India’s NGOs at a new funding crossroads

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‘If the government does decide to limit foreign funding, the future need not be bleak if Indian domestic philanthropy steps up to fill the gap’. Representative image used. | Photo Credit: Getty Images/iStockphoto

When the first Foreign Contribution Regulation Act (FCRA) was passed in 1976, a government of a different political hue was in power from the one that has now proposed the more fierce FCRA Amendment Bill, 2026. But the underlying political apprehensions were similar — the fear that foreign powers could destabilise the country by funding civil society organisations (non-governmental organisations or NGOs). In the present case, there is also an unstated fear of religious conversions by Christians and other religious minorities. The Bill is yet to be enacted because of strong reactions by the Opposition parties and several civil society groups, particularly Christian organisations.

The government claims that the flow of foreign funds into India’s NGO sector operates as a vast, intricate and opaque web. Under the banners of development, human rights and social welfare, thousands of crores of unmonitored capital pour into the country every year. Much of this money deliberately bypasses state accounting mechanisms and finds its way into politically charged campaigns, highly selective local advocacy, and aggressive proselytisation and religious conversion networks.

Under the proposed legislation, if an FCRA certificate is cancelled, surrendered or automatically lapses, foreign contributions and all assets created from them would vest in a government-appointed “designated authority”. The organisation can recover the assets if registration is restored within the prescribed period. Permanent vesting will occur only if registration is not restored within that period. The Bill also provides for revision and an appeal to the District Judge.

If a fresh certificate is not obtained within the prescribed period, the assets could be sold or transferred to a government department, with the proceeds going to the Consolidated Fund of India. However, during the provisional-vesting period, restoration of registration results in the return of assets and unused foreign contribution.

NGOs, especially Christian organisations, which the government says receive a larger proportion of the funds among religions associations, are worried that the legislation may not be religion-neutral and that, ultimately, the real sufferers would be the beneficiaries served by such charitable organisations, which have established and operate numerous schools, hospitals, old-age care homes and similar institutions. As some leaders from the northeast and tribal areas have pointed out, such institutions are sometimes the largest or only providers of these services in many areas.

Already, the FCRA registrations of 22,496 NGOs have been cancelled since 2015, leaving about 14,466 active registered associations eligible to receive foreign contributions (Ministry of Home Affairs data, September 2026). In fact, the amounts received are larger than those in 2006-07 (₹12,289.6 crore from private international donors), the last year for which data were available when this writer wrote the book, Foreign Aid for Indian NGOs: Problem or Solution? (2010).

So why the protests? The fact is that different sources of funding have a differential impact on organisations and their effectiveness because, as the saying goes, “He who pays the piper calls the tune”.

Though in total, the volume of foreign aid to NGOs is small compared with government budgets, and only a small proportion of NGOs receive such aid, it is highly valued because it is not only an alternative source of funding but also more flexible than government funding, with fewer restrictions on how it can be used. It is generally tailored to an NGO’s needs through discussions between the NGO and the donor.

The book, Foreign Aid for Indian NGOs, which is based desk research and interviews with several NGOs, large and small, suggests that while a few organisations felt that foreign aid had adverse consequences, such as encouraging the adoption of ideas and practices from abroad that were unsuited to Indian conditions, most felt that foreign funds had contributed to India’s development and, in particular, to the growth of the voluntary sector. They had brought in new ideas, techniques, technologies and organisational improvements. In the absence of adequate government funding and private philanthropy, foreign aid had played a positive role.

Today, however, given political events in neighbouring countries and elsewhere in the world, and without being privy to the secret sources of information that the government has about the destabilisation role played by foreign money, it is difficult to pass a definitive judgment on the need for and value of foreign aid today.

There can be no doubt that a vibrant and independent civil society is necessary for a healthy democracy and for preventing the abuse of unrestrained political power by any one section of society. Plural sources of funding are also necessary to ensure that civil society is not dependent on any one source.

But equally, one can question whether foreign funds are the only answer to the needs of civil society today. First, the voluntary sector is more developed now. Second, the situation regarding foreign aid itself has changed. Bona fide foreign donors are themselves moving away from giving to India because of their own economic difficulties and the perception that India, which is aiming to become the world’s third-largest economy, no longer needs aid from them.

Third, the domestic non-government funding environment has also improved. According to the Forbes 2026 list, there are 3,332 billionaires in the world, of whom 229 are in India, giving it the third-largest number after the United States and China. The amount they donate to philanthropy has also increased. According to the India Philanthropy Report by Bain & Company, private philanthropy was projected to reach ₹1.43 lakh crore ($16 billion) in FY 2025. In addition, there is retail giving of about ₹37,000 crore annually.

The downside is that, according to the same report, demand is growing faster than supply, with projections indicating that the gap could reach ₹18 lakh crore ($210 billion) by 2030.

Moreover, new philanthropists, especially entrepreneurs and technology leaders, are shifting away from traditional areas towards ecosystem building, scientific research, higher education and complex institutional support.

This is undoubtedly good news for social and economic change, but bad news for NGOs delivering traditional education, health and social welfare services.

A glimmer of hope for such NGOs is that, following the Companies Act, 2013, which made corporate social responsibility (CSR) spending compulsory for companies above a certain size, CSR spending by such listed companies was ₹22,563 crore in FY25, up 17.5% (latest CRISIL report).

Since many companies do not have the internal competency to undertake social development, they rely on NGOs as partners. Although many companies are moving into environmental and other emerging areas, many still find the traditional areas of health, education and rural development more meaningful.

So if, in the ultimate analysis, the government does decide to limit foreign funding, the future need not be bleak if Indian domestic philanthropy steps up to fill the gap.

However, indigenous donors, and the government in particular, must become more responsive to the needs of NGOs, learn from foreign donors some of the practices that made their aid so sought after, and engage in more serious dialogue on funding practices, as distinct from development issues, to improve those practices and address the dissatisfaction on both sides. Ultimately, it is the innate generosity that is dormant in hundreds of dedicated Indians that will change the dynamics of development in India, not foreign aid, which at best can be the cherry on the cake.

Pushpa Sundar is the author of several books on philanthropy, with the latest title being ‘Giving with A Thousand Hands: The Changing Face of Indian Philanthropy’.

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