More private philanthropy is key to build India’s social sector

12 March 2023 4 min. read
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Private sector philanthropic spending on the social sector in India should be increased to help the country bridge a growing funding gap, according to a new report. Over 90% of affluent donors are reportedly interested in providing more funding for initiatives that prioritise social issues like climate change, gender, equity, diversity, and inclusion.

India has one of the fastest growing economies in the world. With a GDP growth rate of 8.7% in 2022, India’s economic growth is expected to remain strong. Yet despite rapid GDP growth, efforts to reach a $5 trillion economy by 2025, and a growing middle class, multi-dimensional inequalities are still a major problem in India.

India’s private funding growth projection by segment (INR ‘000 crore)

While India’s social sector spending as a percentage of GDP grew from 8.6% in 2021 to 9.6% in 2022 (mainly due to 35% growth in public spending), the country still remains well short of NITI Aayog’s estimate (13% of GDP) of total annual funding required to achieve United Nations Sustainable Development Goals (SDGs) by 2030.

The public sector carries the weight of social sector spending in India, accounting for 95% of total spending. The remaining part of funding comes from the private sector, which stems from two major sources: foreign and domestic philanthropists (companies, affluent family offices and individuals).

“Private philanthropy can play a catalytic role in building bridges at the intersection of government, businesses, foundations, civil society, and communities,” according to a report on the state of social giving in India from strategic consulting firm Bain & Company and Dasra, an Indian philanthropic foundation.

Demand supply gap in social sector funding in India (INR lakh crore, until FY27)

Along with individual affluent donors, India’s private sector donations also come from companies through corporate social responsibility (CSR) allocations, up by 5% in 2022 as compared the previous year.

“Affluent givers are a large segment with the desire to give,” said Sumit Tayal, COO at GiveIndia, a major crowd-funding platform. “Building trust and unlocking their giving potential will require tech platforms that are convenient to use and access to reliable non-profit data.”

Funding gap

According to Bain & Company and Dasra, there is currently a gap in social sector funding in India that needs to be bridged. The gap, at 30% in 2022, is expected to rise to 34% by 2027, constituting a difference of around ₹12.4 lakh crore INR (12.4 trillion Indian Rupees – equivalent to about $151.4 billion).

The authors state that it is therefore crucial that stakeholders make investments in bolstering the philanthropic infrastructure for fostering community resilience as the nation recovers from the Covid-19 pandemic. For example, private funding can be used to bolster the effectiveness of non-governmental organisations (NGOs) working in India to meet social needs.

CSR per capita (INR.)

Meanwhile, like the major gaps between social classes, philanthropic spending is also distributed unevenly between states. Maharashtra, Gujarat, Karnataka, and Tamil Nadu alone receive 50% of state-specific CSR investment, demonstrating a geographic bias and the need to diversify allocation among states. It is precisely some of the poorest states, like Uttar Pradesh and Bihar that received the least CSR.

Despite still being one of the fastest-growing economies in the world, the Covid-19 pandemic and the war in Ukraine, among other market turbulence, have posed significant risk to the Indian economy in recent years.

In 2022, the majority of philanthropic contributions (55%) went towards healthcare and education. Due to the pandemic, a significant amount of the money that would have gone to other causes was instead used for healthcare and disaster relief.

CSR Sectoral Fund Allocation (INR crore)

“The next generation of givers are collaborating and giving together to critical challenges such as climate, gender, health, and nutrition, among others,” according to Arnva Kapur, program officer at the Bill & Melinda Gates Foundation. Collaboration between non-profits, private donors, and government will remain key.

A 2019 report from Bain found that philanthropic contributions in India were on the rise – and the trend is continuing into 2023. This previous report identified areas for improvement, such as more funding for gender equality, which does seem to now be an area of increased focus.