What is the future of nonprofits in India?
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The Indian government is again cracking down on nonprofits in the country. This time, receiving funding from overseas has become the central issue. Through new laws which impose tight financial restrictions, PM Modi is expressing his disdain at foreign-funded charities. This is likely to destroy budgets and force charities to end their operations in India. 

The news comes not long after Amnesty International’s bank accounts in India were frozen. The organisation was forced to shut its doors and let its entire staff in the country go. No charges have been filed, but allegations of financial misconduct, especially money laundering, have been made. 

Authorities had been scrutinising Amnesty for two years, conducting raids in the offices and houses of executives, but no action was ever taken. The timing now seems suspicious, given that Amnesty recently published two critical reports on the Indian government’s human rights record. 

Whilst there is no concrete evidence, Amnesty itself and others believe the reports are the reason for the government’s actions. They can be interpreted as an attempt by the government to protect itself from further investigations and criticism. Modi’s administration has received growing criticism from foreign media and organisations like Human Rights Watch in recent months. This is a stark contrast to the international support and encouragement he received when he was first elected. 

Nonprofits and charities are a key part of society in India. From the big names, like Amnesty or Greenpeace, to small, local initiatives – in a deeply divided society in which over 20% live below the poverty line – many depend on their help. 

International nonprofit organisations tend to focus on wider issues, such as environmental issues, land protection, and human rights. Greenpeace India for example successfully led a campaign in the early 2010s protesting the construction of a coal mining project in Madhya Pradesh. Significant deforestation would have been necessary to build the mine which would have endangered the livelihood of around 50 000 Indians. 

However, smaller, localised initiatives should not be discounted, as they arguably have a stronger impact on the community and on an individual level. From housing those who are deemed society’s outcasts, supporting mothers during pregnancy, or trying to educate children in slums or rural areas, they have offered support at a grassroots level.

Both types of groups depend heavily on donations from abroad to sustain their work. Around 20, 000 nonprofit groups received over $2.3bn in 2018-2019 from overseas philanthropic groups. This does not include individual donations. For ease, money is often donated to larger umbrella nonprofits, who then distribute the money amongst local charities.

What will the new legislation do?

Under the new laws, this will be forbidden. Foreign-funded charities are no longer allowed to reassign money to smaller groups. Further, a 20% cap on administrative costs, including employee salaries, has been introduced. 

The law was passed almost in secret – in a hush hush session of Parliament, without public debate and without warning. The lack of transparency from the government meant nonprofits were taken by surprise. 

The new restrictions mean the valuable work of charities is now significantly harder, and more bureaucratic. They also mean that some charities will not survive long-term. Support systems in areas like family planning, healthcare and education, female empowerment or support for disabled people will disappear. Therefore, they will have less of an impact in reducing social inequality and helping individuals break out of poverty’s vicious cycle. 

Critics claim that this is exactly what President Modi wants. Oxfam India’s chief executive Amitabh Behar explained his impression of the government’s stance to the Financial Times: as long as charities are taking care of vulnerable, poor people by feeding them or providing healthcare, it is fine. But as soon as their actions might result in long-term changes to the social and behavioural structures, the government is on high alert. 

Minister of State for Home Affairs, Nityanand Rai, seemed to almost confirm this. Increasing the transparency of charities, intercepting the misuse of money, and making sure that “foreign funds don’t affect the national interest” were his arguments for the new laws. 

Consequently, the question of what ‘the national interest’ really is presents itself. Modi’s actions point to a resulting sustenance in India’s wealth gap, and the strict and impermeable class system in Indian society. To him, this might be in ‘the national interest’ – yet it prevents potential uprisings and protests by people from lower socio-economic groups who feel a new sense of empowerment and dissatisfaction with the government. 

A means for government to avoid accountability?

It also prevents the government from having to find solutions for broader issues: poor people don’t require much living space, they don’t demand healthcare or education. The government therefore does not currently have to provide for them. An improved economic situation or a growing middle class would however change this. The government would have to create additional space and resources, which would be difficult in India’s overfilled cities. 

For many outsiders ‘the national interest’ should however be something else. It should be about empowering people, about improving economic prosperity, about creating opportunities to move upwards in society. The work of nonprofits contributes to this – but the question is for how much longer. 

President Modi has long been suspicious of nonprofits. Large ones like Oxfam and Save the Children have been accused of “negatively impacting economic development”. Others have been seen as responsible for terrorism, Christian charities are deemed dangerous as their supposed sole purpose is converting Hindus. Financial misconduct is another popular accusation – as seen in the case of Amnesty. 

Official explanations of accusations are often fuzzy and evidence is sparse. Government critics believe Modi’s political stance and ambitions are the greatest part of the story. Him and his government are unlikely to suffer any consequences themselves – if anything, the laws seem to be designed to protect him. 

By controlling nonprofits and their activities, the government retains power over its people and their lives. It thereby stabilises itself in a potentially explosive political situation. In recent years, it has become clear what happens when people begin to feel empowered in a country where they were previously suppressed. Just this year we saw what people are capable of in Brazil – there is no reason why similar protests might not erupt in India eventually. Modi’s government seems to believe that nonprofits might speed up this process. 

Amnesty was the beginning

Continued discouragement of nonprofits operating in India seems to be in the future. In all likelihood, the forced closing of Amnesty was the start of a broader crackdown rather than its peak. It can be interpreted as a demonstration of the government’s force and power, a warning sign to other nonprofits that should they not comply with governmental interests, there will be consequences. 

So far it is also unclear how nonprofits will be able to operate under the current laws. Many, especially independents, will inevitably run out of funds or face other issues that will end their work and diminish their ability to create a positive impact. International groups will be publicly shut down if the government believes they should be.

The Indian charity sector is undoubtedly under attack from an increasingly controlling government. This will slow down progress significantly and it seems likely many operations will cease to exist. Long-term effects of this cannot be predicted, but they are almost definitely detrimental to a reduction of inequality and an increasingly empowered population. In doing so, the law achieves exactly what the government wants.