June 30, 2011; Source: Wall Street Journal | In the American obsession with the growth of the economy of China, including hyperbolic concerns that the Chinese own 40 percent of American debt (it's really 8 percent), we sometimes overlook growing economic juggernauts in the developing world, especially India. The statistics are compelling: India ranks fourth in Gross Domestic Product (behind the U.S., China, and Japan and ahead of Germany and Russia) and fifth in GDP growth rate (just ahead of China). 

How does the increasing economic power of India translate into charity and philanthropy? Bain & Co. issued a report a year ago on Indian philanthropy, causing a lot of debate about how wealthy Indians gave proportionally much less to charity than comparably wealthy people in the U.S. or the U.K.  It was a cause celebre when Warren Buffett visited India to sell his concept of the ultra-wealthy making substantial in vivo charitable donations. 

A new report from Bain says that charitable and philanthropic giving in India has bolted upwards since 2006, including a 50 percent increase in private giving as a percentage of GDP as of 2010. The Bain study said that charitable giving has increased from $2 billion in 2006 to between $5 billion and $6 billion in 2010.  As a proportion of GDP, private giving is still low, only between 0.3 and 0. 4 percent of GDP in India compared to 2.2 percent for the U.S. and 1.3 percent ffor the U.K.  The bigger gap is the charitable giving of high net worth people in India (donating between 1.5 and 3.0 percent of their household income annually) compared to their counterparts in the U.S. (donating 9 percent, according to the Bain study).  

What holds back high net worth donors in India?  Bain identified three explanatory factors:

  • "Donors’ concern about the accountability and transparency of the NGOs and whether the money is being used optimally and for the declared purposes;
  • Donors’ lack of awareness of charitable organizations that match their interests; and
  • Tax laws that don’t encourage charitable giving as much as some western countries’ do."

The size of the Indian economy, like the Chinese economy, is expected to surpass America's within a short period of time (in aggregate terms, not per capita measures).  How much will Indian charitable giving grow in that process?—Rick Cohen