If reports by the media are to be believed, concerns are being voiced to India’s government about the financing and actions of foreign funded not-for-profit organisations engaged in campaigning activities. As influential thinkers in India call for greater regulation of the non-profit sector, it is important that any new measures brought in are balanced and proportionate. Improvement to the governance of India’s three million not-for-profit organisations should be welcomed, but only if they do not unfairly target particular organisations and fuel distrust of foreign funded organisations.

In late June it was reported that the Ministry of Home Affairs (MHA) had told the Reserve Bank of India (RBI) to instruct banks to gain clearance from the Home Ministry’s Foreign Contribution Regulation Act (FCRA) Department before allowing money to reach Greenpeace India from its principle international funders. Funds from Greenpeace International and Climate Works Foundation – Greenpeace India’s international funding partners – will now be held until permission is granted. Furthermore, the MHA has announced that other similar foreign funded campaigning organisations will also have to provide detailed information to the RBI about the foreign sources of their funding and their plans for using it.

This move follows an Intelligence Bureau report to the Prime Ministers Office dated June 3, 2014, and leaked to news agencies in India, which allegedly stated that foreign funded not-for-profit organisations are jeopardising India’s economic growth through what it calls “anti developmental activities”.

Though the leaked report is not available for scrutiny, various sources (Including Reuters, The India Express, NDTV and The Times of India) claim the report estimates that certain organisations receiving foreign funds are, through their campaigning and advocacy work, costing the Indian economy between 2-3% economic growth annually.

If media reports are accurate, the report, “Concerted efforts by select foreign-funded NGOs to take down Indian development projects’ indicates specific examples where some foreign funded advocacy organisations have been detrimental to the economy through supporting human rights and environmental movements and campaigns. It is not clear from media reports how the Intelligence Bureau came to its estimate of a 2-3% reduction in economic growth, but news stories do not appear to suggest that the potential positive impact that not-for-profit advocacy has, in productive or preventative activities, been taken into consideration.

It is notoriously difficult to assess the economic impact of environmental and human rights campaigns, even when they are successful. However, the ability to champion long-term and sustainable development ahead of short-term projects could conceivably yield greater gains for the economy. In addition, though impossible to measure, it seems feasible that potentially environmentally damaging industrial and extractive projects that have not occurred due to campaigns by not-for-profits, could have had a negative economic impact in the long run through their impact on the environment and on communities. Perhaps the most compelling argument for the positive economic impact that campaigning organisations have is their contribution to democratic stability and good governance. I have pointed out before on this blog that in an electoral democracy, civil society plays a crucial role in balancing a system of representation in which the slight preferences of the many often outweigh the urgent concerns of the few. Ensuring that all views can be expressed prevents the build up of social unrest and empowers the kind of public scrutiny that is essential for good governance.

The Intelligence Bureau report names several not-for-profit organisations – including Greenpeace, Cordaid, Amnesty and ActionAid – which it claims have undermined the profitability of industries including nuclear and coal power infrastructure, dam building projects, extractive industries and research into genetically modified products. Abhishek Pratap of Greenpeace India – singled out in the report as having mounted “massive efforts to take down India’s coal-fired power plants and coal mining activity” – defended his organizations “legitimate right to express our views in what is after all the world’s largest democracy” and expressed the belief that the report was “designed to muzzle and silence civil society [sic] who raise their voices against injustices to people and the environment by asking uncomfortable questions about the current model of growth.”

Whilst we are not in possession of the necessary information to allow us to support or defend the actions of Greenpeace, there are signs of increasing cynicism about the impact of foreign funded not-for-profit organisations in some quarter in government. The Intelligence Bureau report followed comments by the former Union Minister and senior Congress leader M Veerappa Moily who said that the government should “seriously look into” whether any not-for-profit organization was using the funds it receives from abroad to disrupt economic growth or destabilize the nation.

Mr Moily is rightly concerned with ensuring that foreign funded organisations are subject to the proper scrutiny and that the funding and actions of these organisations are consistent with the laws of the land. However, rather than singling out individual organisations for their causes and fuelling mistrust in foreign funded organisations, we would encourage the government to focus on developing and improving the regulatory framework to promote improving standards of governance in all not-for-profits. This is one of the central recommendations in our report, Building Trust in Charitable Giving.

International development assistance (ODA) to India is experiencing a sharp decline. The United Kingdom currently gives £280 million ($US479 million) in ODA to India annually but has announced funding will end in 2015. ODA from the United States has fallen from $127 million in 2010 to $98 million in 2013 with a further 16% reduction in the 2014 budget. In response to this the Indian government has looked to the private sector to plug the funding gap for not-for-profit organisations by creating legislation that mandates companies of a certain size dedicate 2% of their profits to social causes. In addition, the government has bolstered its own financial support for the sector through myriad programmes. However, such well intentioned policies are not sufficient to plug the funding gap and without strong checks and balances, could threaten the independence and governance of the sector.

To secure the financial future of civil society and limit the reliance and influence of foreign donors, policy makers should focus on nurturing the burgeoning growth of domestic middle class donors. Indeed, with the proportion of Indian’s giving money to charitable causes doubling from 14% in 2008 to 28% in 2012 according to World Giving Index data, the most effective way of ensuring that foreign donors don’t exert undue influence might be to build the influence of domestic donors. However, to do this, the government should focus on ensuring that they create an enabling environment in which not-for-profit organisations can earn public trust. The Charities Aid Foundation’s India Giving research revealed that a lack of trust in not-for-profits represents a key barrier to continued domestic growth in giving. A good place to start in overcoming this would be for sector representatives and politicians to speak out in support of the vital role that not-for-profits play in Indian society and to cease making comments that fuel mistrust in the sector.

The most recent edition of ICNL’s Global Trends in NGO Law highlights recent and proposed laws in 14 countries around the world which will limit access to foreign funds. Our Future World Giving reports on Building Trust in Charitable Giving and Enabling an Independent Not-for-profit Sector both highlight examples including Indonesia, Azerbaijan, Kenya, Turkmenistan, Russia, Algeria and Egypt of countries that have recently enacted policies that threaten the flow of foreign funds. The above represents company that Indian politicians may well feel uncomfortable being associated with. Hopefully they will choose to treat the Intelligence Bureau report with the same suspicion that it holds for foreign funded not-for-profit organisations and their campaigning.

Adam Pickering