Foreign funding and the Maharajas among NGOs

India is emerging as the land of not-for-profit organisations, NGOs, with shadowy disclosures sources of funding. Perhaps, it is time for a re-look of foreign funding of NGOs given the compulsory CSR contribution in the Companies Act 2013

India is a fascinating country. The number of stock exchanges we have, as per official records is 20, but the number of functioning exchanges is only two. The number of scrips listed on the Bombay Stock Exchanges [BSE] is nearly 9,000, only 3500 of these are traded at least once a year, and the top 50 securities constitute nearly two-third of the turnover. Actually only 250 to 300 are “active” traded scrips. Interestingly, the latest Handbook of Statistics on Indian Securities Market published by the Securities & Exchange Board of India (SEBI) has dropped the column for number of scrips listed on the BSE! It is one way to solve the issue of numbers.

In a similar fashion, we decided to probe the number of not-for-profit or non-governmental organisations (NGO) in India. Being in the teaching line, we have the habit of probing issues that are otherwise not to be probed at all! Let sleeping dogs lie is the national dictum in such matters.

NGOs are also known as Voluntary Organizations (VOs) or Voluntary Agencies (VAs) and more recently as Voluntary Development Organizations (VDOs), Non-Governmental Development Organizations (NGDOs) or Non-Profit Institutions (NPIs). There are equivalent names for NGOs available in different Indian languages. In Hindi NGOs are called Swayamsevi Sansthayen or Swayamsevi Sangathan.

Prior to the enactment of the Societies Registration Act of 1860, voluntary action was guided mainly by religious and cultural ethos. Subsequently, a series of legislations addressing the non-profit sector were promulgated. The starting point in this respect was Article 19 of the Indian Constitution which recognized a number of civic rights including the right “….to form associations or unions”. It constitutes the legal basis of relevant legal provisions applicable to the non-profit sector. There are also non mandatory provisions that allow any group with the intention of starting a non-profit, voluntary or charitable work to organize itself into a legally registered entity. However, given the optional nature of these provisions, there is a large group of voluntary bodies that are not registered.

The United Nations Development Programme (UNDP) India and the UN Volunteers (UNV) programme had organized a Forum in January 2006 at UNDP’s Delhi office to discuss the issues relating to implementation of the UN Handbook on Non-profit Institutions (NPIs) in the System of National Accounts in India.
The meeting was attended by representatives of the Planning Commission, Ministry of Statistics and Programme Implementation (MoSPI), NGOs, UNV Headquarters, and the Centre for Civil Society Studies of Johns Hopkins University, which is leading the effort to implement the UN NPI Handbook throughout the World.
At this Forum, the UN Resident Coordinator and UNDP India Resident Representative stressed the need to implement the UN Handbook in order to capture the contribution of NPIs to the national economy. It was mentioned that the voluntary sector played a significant role in the economic and social change of the country and contributed significantly to the development in both rural and urban areas. The Forum therefore urged that India should take suitable steps to implement the UN Handbook on NPIs and compile accounts of NPIs functioning in the country.

The National Policy on the Voluntary Sector, adopted in May 2007, presumably under the guidance of the National Advisory Council, pledges to encourage, enable and empower an independent, creative and effective voluntary sector, with diversity in form and function, so that it can contribute to the social, cultural and economic advancement of the people of India. It constitutes the beginning of a process to evolve a new working relationship between the government and the voluntary sector, without affecting the autonomy and identity of voluntary organizations (GoI/Planning Commission, 2007). Accordingly, it is expected that the enabling environment will be further enhanced to encourage the development and active engagement of the non-profit sector, including volunteerism, in the community’s affairs and developmental efforts.
So we can conclude that at the beginning of the United Progressive Alliance (UPA)’s second term, the so called voluntary or NGO sector was fully ensconced in decision making and fund collecting activities.

NGOs can be registered under several regulations or none—the latter is more common.
The main statutory laws governing the various types of registered non-profit organizations are: The Societies Registration Act, 1860; The Indian Trusts Act, 1882; Public Trust Act, 1950; The Indian Companies Act (Section 25), 1956

Religious non-profit organizations can be registered under: the Religious Endowments Act, 1863; The Charitable and Religious Trust Act, 1920; Mussalman Wakf Act, 1923; Wakf Act, 1954 and the Public Wakfs (Extension of Limitation) Act, 1959

By 2009, a total of 33 lakh societies reported as “Societies registered under the Societies Registration Act/ Mumbai Public Trust Act”. Of these, the State Directorates of Economics and Statistics [DESs] were able to collect information for about 22.58 lakh units and computerize the information relating to about 21 lakh units.

But when the Central Statistics Office (CSO) sent people searching for these NGOs in the states, it could not trace lakhs of them. Of the roughly 22 lakh NGOs it tried to verify, only 6.95 lakh could be traced.

These figures did not include non-profit organizations registered under the Charitable and Religious Trust Act, 1920, which, if counted, would add a few thousands to the number. Then there are non-profit companies under the Indian Companies Act, 1956, and other laws that also help set up trusts.

The numbers also did not include many groups and associations, which, in common parlance are referred to as mass-based groups, usually operating at block and village levels, at times federating into larger organizations for specific purposes or campaigns. A study by PRIA and Johns Hopkins University suggested, nearly 50% of the total voluntary organizations in India were not registered under any law.

The antiquated societies registration law is blind when it comes to classifying these registered groups. It treats all registered societies the same way. These numbers include societies that run hugely profitable schools, colleges, hospitals and sports bodies in the country. Remember, the Board of Control for Cricket in India (BCCI) is also an NGO, registered under the Tamil Nadu Societies Registration Act. The Confederation of Indian Industries (CII) too is an NGO, under the law.

The Major Findings from the CSO Survey are as follows:
The CSO’s study covered only the societies registered under the Societies Registration Act 1860/Bombay Public Trusts Act, 1950 and companies Registered under section 25 of Indian Companies Act, 1956.
Data available from the first phase shows that there are about 31.7 lakh NPIs registered in India and that 58.7% of these are located in rural areas. A majority of NPIs are involved in community, social and personal services, cultural services, education, and health services.
The number of NPIs formed after 1990 has increased manifold. This is the post economic reform period when global powers began to show interest in India. There were only 1.44 lakh societies registered till the year 1970, followed by 1.79 lakh registrations in the period from 1971 to 1980, 5.52 lakh registrations in the period from 1981 to 1990, 11.22 lakh registrations in the period from 1991 to 2000, and as many as 11.35 lakh societies were registered after 2000.

Since there is no clause in the Act for the de-registration of defunct societies, the first phase of the survey results give number of societies and their distribution on the basis of records available with the registering authorities.

About 18 lakh societies have been visited during the second phase, i.e. 57.6% of the registered societies. Out of these, results are available for 4.65 lakh. The top three sectors where these societies were engaged is as follows: engaged in Social Services (35%), followed by Education & Research (21%), and Culture & Recreation (15%). The top three activities account for 71% of the registered societies.

The data on total work force includes volunteers and paid workers. Out of the 144 lakh work force, only 11 lakh are paid workers. The CSO used the sum of their operational expenditures to come to a value of their economic output at a whopping Rs41,292 crore!

Non Profit Institutions are also registered under the Indian Companies Act (Section 25), 1956. The financial data in respect of 2,595 companies listed with Ministry of Corporate Affairs has been obtained and analyzed. However, no information could be obtained in respect of the workforce of these companies and activities/purposes in which they are involved.
CSO decided to limit the coverage to the Societies registered under Societies Registration Act 1860, Mumbai Trust Act and the Indian Companies Act (Section 25), 1956. This is because a majority of the NPIs are registered under Societies Registration Act 1860. This also means that NGOs under various religious non-profit organisations were excluded and they constitute a large number.

The study found that in most States, the provision of submitting financial statements is not strictly enforced. Even if societies file financial statements with the registrar’s office, there is no mechanism to maintain this database.

Maharajas among NGO’s:
A category of NGOs are registered with Ministry of Home Affairs -under Foreign contributions regulations Act [ FCRA] –These can be called Euro or Dollar NGOs  who get funds from private charities as well as Government organizations abroad.
The salient features for 2011-2012 are as follows:

I. A total of 43,527 Associations have been registered under the FCRA until 31 March 2012. During 2011-12, as many as 2001 associations were granted registration and 304 associations were given prior permission to receive foreign contributions.

II. 22,702 Associations reported a total receipt of Rs11,546.29 crore as foreign contributions. [Under or non-reporting is common]



No. of Registered Associations

No. of Reporting Associations

Amount of Foreign Contributions




[Rs Crore]









































Total from 2002 -2012




1. Source: Ministry of Home Affairs –Foreigners Division, FCRA wing


III. Delhi reported the highest receipt of foreign donations at Rs2,285.75 crore, followed by Tamil Nadu (Rs1,704.76 crore) and Andhra Pradesh (Rs1,258.52 crore).

IV. Among districts, Chennai reported the highest foreign donations (Rs889.99 crore), followed by Mumbai (Rs825.40 crore) and Bangalore (Rs812.48 crore).


V. The list of donor countries is headed by the US (Rs3,838.23crore), followed by UK (Rs1,219.02 crore), and Germany (Rs1,096.01 crore).

VI. The list of foreign donors is topped by the Compassion International, US (Rs183.83 crore), followed by the Church of Jesus Christ of Latter day Saints, US (Rs130.77 crore), and the Kinder Not Hilfe (KNH), Germany (Rs51.76 crore).

VII. World Vision of India, Chennai, Tamil Nadu (Rs233.38 crore) received the highest foreign donations among NGOs, followed by the Believers Church India Pathanamthitta, Kerala (Rs190.05 crore) and Rural Development Trust, Ananthapur, AP (Rs144.39 crore)

VIII. The highest foreign contribution was received and utilized for--Rural Development (Rs945.77 crore), Welfare of Children (Rs929.22 crore), Construction and Maintenance of school/colleges (Rs824.11 crore) and Research (Rs539.14 crore). Activities other than those mentioned above received Rs2,253.61 crore.

Interestingly establishment expenses [Building/ cars/ Jeeps/ Computers/ Cameras etc.] constituted the bulk of expenditure in most of the NGOs.


Need of the Hour:

In the context of the Intelligence Bureau’s (IB) report on anti-development activities of many foreign funded NGOs, it may be time to constitute a commission of experts including those from the IB to comprehensively study this sector. Also, to use experiences of other countries like Russia, China and the US in dealing with NGOs and formulating regulation to govern them. Perhaps, it is also time to re-look the foreign funding of NGOs in the context of compulsory CSR contributions introduced in the Companies Act 2013—since we are no more the white man’s burden!


(The author is Professor of Finance at IIM-B—views are personal)


(R Vaidyanathan, Professor of Finance and Control, has taught at IIM Bangalore for over three decades and is consistently rated as one of its most popular teachers. Prof Vaidyanathan has coined the term India Uninc for the largest component of the Indian economy comprising small entrepreneurs, households. Prof Vaidyanathan sits on the advisory boards of SEBI and the RBI.)

Subhash Mittal
10 years ago
I feel the problem is that NGOs have not created sufficient mechanisms to create an awareness about what they are doing. In absence of such awareness I feel often there is a bit of paranoia. First of all what are the sources of income for NGOs. They cannot undertake profit activities, basically they depend on donations and grants. In India generally most donations are religious in nature. Only a few persons (mainly young professionals) have started give a bit. Grants are mainly from government or corporate. Neither Government nor corporates would give money for anything which results in criticism of Govt. So NGOs who focus on evaluating social policies of the Govt, where should they seek funds. Therefore, traditionally such NGOs source of income has mainly been foreign donors. If the Govt bans foreign funding of NGOs (mind you they are all Indian NGOs) for criticizing its policies, then how social policies evolve. I have seen a number of examples, where success has been much higher in projects where foreign funding was involved, not because lot of money was there but simply because it gave freedom to such NGOs to hire experts and work far more methodically. Most Govt. funds do not allow any experimentation. Today we have Right to Information, thanks to a number of Rajasthan (and some other states) based NGOs which used activism to highlight the problem and the benefits. Today Govt has accepted RTI as a major instrument to fight corruption. Right to Food was fought through various SC committees. Initial experimentation in Rural Water schemes through foreign funding resulted in Swajaldhara - a GoI scheme (although it has not been a success mainly because in practice Swajaldhara does not have community participation). I can go on, there are several other examples which provide how foreign funding helped our social development.
Nagesh Kini
Replied to Subhash Mittal comment 10 years ago
Thanks Subhash for putting it across so explicitly.
The fact of the matter is that this NGO sector is much maligned for what it has not done - going in vigorous defence by putting down all the good work that is being done - their contributions to the causes of education, health, RTI, environment protection, arts, culture.
The IB leak has only exposed the chinks in its armour, an used by vested interests for making it a whipping boy.
Is FDI not another form of foreign funding with the foreign investing institutions indirectly calling the shots by exiting at will or withdrawing from agreements?
Opposing Narmada Dam and Jaitapur Atomic Power Plant when it is being opposed all over the world in Japan, Germany and France should not by any stretch of imagination be termed 'anti-national or against our security'.
All that is called for is putting in place adequate checks and balances to monitor their activities - a pan-India legislation and a Regulator to prevent their wanton unregistered proliferation.
As it is the Income Tax prohibits carrying on for-profit activities.
10 years ago
flush with funds ngo can influence govt policies which means they can block development too . finding a reason is rather simple. there is a definite need to explore how each campaign is funded. and let the public know.
Nagesh Kini
Replied to mathai comment 10 years ago
In response to Mr. Mathai and Mittal-
In the absence of any authentic data from either the MOH which receives the FCRA filings or the ITO where tax returns are filed per force one has to resort to accessing secondary data that may not necessarily be reliable.
There is an urgent need to set up an independent regulatory authority to collect and collate inputs from MOH, ITO, Charity Commissioner and the like.
Make it an offence to set up any entity to raise monies for any activity.
Subhash Mittal
10 years ago
Sir, With all due respect, a large part of data about Central Statistical Organisation's efforts of enumerating NGOs is a straight lift from recently published book 'A Million Missions' by Mathew Cherian.

Further he has done the easy part, i.e. lifting the data from FCRA website. Wish he had also tried to look at how the sector has contributed to social development in the country. It is always easy to criticise by using the criteria of how much funds that they have got and not what they have contributed. Article is totally partisan in its approach.
Subhash Mittal
10 years ago
Sir, With all due respect, a large part of data about Central Statistical Organisation's efforts of enumerating NGOs is a straight lift from recently published book 'A Million Missions' by Mathew Cherian.

Further he has done the easy part, i.e. lifting the data from FCRA website. Wish he had also tried to look at how the sector has contributed to social development in the country. It is always easy to criticise by using the criteria of how much funds that they have got and not what they have contributed. Article is totally partisan in its approach.
Gopalakrishnan T V
Replied to Subhash Mittal comment 10 years ago
Wnen some one starts NGO, the objectives are laudable and really worth encouraging but are the intentions are the same is what one has to prove with the contribution that it makes to the society. If one were to go by the past experience of scams left and right carried out by those who are supposed to protect the economy and boost its growth for the welafare of the community,the suspicion on any organisation is justifiable and it needs to be kept under close monitoring. In fact professor Vaidyanathan has done a commendable job in bringing out the mushroom growth of NGOS and he has not made any serious allegations as such on any of them on their malfunctioning. What he has done is to draw the attention of the New Government which has promised good Governance that the NGOs receive huge funds and their activities need perhaps a close scrutiny to ensure that their presence in the economy benefit the community and the welfare is spread in a positive manner. There is nothing wrong in ensuring that these NGOs are brought under regulation and supervision and any bad elements are there they can be nipped in the bud itself. Money Life does an excellent job of bringing out to public notice the possible areas of public service where things can go seriously wrong and bring in more damage than any real benefits.
Gopalakrishnan T V
10 years ago
Hats off to Prof Vaidyanathan for having taken the trouble of bringing out the way the NGOs get growing under various acts and how they are able to raise funds domestically and internationally.The information provided is mind boggling and in the absence of adequate regulations and Governance Standards in the country, the very thought of what these NGOs would be doing in India is alarming and the loot in the economy that can happen through these NGOs is only imaginable. The Government should act very early without any further loss of time and streamline the registration of these NGOs, their activities and bring them under one or two acts and introduce regulation to make them accountable for the money they collect and the contribution they make to the economy. When the economy is suffering from growth for want of adequate resources and the ordinary masses are squeezed with inflation and all other forms of taxes, the Government cannot remain a silent spectator on these NGOs who indulge in all sorts of undesirable activities in the society. The article is an eye opener and what Prof Vaidyanathan has suggetsed should be implemented at the eraliest. They should not become another Sahara and a different type of scam.
Simple Indian
10 years ago
Very insightful article by Prof. Vaidyanathan. Thanks for sharing all the information on the funding of NGOs/VOs in India. Unlike the early years after our so-called 'freedom', most NGOs are setup by vested interests, who are not exactly philanthropists. Hence, there is indeed a need to regulate the social sector funding, where NGOs are funded as advocacy groups by 'interested' foreign/domestic sponsors. Though NGOs can enjoy functional autonomy, there is a case for their financial audit. Moreover, as the article mentions most NGOs in India are regd under archaic laws enacted during the British era. It's a pity no govt since 1947 cared to review and repeal (or re-enact) laws made by the British to facilitate their rule in India. I wish the current NDA govt does review and revise / repeal all laws passed during the British era, to make them relevant to prevailing conditions in the country.
Nagesh Kini
10 years ago
I entirely agree with Prof. Vaidyanathan that there is an immediate need to revisit the entire law and practices relating to the NPI sector also going by then new alternate name of "Social Entrepreneurship".
For want of adequate regulations this sector is largely unregulated governed as it is by the 1860 Societies Act and a plethora of other cause specific enactments that have lost their relevance.
Added in the recent past are filings under the Income Tax and FCRA. No serious attempt has ever been made to establish the veracity of the filings and whether the entities file at all. Income Tax returns have to be filed only to claim refund of the TDS on Interest Income, otherwise they also wouldn't file returns.
FCRA was a sleepy dormant piece of legislation monitored by the Home Ministry with no inkling of financial impact.No one knows for certain how effective this Dept. is at all, till it came to the IB leak!
It is rightly pointed out that all entities are not registered. There is absolutely an immediate need to bring them all under a common law and umbrella and revisit the tax benefits and exemptions before matters go out of hand.
I speak from professional hands- on experience of helping draft constitutions,register and audit them for over three decades.
SRajah Iyer
10 years ago
Chanakya says"If the King is ignorant,the subjects will be invaded by an Ifiot on a daily basis!"We have been ruled by Budhus for67yrs.They have been either Ignorant or acted seemingly ignorant of such criminal activities,funding the Terrorist Cells thro' a dignified name..NGO!Time the new King becomes aware of these Criminals!
10 years ago
My concern with all aspects of Indian Governance is that, instead of an operational, case by case action, or a systemic overhaul that sifts between helpful and harmful to the weal of the policies if not the Nation, Indian Governance is a trigger happy structural actor. If somebody makes a mistake or does something malefic, Governance, immediately, unleashes laws and actions to throw out the good with the bad, the execute and decapitate all Indians, entrepreneurship, socially beneficial activity, love making, partying, freedoms and so on. This is part of larger malaise where the lazy, incompetent, greedy Quota-Corruption Raj takes your taxes and your bribes but forces you to do all the work while abstaining from all that you would like to do while the Neta-Babus do as they please without any accountability. Yea, even commit crimes with impunity. This is the Khangress culture that saw to their demise. The continuation of this culture may bring about their resurrection. The only salvation for this benighted country will be "Equality under law" and "Rule of law". When, Netas, Babus, Cops and Judges are subjected to the same laws of the land with even greater rigour than the common man and, by extension, quotas, entitlements and corruption become excrescence of the past while laws become practical, equitable and reasonable, India can see the glimmer of the India that Tagore envisaged. Where the mind is without fear and the head held high. Indeed.
10 years ago
it is doubtful whether the authorities will wake up from slumber and take action inn the lines suggested until and unless the SUPREME CORT STEPS IN.A WELL RESEARCHED ARTICLE.THANKS A LOT SIR,FOR BRINGING ABOUT ALL THE FACTS BEHIND THE CURTAIN
10 years ago
it is doubtful whether the authorities will wake up from slumber and take action inn the lines suggested until and unless the SUPREME CORT STEPS IN.A WELL RESEARCHED ARTICLE.THANKS A LOT SIR,FOR BRINGING ABOUT ALL THE FACTS BEHIND THE CURTAIN
Sigh Baboo
10 years ago
Dear Prof. Vaidyanathan,
Thanks for writing this nice article. I particularly liked learning about the genesis of NGOs through various Acts etc..

Regarding Item VI (below the Table sourced to MHA regarding FCRA receipts):

It may be pertinent to check out the foreign donors of Gospel for Asia (RCN=052850064) & Believers Church (RCN=052930220). GFA-India is a charitable trust working under BC-India (according to their website). Both are located in Thiruvalla, Kerala.

As can be seen from their respective FC6 returns (BC: (GFA:, one of their foreign donor is the same -- Gospel For Asia Inc, located in Carrolton, Texas. However, many of the other (nominally different) donors such as Cup of Blessing, Way of Hope, Voice of Love, Road to Peace, Unconditional Love, In His Steps, Peace Givers, Teaching Skills, Grace in Action, etc..are all LLCs (Limited Companies) based out of Texas.

If one checked the Texas State Govt. website for LLCs, which is
for details about any of these LLCs, two things are common: (A) They were all registered on 8/27/2009 and (B) their Officers & Directors data contains "Gospel For Asia Inc" as "Member" (& no other member).

Thus, shouldn't Gospel for Asia Inc, Carrolton, Texas get the honours of being the largest donor to India, via FCRA (at least in 2011)?

Thank you Sir,
Sigh Baboo
Replied to Sigh Baboo comment 10 years ago
My blogsite is: wherein I have examined a little bit of FCRA data.
10 years ago
Hats off to Prof. R Vaidyanathan and the MOneylife to give us this well researched insightful article . Indeed an eye opener. How many of us knew thee facts ?
It is high time that a serious movement as suggested by the Author is treated the call of the day by the Government and categorise the white and black sheeps amongst FCRA accreditated NGOs .
Free Helpline
Legal Credit