Indian Tycoons Endow American Colleges

American Ivy League colleges have been reaping a series of lush endowments from top Indian business houses. This month alone, Harvard Business School received donations amounting to US$60 million from two prominent industrialists – the Tatas and the Mahindras.

Thus the Indian magnates are the latest to follow a long line of other overseas potentates, satraps, industrialists and occasional outright crooks and bandits to endow America's colleges and universities for sheltering and presumably educating their sometimes-dim young. The Ivy League colleges throng with buildings, arches, steles and statues of the world's hoi polloi buying their way to America's door. The University of California at Berkeley, on the other end of the country, is similarly endowed by buildings from dodgy Chinese tycoons.

The US$50 million donated to Harvard by the Tata conglomerate is the largest gift received by the school from an international donor in its 102-year history. The Mahindra Group invested US$10 million in a new academic and residential building – the Mahindra Humanities Center – on the school's campus. Harvard will construct a Tata Hall for its Executive Education program in the group's honor.

Both tycoons are Harvard alumni. Ratan Tata, 73, the chairman of Tata Sons Ltd, attended the school's advanced management program – one of the three leadership programs offered by Harvard's executive education program – in 1975. Mahindra, 55, vice chairman and managing director of one of India's largest companies, Mahindra & Mahindra, earned his undergraduate and master's degrees from Harvard Business School.

The political overtones in the gifts, analysts say, is unmistakable, coming as it does on the eve of President Barack Obama's maiden visit to India next month. Further, Obama will be staying at the Tata Group's flagship property, the Taj Hotel, which was devastated by the deadly 9/11 terrorist strike by Islamic jihadis.

Like the Tatas and Mahindras, ex-Infosys co-founder Nandan Nilekani, along with his wife Rohini, also gifted Yale University with US$5 million to underwrite the Yale India Initiative some time back. The couple's two children are Yale and Harvard alumni. Their daughter Janhavi graduated from Yale and is now pursuing a doctorate at Harvard while son Nihar is still studying at Yale.

Nilekani's ex-colleague – Infosys co-founder and chief mentor N. R. Narayana Murthy – has also helped Harvard University initiate a new series on the literary heritage of India via a US$5.2 million endowment.

While such philanthropy is commendable, especially in the aftermath of a bruising economic meltdown, many Indians are curious as to why they don't begin their charity at home. Why shower precious grants on already cash-lush American schools?

Harvard University's endowment fund, for instance, is the world's biggest, at US$27.6 billion as of June 30, 2010. It earned an 11 percent annual return for the year ended June 30 despite the economic downturn and is so lavish that the school knocked off tuition for honors high school graduates whose parents have annual incomes of less than US$60,000. Yale's – though well behind – is still substantive at US$16.7 billion, earning 8.9 percent for the same period. Yale and several other Ivy League schools – as well as Stanford University in California – have also formulated new tuition policies that allow any deserving child whose parents' combined total income is less than US$100,000.

Why does the Indian education sector not benefit from the largesse of the country's corporate stars? Telecom magnate Sunil Bharti Mittal once noted that even Africa has better philanthropic programs than India. According to a study by Bain & Company, philanthropic donations in India are only 0.6 per cent of gross domestic product and, of this, only a tenth is from corporations and individuals. Contrast this with America's figures – 2 per cent and 75 per cent, respectively. Annually, Americans make donations totaling over US$300 billion.

While there are strong cultural reasons why America has such a vibrant philanthropic culture, analysts point out that a key reason why this trend is missing in India is because the country lacks strong institutional support in the form of tax breaks and administrative receptivity.

Another reason for lack of generous endowments to Indian schools is corporate inertia. "Social welfare is primarily seen as a monopoly of the state," says Washington-based political science scholar Kapil Kapur, who earlier taught at Delhi University. "Also, few people feel secure about donating millions to Indian educational institutions as they lack transparent audit trails for absorbing even small amounts."

India's notorious bureaucracy and corruption also inhibit the good samaritans. The Human Resources Development ministry, for instance, is infamous for deterring donations or for redirecting funds to itself. In other words, a strong obstructive culture pervades the entire system.

India has also consistently scored abysmally – usually less than 3 out of 10 (10 being least corrupt) – in Transparency International's Corruption Perception Index. "There is a direct correlation between a country's transparency ranking and its philanthropy," Kapur says. "Unless organizations believe in the government, they won't give money away. Donors believe that support networks are not professionally managed, and as a result, their contributions might be misappropriated."

On the contrary, for Indians investing in western universities, there are many benefits, tangible and intangible. Apart from getting on-campus centers named after them, they are also able to access networks of influence and through that, establish their credibility and presence in the global arena.

According to sociologist Vasantha Pathak, the relatively recent accumulation of wealth by individuals also inhibits philanthropy: "The number of wealthy individuals in India started growing rapidly only after the economic reforms of the 1990s. Normally, it takes 50 to 100 years for philanthropic markets to mature. Today in India, many of those with hard-earned new wealth are not eager to part with their money."

Not that there are no examples of corporate philanthropy in the Indian education sector. Many corporate honchos have strived to fulfill their Corporate Social Responsibility (CSR) obligations by giving away large sums of money to schools. Wipro founder Azim Premji is reportedly planning an endowment trust in India, modeled on the lines of the Harvard Management Company, which supports Harvard University's educational goals. Nandan Nilekani gave US$5 million to his alumni IIT, Mumbai in 2000. The Tatas, similarly, have been in the forefront of donating generously to institutions of academic excellence in India.

Several IIT alumni have also made donations to their home institutions and other premier institutes of learning. IIT-Delhi has partnered with the Bharti Foundation to set up the Bharti School of Telecommunication Technology and Management. There's also a Bharti Centre for Communication, Mumbai, set up in partnership with IIT-Powai. The Indian Institute of Science, Bangalore, has also succeeded in attracting private funding as well.

Besides this, Infosys is starting a campus in Hyderabad with the Georgia Institute of Technology, USA. Corporate houses and individuals are also entering primary education in a big way. The Bharti Foundation has started 236 Satya Bharti primary schools across the country.

Despite these efforts, Bain's analysis of 30 high-net-worth individuals in India showed that they contribute, on average, just around one-fourth of 1 percent of their net worth to social and charitable causes.

India's education sector, especially higher education, remains seriously undercapitalized. The country spends an abysmal 3-4 percent of GDP on basic needs like education even as the government mulls a hike in infrastructure spending from 4 percent to 7 percent of the GDP in the 12th Plan. As a contrast, even Cuba, impoverished by a Communist system and five decades of American embargo, spends 18 percent of its GDP on education, Lesotho 10.4 percent, Yemen 9.5 percent and Mongolia 9 percent.

Neeta Lal is a New Delhi-based senior journalist;