Indian Americans Have the Potential to Drive Foreign Aid to India

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October 24, 2016; Financial Times

With a population of over three million in the U.S. alone and a median family income close to $40,000 greater than the $50,000 of the average American family, it comes as no surprise that Indian Americans are beginning to have a huge impact on charitable giving. For the time being, however, these philanthropic dollars are concentrated in their home country overseas. Rohit Menezes, a partner in the Mumbai office of Bridgespan, offers one reason for this phenomenon: “Because they’re relatively new to America, they still retain community ties to India.”

For instance, when petrochemical giant Vijay Goradia, who has a family net worth in the $1.5 billion ballpark, decided to establish the Vijay and Marie Goradia Foundation, his focus was on helping some of the poorest Indians attain an education. Goradia’s daughter, Sapphira, executive director of the family’s foundation says, “While we give in the U.S. as well, my parents wanted to give back to India because it was where they felt they were given the initial opportunities and education to pursue their goals.”

This makes sense. An emotional connection to a cause is one of the strongest motivators of charitable giving. Given the success Indian Americans have attained in the U.S., the amount of money going to Indian charities could be astoundingly high. A study by Bridgespan reports, “The combined annual discretionary income of Americans of Indian origin is approximately $67.4 billion. If their philanthropic contributions were consistent with those of other U.S. households in similar income brackets, and if they directed 40 percent of their philanthropy to India, $1.2 billion per year would flow from Indian diaspora donors to Indian causes as compared to U.S. foreign aid to India ($116.4 million in FY 2014).”

With strong ties to causes in India and ample funds to donate, it appears the only issue standing in the way of larger and more frequent donations to Indian causes is an uncertainty with the credibility of overseas nonprofits. To that end, the Financial Times indicates that companies that vet overseas nonprofits are popping up, including Give2Asia, GiveIndia, and Dasra. While the exact mechanism of gift facilitation varies, all of these platforms offer U.S. donors peace of mind, knowing that their donations are going to reputable nonprofit organizations.

Because it appears that the primary driving force for charitable giving to Indian causes is an emotional tie to their home country, it will be interesting to see how this shifts as more American-born Indians begin to engage in philanthropy. Will we see more dollars going to American nonprofits as Indian families enter fourth and fifth generations in the U.S.? Or, will that emotional connection be cross-generational? We will have to wait and see.— Sheela Nimishakavi