropy Report 2023 published by Bain & Company, the contribution of the Indian ultra-high net worth individuals (UHNIs - those with a net worth of over Rs 1,000 crore) to the social sector dipped to Rs 3843 crore in FY22 from Rs 4,041 crore in FY21, excluding Premji's donations.
As stated in the Hurun India Rich List, nearly 61% of India’s billionaires called themselves self-made. There is much tendency among first-generation entrepreneurs to personally enjoy all the comforts of their new wealth as they are born in the pre-liberalization era and were raised in a poorer and more challenging India.
Secondly, the tax laws are more complex in India and don't incentivise philanthropy. The rich don't want to end up on any radar or become the subject of more appeals for money by revealing their wealth through getting in the limelight of social service. The revelation of donations is not considered as appropriate action for the business.
Thirdly, this is the time of uncertainty, as the business world is gradually recovering from pandemic wounds and the ongoing recession in the world economy. The billionaires, in this critical time, try to avoid the large outflow of cash from their account and get it reserved for any unexpected mishap in near future.
Also, the notable point is that India is witnessing the considerable migration of the richest outside the country. Growing up in a deeply unequal society motivates these newly-rich individuals to act differently from their western counterparts. Some of them leave for countries with better economic conditions for their business. In the last 14 years, for instance, nearly 61,000 Indian millionaires have left the country—second only to China’s 91,000 millionaires. Some of those who stay keep more for themselves and their future generation, not only by avoiding charities, but also by being creative with their tax structures.
Given these positive developments, Indian UHNIs could potentially increase their donations by 8 times, to INR 90,000 to INR 100,000 Cr., given that they match the percentage of giving of their UK and Chinese counterparts, and by 13 times, to INR 160,000 to INR 170,000 Cr., if they can match their US counterparts. Unlike UHNI philanthropy’s huge swings, total HNI donations could be less volatile, growing at a CAGR of 6%, from approximately INR 16,000 Cr. in FY 2015 to approximately INR 22,000 Cr. in FY 2021. In the period mentioned, the number of affluent households has risen from approximately 280,000 to approximately 391,000, and the number of HNI households has increased from approximately 5,000 to approximately 8,000. Both segments have increased at approximately 6% CAGR over the past seven years, driven by upward movement among upper-middle-class families into the affluent category.
Growth of the stock markets and India Inc. profits, increasing inflow of foreign capital for investment, and a meteoric rise in value creation in the start-up ecosystem have all contributed to this phenomenon. This trend is expected to grow stronger as India strives to become a $5 trillion economy by 2030.
Executives increasingly see themselves in a no-win situation, caught between critics demanding higher levels of “corporate social responsibility” and investors applying unrelenting pressure to maximise their short-term profits. Giving more does not satisfy the critics—the more companies donate, the more is expected of them. And executives find it hard, if not impossible, to justify charitable expenditures in terms of bottom-line benefit .
This dilemma has led many companies to seek to be more strategic in their philanthropy. But what passes for “strategic philanthropy” today is almost not truly strategic, and often it isn’t even particularly effective as philanthropy. Increasingly, philanthropy is used as a form of public relations or advertising, promoting a company’s image or brand through cause-related marketing or other high-profile sponsorships.