One of the obstacles is that there are very few credible public institutions where donors can be confident that money will be well spent. Professional organizations outside of government are not of a critical mass and achievement to attract huge sums of money. The government further distorted the incentives by inappropriate forms of regulation. The whole relationship between the corporation and the state, between the individual and the state, in matters of taxation was so convoluted, that clean, transparent giving became very difficult.

Charities need to be made accountable, but our accountability is done in a way that deters the good and collects rents from the bad.

For instance, under current law, it is still not easy to create a huge endowment of the kind that can sustain world class institutions for posterity. Although exemptions can be granted, the requirement of spending 85 per cent of income in the year it accrues, coupled with restrictions on investment, make it difficult to sustain large endowments. From the Wanchoo to the Shome Committee Reports, from the Charities Commissioner to our FCRA rules, the pervasive sense of mistrust and cynicism about private philanthropy has created a culture that will take time to overcome.

But if the demand side is plagued by restrictions, the sources of supply need to introspect as well. Other than a few fleeting experiments, Indian Capital is still a non-entity in philanthropy. It now has the resources to fill in critical gaps in what citizens require in areas like health and education. It can foster a diversity of experiments that are not possible within state structures. The pressure on capital to socially legitimize itself will grow rather than diminish with its success, as the controversy over private sector reservations suggests.

... contd.