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Back to the seventies

Government needs to move away from policing foreign donors to encouraging philanthropic support to Indian causes. The FCRA should be amended to refocus on its original scope

Written by ADARSH KUMAR | Published: September 8, 2012 12:53:38 am

The Foreign Contribution Regulation Act (FCRA),set up to regulate contributions by foreign donors to non-profit organisations in India,has recently been in the news due to the home ministry’s decision to revoke permissions to a range of reputed institutions. The decision — and the attendant amorphous allegations about the potential links of foreign donors to outside intelligence agencies — highlights not only the propensity of the FCRA to be used arbitrarily by the home ministry,but also the narrow approach to the philanthropic sector taken by the government and its poor historical understanding of the role played by foreign donors in supporting development initiatives in India.

Legislated in 1976,the act represented fears about the use of foreign contributions for two specific purposes: missionary activities by religious organisations,and foreign intelligence agencies using such contributions to influence the Indian electoral process through front organisations in India. The act mutated over time — with a round of modifications in 1985 and another in 2011 — into a catch-all,requiring every non-profit in the country that wants to access grants from foreign sources to get permission from the home ministry,either on a case-by-case basis or through a one-time registration and filing of annual accounts.

The intention of successive governments in the last two decades,at first unstated and now made explicit,expanded the FCRA from its original purpose to more broadly discourage foreign contributions to NGOs. The home ministry,in its last available FCRA annual report for 2009-10 states that “…the general policy of the Government of India is not to encourage soliciting of foreign contributions.” Even though the report states that total foreign contributions to Indian organisations in that year was Rs 10,337.59 crore,it goes on to estimate,roughly,that only 2 per cent of registered NGOs in India access foreign funding,implicitly making the case that such funding is not crucial for charitable and development activities in India.

The reality is that foreign donors have played a key role in seeding various development spheres and institutions in India. Take the historical record of grants made by the Ford Foundation — an organisation the home ministry claims “may have some links with the government and some intelligence agencies in USA.” Operating in India since 1951,the full range of Ford’s grants are too numerous to list here,but a sample of the initiatives they have supported includes building the capacity of the Planning Commission through study tours and overseas fellowships for civil servants; helping to develop the Intensive Agricultural Development Programme to raise agricultural yields; helping to establish the National Institute of Design and the Indian Institutes of Management; and playing a role in scaling-up various pioneering NGOs including the Self Employed Women’s Association,the Public Service Broadcasting Trust and SPIC MACAY.

The Ford Foundation is also not the only foreign donor to play a seminal role in various development spheres in India. Other notable examples include the MacArthur Foundation,which played a significant role in supporting reproductive health programmes,and more recently,the Gates Foundation,which has given large and sustained grant support towards shaping HIV/ Aids programme strategies in India.

Why does foreign funding play such an outsized role in the Indian development sector? Historically,charitable giving in India has coalesced around religious causes with there being no tradition of secular,strategic philanthropic giving at the national level. Domestic philanthropic giving has also not kept pace with rapid economic growth and wealth creation. A 2010 report by the consulting firm Bain and Company found that despite having amongst the highest growth rates for High Net Worth Individuals (HNIs) in the world — defined as those with net assets of more than $1 million (after excluding the value of their primary residence) — average philanthropic giving by such HNIs was only 2.2 per cent of their income,compared to 9 per cent in the US. Unlike historical and current American business magnates such as Ford,Rockefeller,MacArthur,Gates,Dell,Packard and Omidyar,who built independent,professionally managed philanthropic foundations that evolved to be global in scope,the largest Indian business magnates — with the notable exception of the Tatas — have yet to build similar philanthropic institutions in India.

Given the rich history of foreign philanthropic support to Indian development initiatives,the government needs to move away from a xenophobic approach of policing foreign donors to one of encouraging philanthropic support to Indian causes. In the short term,the FCRA needs to be amended to refocus on its original scope and to require the home ministry to present concrete evidence — that can be challenged in an appropriate appellate authority or through judicial review — to back up its decisions. In the long run,the government needs to look at removing such widespread regulatory powers over the non-profit sector out of the ambit of the home ministry completely — perhaps to a new specialised regulator-cum-promotional body like the Charities Commission in the UK. The home ministry should be investigating anti-national activities,not development and philanthropic initiatives.

The writer heads Livelihood Equity Advisors,a Delhi-based for-profit organisation

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