MUMBAI (Reuters Life!) - The number of wealthy Indians has been rising fast over the last decade, but they’re not ready yet to let go of their hard-earned cash, even for charity, according to a study by business consultancy Bain & Co.
The number of so-called “high net worth individuals” in India has grown at about 11 percent every year since 2000, possibly the fastest pace in the world, to more than 115,000 now.
Two industrialists, Reliance Industries’ Mukesh Ambani and Lakshmi Mittal, are among the five wealthiest individuals in the world, according to Forbes magazine.
But when it comes to giving away money, India’s rich are not very keen on loosening their purse-strings.
Charitable giving in India probably totaled about $7.5 billion in 2009, according to the study by Bain & Co, equivalent to about 0.6 percent of the country’s GDP.
That percentage is higher than Brazil’s 0.3 percent and rival China’s 0.1 percent, but it falls way short of the 2.2 percent in the United States, and 1.3 percent in Britain, the report said.
Most Indians have no qualms about giving cash to family, friends, household staff and religious institutions, but given the scale of poverty -- an estimated 40 percent of India’s 1.1-billion population lives on less than $1.25 a day -- Indians need to become way more generous, said Bain partner Arpan Sheth.
“Should individuals, particularly the well-off, be giving more? Can they afford to make larger donations? The answer to both these questions is absolutely yes,” Sheth said at the first Indian Philanthropy Forum in Mumbai, the country’s financial hub.
There are an estimated 2.5 million non-profit organizations in India, and about half of all donations in the country go to religious, sports and cultural organizations, the Bain study showed.
A huge 65 percent of donations comes from the central and state governments, with a focus on disaster relief. A large amount also comes from foreign organizations.
Only 10 percent comes from individuals and corporates, in sharp contrast to the United States, where 75 percent of charitable giving is from individuals and corporates, Sheth said.
And in India, it’s not about who has more money: in fact, the wealthiest social class has the lowest level of giving, just 1.6 percent of household income, which palls when compared to billionaire investor Warren Buffett, who has given away some 82 percent of his net worth.
Bain & Co’s Sheth said Indians’ reluctance to part with their cash stemmed from a variety of reasons including no tax breaks for charitable donations and a deep-seated suspicion of what charitable organizations really do with the money.
“Accumulation of wealth is a fairly recent phenomenon in India -- it really began only with the opening of the markets, and we do have a history of scarcity,” Sheth added.
“So it may be harder for people to let go of their newly-earned wealth.”
But change is coming: software czar Azim Premji and telecom tycoon Sunil Mittal have set up charitable foundations, and Vineet Nayyar, head of software firm Tech Mahindra recently gifted a third of his shares to another charity.
“Such high-profile donations, private foundations, greater organization in the NGO landscape and mass events that encourage fund raising, will encourage a greater culture of philanthropy in India,” Sheth said.
“What’s also needed are conducive tax laws,” he added.
Editing by Miral Fahmy