The Impressive Times21 July 2024 :- India’s nonprofit sector is grappling with severe challenges, including funding instability, increased regulatory scrutiny, and significant workforce reductions. The termination of over 100 staff members at the Tata Institute of Social Sciences (TISS) following the withdrawal of funding by the Tata Education Trust, and subsequent similar incidents, have highlighted the precarious situation faced by many organizations.
Key issues contributing to this crisis include:
1.Funding Challenges:
– Many nonprofits, heavily reliant on external grants, have faced financial instability. The Tata Education Trust’s temporary withdrawal of funds from TISS exemplifies the vulnerability of these organizations.
– The revocation of the Foreign Contribution Regulation Act (FCRA) licenses for various NGOs, such as the Centre for Financial Accountability’s parent trust, has severely restricted foreign funding. This has particularly impacted organizations dependent on international donations.
2. Regulatory and Administrative Hurdles:
– The FCRA, originally enacted in 1976 and amended multiple times, has been used to scrutinize foreign contributions, resulting in the cancellation of licenses for numerous NGOs.
– New compliance requirements, including GST obligations and caps on administrative expenses from foreign funds, have added to the administrative burden on nonprofits.
– Recent amendments in September 2023 banned subgranting to smaller entities, further cutting off essential funds to grassroots organizations.
3. Impact on Workforce and Services:
– The sector has experienced significant layoffs, with tens of thousands of job losses reported, including at partner organizations.
– Large international NGOs and think tanks, as well as advocacy organizations and those with religious affiliations, have been particularly affected. For instance, World Vision had to close 80% of its projects after its FCRA license was canceled, and Oxfam significantly scaled back operations due to similar issues.
4.Shift to Domestic Funding:
– With foreign funding constrained, NGOs are increasingly turning to domestic donors. However, this shift comes with its own set of challenges, such as higher compliance requirements and the need to return unused funds within the fiscal year.
– The removal of full tax exemption for NGO donations in 2014-15 has reduced donor incentives, further complicating fundraising efforts.
5.Effect on Local Philanthropy:
– State scrutiny of NGOs has also impacted local philanthropy, with many philanthropists now cautious about donating to organizations without FCRA clearance.
– Informal conditions, such as state administrations directing companies to focus their CSR funding locally, have also affected the distribution of funds.
6. Future Outlook
– The nonprofit sector’s future remains uncertain, with many organizations struggling to communicate the impact of these regulatory measures to the public.
– Efforts to bridge the trust deficit with the state, such as the “India’s Million Missions” report compiled by a coalition of NGOs, aim to highlight the essential role of civil society organizations.
– Despite these challenges, NGOs continue to play a crucial role in reaching underserved communities, contributing nearly 2% to GDP, and providing employment across various levels.
The nonprofit sector in India is at a critical juncture, facing unprecedented challenges that require innovative solutions and increased support from both domestic and international stakeholders.
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