As India grows too rich for the World Bank, other philanthropic sources are needed

According to a presentation by Cornell University Economics Professor Ravi Kanbur, India is only a few years away from becoming ineligible to receive funds from the World Bank’s International Development Association— the bank’s fund for the poorest countries. In essence, India’s per capita income has risen above the maximum threshold to receive money from the IDA. This factor by itself is a great milestone as it shows that India has reached a point in its economic development where it is no longer considered one of the world’s most impoverished countries. Moreover, India will continue to have access to World Bank fund via another facility called the International Bank for Reconstruction and Development, who targets middle income countries. The primary difference between the IDA and IBRD is that the former relies much more heavily on grants and the latter on loans.

However, this transition from a low income country to a middle income one by World Bank definitions also raises some concerns. In particular, Kanbur highlights in his presentation how per capita income has grown unequally across the country and specific regions of the nation continue to live in impoverished conditions. India continues to have the largest number of people living in poverty in the entire world. The current eligibility requirements for the IDA, however, does not allow for such intra-country analysis and so regions/states within the country that still need substantial aid will no longer be able to appeal to the IDA.

This forthcoming transition then begs the question over who will be able to fill the void that will be generated. While alternative international aid facilities are an option, one source of optimism may come from the private sector. Private philanthropy is still a nascent world within India, but recent studies have suggested that it is one with rapid growth. This past Wednesday, the third annual Indian Philanthropy Forum gathered over 200 government representatives, philanthropists, think tanks and social sector experts to discuss how philanthropy can be used to help develop India [Livemint].

In a recent Bain & Company report, India showed substantial growth in private giving, particularly from corporations and foundations. The report did highlight that individual giving still lags behind other countries. Matthew Bishop, New York editor-in-chief of The Economist, stated that India has the fastest growing population of high net worth individuals in Asia, and that it is critical that this new wealth is directed strategically into philanthropic efforts:

“It’s not how much you give away, but how much difference does your giving make in terms of moving the needle and solving the world’s problems,” he said at the forum. “That requires taking risks and being innovative.”

The development of a sophisticated philanthropic community within India is still some years away. However, with the macro shifts in aid and funding that will occur from the World Bank, it cannot come soon enough.