NGOs, or nongovernmental organizations, are the third largest labor force in the United States
Not many people understood what Niti Aayog is or what it does, but its leader Amitabh Kant gave his take on how to “improve the ease of doing business” in India. His answer is “one-stop-shop authorizations, timely authorizations and land acquisition”. Mr. Kant also said that “public-private partnerships in social infrastructure such as health care is another avenue for investment in India.”
It is of course extremely important that India does this, as the number of people employed in India has decreased over the past five years, although the population has increased. I wanted to look at an area that I understand quite well.
NGOs, or non-governmental organizations, are the third largest labor force in the United States. The retail and manufacturing sectors employ more people there than the NGO sector. In 24 out of 50 US states, NGOs actually employ more workers than all branches of industry combined. It is the same in the United Kingdom. In Europe, 13 percent of all jobs are in the NGO sector, which represents 2.8 million jobs in total. To put this figure into perspective, consider that less than 10 percent of all jobs in India are in the formal sector.
Let us now see how this government has improved the ease of doing business for this part of the private sector in India. In 2020, the Narendra Modi government ordered a change in the way NGOs could work in India. The first change is that the 23,000 NGOs that received any form of foreign donation could only receive this money at one branch of the State Bank of India in Parliament Street in New Delhi. Only 1,488 NGOs were registered in New Delhi, and the others must therefore come to New Delhi to open and operate their account, during the Covid-19 pandemic. No other part of the private sector is invited to do so and legal persons can receive foreign money in any bank account anywhere in India.
More than 46% of these NGOs received no foreign money in 2018-19 despite having an FCRA license, and 41% received less than 1 crore.
The second change was that NGOs could only spend 20 percent of the money they received on what the government defines as “administrative expenses”. Salaries, travel costs, costs of hiring people, consumables such as electricity and water costs, telephone costs, postage and courier costs, office repairs, stationery and printing, transportation, accounting and fund administration costs, vehicle operation and maintenance, report writing and filing costs, legal and professional charges, and rents have all been classified as administrative charges. No more than 20 percent could be spent on these things. Again, no other part of the private sector is getting orders about what it can and cannot do with its own money.
The third is that the law now prohibits an NGO from redistributing its funds to smaller NGOs, which were working in the field and did not have access to the money. This rule would hit the sector because NGOs do not compete with each other and cooperate in many areas. A study from Ashoka University showed that half of the 4,107 small NGOs that received money in this way in 2018-19 received only 7.6 lakh or less. They wouldn’t even get that anymore.
There have been other changes as well, but let’s put those aside and take a look at what the damage has been to India. When the second wave of the Covid-19 pandemic hit India, the Modi government turned to these same NGOs for help. Ten NGOs the BBC spoke to for a report on its Newsnight show said they all had difficulty distributing aid because of the new rules. Indian hospitals and charitable trusts were unable to receive Covid relief supplies sent from donors overseas due to the law. This has undermined donor plans to buy oxygen plants and concentrators, especially in rural areas. In a hospital where two dozen people had already died from lack of oxygen, foreign donors could not send an oxygen production plant because of the law. No entity could receive foreign aid, even in the form of medicine or life-saving equipment, without being registered under the NGO Act, known as the Foreign Contribution Regulation Act.
In addition, the very strict provisions of this FCRA law mean that the intended use of the foreign contribution must also “correspond to the specified objective of the trust at the time of FCRA registration”. This means that if the NGO has registered its specified goal as education, it cannot use its money to buy ventilators. None of these restrictions apply to any part of the rest of the private sector. It is only the NGOs in India that are subjected to this even though it is hurting the country and hurting the poorest Indians as the pandemic has revealed very clearly.
If the government is serious about facilitating operations in India, there is a simple way to do it. It should stop what it is doing deliberately in the NGO sector and let it operate as freely as the rest of the private sector. And it should look at the United States, Britain and Europe and consider what the benefits of a large and robust NGO sector are for the economy, jobs and society.