Charity Case: Do Indians Give Enough Away?

As the U.S. and Europe inch toward the holiday season, Indian festivities are already in full swing. The Hindu holiday of Diwali, a week of celebrations that finishes Friday, is one of the country's biggest festivals. Like Christmas, it is mixture of bright lights, commerce and charity. Neighbors exchange gifts, bosses dole out bonuses, and temples are typically flush with donations. With its economy on the rise, India is now, more than ever, a country with money to spend, and give. As shoppers flood markets looking for gifts, it's clear that many Indians are indeed spending big on friends and family. But research suggests that charitable giving is not necessarily keeping pace.

Earlier this year, billionaire philanthropists Bill Gates and Warren Buffett arrived in India to try to convince India's wealthiest that they could, and should, do more. India is now home to 57 billionaires, according to Forbes, and a multiplying number of millionaires. Despite difficult economic times around the globe, over the past two years, India's 20 wealthiest individuals have doubled their combined wealth, according to Bain & Co. However, India's superrich have been relatively slow to give. Bain & Co.'s 2011 India Philanthropy Report found that India's wealthy are giving away between 1.5% and 3% of their yearly income. The number marks an increase, but still pales in comparison with the 9% donated each year in the U.S.

Creating a culture of philanthropy will take time, says Gurcharan Das, author of The Difficulty of Being Good. "You have to measure that speed against the fact that money has just come to India. In America, there's been 100 years of Carnegies and Rockefellers and time to build a certain tradition and culture. In India, we're telescoping all of this in 10 or 15 years."

Even for those who are looking to donate, giving away large sums of money in India poses logistical challenges. India has seen an explosion of NGOs seeking funds and doling out help. Over the past three years, an average of 700 NGOs open daily in India, and the country is now home to 3.3 million NGOs. That has made deciding where to donate funds, and making sure the money's going to good use, a difficult task.

Organizations like Dasra, a strategic-philanthropy foundation in Mumbai, aim to bridge the confidence divide. Dasra vets potential nonprofits for big donors to make sure everything is on the level and the funds will be used effectively. The approach is good for both donors and charitable organizations, says Deval Sanghavi, Dasra's co-founder and CEO. "It gives philanthropists the comfort level to part with larger amounts of capital and ensures social entrepreneurs have a plan in place, which they probably never had before, and can create greater impact than ever before," he says.

There have been signs of progress, as the amount of charitable giving among the wealthy has almost tripled over the past five years, according to Bain & Co. Last year, Azim Premji, the head of the software giant Wipro, made India's largest private donation to date, giving nearly $2 billion in shares to set up an educational foundation. And while the philanthropic numbers of the country's wealthy may still be lagging, that doesn't mean that Indians without fortunes to bankroll a charity don't give. "Traditionally, giving has been comprised of giving within own communities, religious institutions and in-kind donations — like clothes or sponsoring a child's education," says Sanghavi. "So there may not be money passing through nonprofit organizations, but goods and services passed to the individual directly, and there's never been a record of that giving."

Instead of giving to charities, the most popular form of giving is donations to temples, which in turn open schools and hospitals for the poor. "In the West there are a lot of things that are taken for granted that the state will provide," says Das. "Here these things are provided through the private sector, individuals and community institutions, like the temple. That means, in India, people have to look after their own through the joint family, caste and other community institutions."

The tradition of giving within the community is a good start, but in a country where 450 million people live in poverty, more needs to be done, says Dhaval Udani, head of GiveIndia, an online portal for charitable contributions where individuals typically give between $10 and $500. "Giving to temples and other unstructured giving are all good mechanisms to give, but it's not enough," he says. Udani says the target for Indian households should be 1% to 2% of their annual income, but at the moment it's still only a fraction of that number. "Currently we are very disengaged with what's around us. We put on blinkers, go to work and come back, not seeing what's going on around us," he says. "When you start giving, you become more aware. That change in mind-set [will] have the biggest impact."