A Changing Philanthropic Landscape in India
Understanding how Indian NGOs continue to innovate and give voice to the marginalized within the framework of changing policies
March 22, 2023
The landscape of giving in India is vibrant and dynamic, with a thriving digital ecosystem, a young giving population, a growing network of high-net-worth individuals, and increasing involvement from corporations as a part of their corporate social responsibility (CSR) efforts. This vibrant space has developed over the past decades within a complex paradigm of policy framework, such as the Companies Act 2013, the Income Tax Act, and the Foreign Contribution Regulation Act (FCRA). However, in recent years, there have been significant changes to the policy framework that affect the way the philanthropic sector functions. Of these policy changes, the Foreign Contribution Regulation Act has experienced the most significant changes, most recently in 2020. Donors looking to support philanthropic causes in India must be mindful of the restrictions in place, but through the partnership of knowledgeable organizations both in India and the US, it can be done with great impact and efficiency.
The Evolution of India’s Philanthropic Landscape
With the advent of neo-liberal policies in the nineties, India began welcoming foreign financial support outside of normal commercial investment, such as political campaigns, social development, and, of course, philanthropy. This foreign capital was badly needed: according to a Standard Chartered SDG Investment Map report, India needed an investment of 2.4 Trillion USD to meet the United Nations SDG goals.
The FCRA was first enacted in 1976 to help regulate foreign contributions and develop a system that tracked foreign contributions within India. Throughout its history, the FCRA has gradually expanded the rules, procedures and enforcement that oversees the non-profit sector. In 1984, an amendment was made that required all non-governmental organisations (NGOs) receiving foreign grants to register themselves with the Ministry of Home Affairs with instructions that they “utilise those funds only for the purpose for which they have been received and as stipulated in the Act.” Then, in 2010 that act was repealed and a new consolidated act was passed. This aimed at “prohibiting acceptance and utilization of foreign contribution or foreign hospitality for any activities detrimental to the national interest.”
The 2010 act mandated many rules that are still followed today, such as: a five-year validity period for organizations registered under FCRA, maintaining a separate bank account for foreign contributions, mandatory financial audits, and additional reporting requirements. After this amendment, many NGOs no longer met the requirements to receive foreign funding.
The Current Giving Landscape
The FCRA was further amended in 2020, at a time when the country was reeling from the severe effects of the pandemic. The new amendment enacted new rules intended to add security and safety to the system. The most important updates required charities to accept all foreign contributions to an account held at the Delhi branch of the State Bank of India, and forbade charities receiving foreign contributions from granting them out to other organizations within India to better facilitate government oversight and accountability.
Prior to the 2020 amendment, larger NGOs, typically those with international reach, access to technology, and greater expertise, often sub-granted funds to smaller NGOs in secluded areas that had difficulty accessing foreign donors. With sub-granting now off-limits, foreign funding now flows directly to smaller, grassroots NGOs who meet the eligibility criteria. This is fully in line with the global trend towards localization and local ownership of the development process.
When the FCRA amendments came into effect, CAF India was able to evolve while being thoroughly compliant with all regulations. The changes did indeed have a significant impact on our operation; one of the biggest outcomes from the new amendment for us was that we have moved to a new model of working directly with beneficiaries on the ground, rather than simply granting funds to third party NGOs. We saw this as an opportunity for transformation, adding meaning and purpose to our work.
When the 2020 amendment was passed, CAF India also saw a desperate need emerging as India required funds to respond to the growing emergency of the pandemic. It was during this time that we consciously decided to pivot as an organization and take full advantage of the FCRA changes.
A Hybrid Approach
CAF India has adopted a hybrid approach to enable cross-border giving and become a self-sustaining organization. While we are still rooted in grant management as one of our primary offerings, we are now in the process of building bespoke programmes that provide end-to-end solutions, from the point of commission through execution and reporting.
CAF India is cause-universal and executes programmes across multiple thematic areas. While responding to the COVID pandemic we identified vulnerabilities and areas that needed attention, particularly as we look to support underprivileged communities. These five areas of work include:
1. A focus on early childhood development (aligning with SDGs 3: Good Health and Well-being and 4: Quality Education);
2. Skills and livelihood (aligning with SDG 8: Decent Jobs and Economic Growth);
3. Education, as children returned to school, and needed support to catch up (SDG 4: Quality Education);
4. Health, particularly diseases that did not receive attention during the COVID period (SDG 3: Good Health and Well-being); and
5. Environmental issues, which lead to stress and vulnerabilities, addressing which can create opportunities to build back better and more resilient (SDG 6: Clean Water and Sanitation, SDG 15: Life on Land).
Additionally, the pandemic has acted as a fragility multiplier, which demonstrates how important it is to integrate Gender Diversity & Inclusion across all causes that we work on.
As we develop these programmes, we also have an understanding that they cannot be implemented without our charity partnerships operating at full capacity. An increasing number of charities are encountering challenges with maintaining their compliances, of which FCRA is one important regulatory framework, and consequently cannot reach the international philanthropic community for direct funding. This is emerging as a major area of concern within India’s philanthropic community.
We must ask ourselves—who will carry on the work of development if grassroots organisations do not have access to the necessary information, knowledge, and resources to undertake developmental activities? To answer that question, we are working with NGOs to help identify their needs and partner on solutions. Together, we can develop programmes and plan for scale, manage compliance concerns like reporting and accounting, and build necessary processes and policies. We also render support to NGOs in ways that strengthen their credibility, enhance their visibility with donors, and improve their organisational practices for sustainable resource generation.
While the recent FCRA amendment has produced significant changes to the way NGOs function within India, the giving landscape remains vibrant. It is up to NGOs to adapt and continue to create impact within their communities; CAF India itself has undergone many changes within the past two years, but we are always looking for ways to enable cross-border giving and empower communities, donors, and NGOs alike.
About the authors:
Dr. Nivedita Narain is currently the CEO of CAF India, and comes with over 35 years of experience as a strategic thinker, advisor, researcher, and trainer in the social development sector. She is also adjunct faculty at the School of Public Policy at the Indian Institute of Technology Delhi.
Dr. Narain has made pioneering contributions to the establishment of India’s first SHG in India and has collaboratively worked with multiple governmental and non-governmental agencies across the board. Over the years, Dr. Narain developed her niche in Gender and Livelihood, and plays a pivotal role in programmatic intervention in academia and development discourse.
Deepanwita De is currently heading Marketing and Communication at CAF India. Deepanwita previously worked as a journalist before shifting her focus to the development sector. She comes with a decade-long experience in strategic communications, fundraising, and program design. She is a writer, speaker, and facilitator. She has facilitated organisational development, fundraising, and communication for nonprofits in India.