India’s Social Sector Funding Faces Massive Shortfall

A new report on India’s philanthropy sector by Bain & Company has thrown up two important observations: one, that the ‘Ultra High Networth Individuals’ are donating less for the good causes, and two, that the government’s social sector funding may have a shortfall of a staggering Rs 10 Lakh crore by the year 2026 if the present trend continues.

The government’s dependence on Corporate Social Responsibility (CSR) measures to bridge the gaps of this funding leaves a big hole in finances allocated for social security measures year by year. It needs almost doubling the allocations in the Union Budget to ensure basic level of social services for millions of poor citizens. But allocations in the recent Budget are inadequate and leave room for massive improvement

The “India Philanthropy Report 2022” says: “UHNI giving has contracted from its peak of 18% in FY 2015 to 11% of total private giving in FY 2021; and retail giving has grown marginally, but its overall share remains 25% to 30% in total private domestic giving.” But the report warns at the outset: “The glaring deficit of social sector funding in India must be plugged. As with any developing nation, the government has been taking most of this burden, but with increasing fiscal deficit and higher debt burden following the pandemic, government finances will be limited. It is here that private philanthropy comes into the picture, with its ability to bridge some of the gap if it realises its true potential.” The total shortfall according to data calibrated by NITI Aayog projections on social sector spending could be as huge as Rs 10 lakh crore.
The nub of the problem is that the government has been exhorting the private sector to participate in nation building and contribute to its branded campaigns in social sector initiatives while cornering the credit. ‘Swachch Bharat Abhiyaan’ in 2015 was such a campaign where CSR spending were shifted to a government effort on a large scale. Before that the corporates were free to allocate their resources to activities which suited them best, like educating children in the areas around their plants, providing safe drinking water to villages or setting up vocational training centers for youth who could find jobs in their factories or industrial units. 

With the pandemic hitting in March 2020, the government decided to direct the corporates to shift its efforts to healthcare. Contributions to PM Cares Fund were included in the CSR activity. Thus the limited CSR resources were shifted to the healthcare at the expense of cutbacks in other activities.

This was done at time when the government was actually reducing its own expenditure on healthcare- A case of outsourcing an essential government responsibility at the time of a pandemic.  

See earlier story for allocations in the last Union Budget
 

In the latest Union Budget too, the government has decided to shift focus to transportation while making cutbacks in social sector spending.
See earlier story on cut in budget allocation of five important schemes

Now that the economy is facing headwinds, the CSR allocations and private philanthropy may again come under stress leaving a huge gap between what is required for the social sector and the government can mop through taxes at a time when the fiscal deficit is threatening to go out of control. 
The money for poverty stricken Indians will be hard to find.

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