The popular self-branding of India as the next up-and-coming economy poised to take over the global stage is something of a half-truth “in waiting”. India knows this, America knows this, and corporate India has been put in the spotlight.
Increase in flow of funds to projects which exist for the purpose of alleviating some terrible social and living conditions is not the same as addressing the said problems themselves. The global perception of India’s future prospects and potential (an image mostly engineered by India itself) has been covering up a lack of progressiveness. The Companies Bill is targeted towards investor protection in India via the quotas for Board members, Corporate Social Responsibility (CSR) and auditing in order to improve a very convoluted and corrupt business environment. The main goal of this new bill is to improve the attractiveness of Indian firms and encourage mergers with foreign firms all the while officially mandating corporate social responsibility in India. In essence, the Indian government wants to create a mutually beneficial relationship between the social and economic sectors but the corporate obstacles to realizing these goals are not explicitly addressed in this bill. The stipulations are as follows according to Acumen.org
- All companies with revenue greater than Rs. 1000 Cr ($200M) or profits of 5 Cr ($1M) must spend 2% of the average of the last 3 years profits, towards CSR activity
- The Board must designate a 3-member CSR committee (including one Independent Director) to ratify decisions on spending
- Employee expenses will not be classifiable as CSR spending
- Poverty alleviation, healthcare, education and social business ventures have all been included as potential areas of investment
- If the spend is not made in that year, the CSR committee would have to submit an explanation for why that has occurred to not be penalized.
Anirudha Dutta summed up the problem of social welfare initiatives in India in his blog post, ‘Corporate India and CSR’. Corporate corruption, embezzlement, the twisted attitude towards charity all show that without accountability and without mandatory disclosed audits, the CSR initiative of the Companies Bill serves a alternate purpose other than itself and actual social welfare spending. It can be argued that the CSR portion of the bill can be deemed as a way to create a culture of “social responsibility” in India but given the multiple loopholes through which companies can avoid the financial requirements (Point 5), it begs the question of how this CSR initiative might reliably and consistently improve the current and upcoming social initiatives and programs in India in real time. It seems that the question the Indian government asked itself was how it would fit in with India’s plans to become a “attractive destination for investment”( The Hindu).
What the Companies Bill means for the non-profit sector
“According to Union Minister of State for Corporate Affairs Sachin Pilot, this stipulation makes India the first country in the world to legally mandate corporate spending on social welfare.” India has 3 million NGOs in operation but most lack scale, structure and consistent government funding. This is because the concept of “social welfare” in India is abstract, and very much a new idea within the Indian culture. Even in a political context, the representation of minority groups and of women is still a matter of concern in the Upper House and Lower House leaving issues important to these two groups less discussed. Given the disparities between deep-rooted social and economic distinctions present within the gender, urban/rural and caste contexts and the all-encompassing concept of “social welfare”, one can see the Mr. Pilot’s statement will need to be matched by some drastic social and cultural changes first. Greed, corruption, social and gender discrimination is propagated to the highest levels of Indian government. The proposed “trickle-down” that this CSR initiative promotes is not enough to address the very real social problems holding India back from actually having a shot at being the next superpower. These ondulations of the financial and economic state of the country without the accompanying upward progression of social habits will result in a self-sabotaging economy and a widening of social rifts.
There is no doubt that many NGOs that secure a corporate relationship will receive much needed financial support and publicity as a result of this mandatory “voluntary initiative”. Despite this, as the bill becomes tested for real life wear and tear, it is an incredibly disheartening thought that out of the 3000 Indian corporations that this bill especially applies to, given the flaws in corporate India, many will not adopt a long-term, substantial sense of welfare responsibility because as M.r Dutta also mentioned, many will look for the tangible “returns” of such an “investment” instead of acquiring a long term sense of national partnership. That being said, foreign multinational companies in India such as Proctor & Gamble have initiated CSR programs of their own in partnership with Indian NGOs and has set an example of the potential for a mutually beneficial relationship between social and economic sectors. A quote from Desmond Tutu expressed this sentiment eloquently:
“You are powerful people. You can make this world a better place where business decisions and methods take account of right and wrong as well as profitability…”
Despite being hailed as one of the fastest growing economies, India is still one of the most difficult countries in which to conduct business and maintain investments.The issue of investment safety and the necessary social changes that needs to occur comes hand in hand and given the recent “economic storm”, India is struggling to maintain it’s mislabeled rapid growth and “progressiveness”. The government is trying to realign corporate mandates towards foreign mergers and investment attraction in an effort to keep perpetuating India’s growth both tangibly and with global confidence. The Rupee might be in bad shape now but if corporate India doesn’t jump on board with the government’s Bill and make the mandatory structural and financial changes, recovery and growth will be stifled in ways that will leave India far behind.
– Hiba Ganta
Featured Photo MDGovpics, Creative Commons, Flickr