Late last year, the former chief executive officer of IT company Infosys Technologies, Nandan Nilekani, and his wife Rohini, decided to donate over $8 million of their personal wealth to an economic research institution. While lavish weddings tend to dominate international headlines about the way India’s elite spend their money, this development marks a transition in the approach of the rich towards their wealth. The new and mature business leaders are sharing their wealth with worthy causes.
This is a welcome new trend that has been gaining momentum in recent years. Many industrialists are increasingly spending a significant percentage of their wealth on philanthropic activities. Large corporations are budgeting support to non-profit organizations that work in sectors like health, education, nutrition and gender equality.
While a few corporations have a long track record of sharing, giving has not come easily to most Indian companies and business leaders. Many would spend a token amount on welfare activity and a larger sum advertising it. For them, charity money came from the marketing budget. Most companies and wealthy individuals have been neutral to the idea of giving. They either didn’t care, didn’t know how to or were too lazy to make the effort.
Corporate India will no longer have a choice. A new law that comes into force from April 2014 will mandate companies above a certain size to spend at least 2% of their annual net profit on charitable activities. Industry leaders opposed the move. They sought carrots for spending on charity but did not want the stick.
The new law is expected to squeeze more than $2 billion out of corporate India and direct it for social causes and charities. Companies are now setting up their internal procedures to ensure transparent management of such resources for giving back to society.
There is no such mandatory law for wealthy individuals. While they are donating more, wealthy Indians tend to be conservative and restrict themselves to causes close to their culture and community. Most are yet to warm to issues like human rights, women’s empowerment, disability, financial inclusion and skilling.
The World Billionaire Census 2013 says there are more billionaires in India than in France, Saudi Arabia and Switzerland. But the World Giving Index ranks India 93 out of 135 countries. Ideally, this irony will disappear soon.
Hopefully, wealthy India will go the way of Mr Nilekani.
Author: Pranjal Sharma is consulting editor at Businessworld
Image: A man walks on Bombay’s promenade REUTERS/Desmond Boylan