FCRA, NGOs and the Question of Which Foreign Funding Is in National Interest

Foreign interests and influences come with foreign capital and these are far stronger than what the funds flowing to NGOs bring with them.

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The Foreign Contribution (Regulation) Act (FCRA) registration or license that enables the licensees to get foreign funds has either not been renewed or cancelled for many non-governmental organisations or NGOs.

Problems created for of one of the best known of them, Missionaries of Charity, drew international attention and criticism since the organisation has been doing yeoman’s work in giving succour to the poor. Under pressure, permission was restored for the organisation and along with it the FCRA of prestigious institutions like IIT Delhi and JNU were also restored.

Why did all this happen in the first place?

There is a view in the government that many of the NGOs are not working in the national interest since foreign money makes them subservient to foreign agendas. The corollary of this line of argument has been that their activity in India needs to be curtailed and the best way to do that is to cut off their funding on some pretext. Given the complexity of rules, it is not difficult to claim that these organisations have violated some FCRA conditions. But justice demands that the organisations so labelled be given a chance to respond or reply to accusation of serving a foreign agenda.

If foreign funding promotes an agenda inimical to the national interest, what about foreign investment which the government has been welcoming. This is seen to be in the national interest. To encourage it, concessions of various kinds are offered. Is there a clear cut distinction between these two kinds of funds flowing into the country?

To understand whether there is a distinction, one needs to consider the social, political and economic aspects of these two types of flow of funds to arrive at a judgement of their desirability. Also, can all the flow of funds under each of the two categories be tarred with the same brush?

Money has strings attached

Undoubtedly, money has strings attached. Foreign aid since the 1950s has been an instrument of serving the donor country’s interest. USA refused to set up the Bokaro steel plant because it did not want to promote the public sector. The USSR which had set up the Bhilai steel plant stepped in. The US gave food aid under PL480 and extracted a heavy price like, forcing a massive devaluation of the rupee in 1966. Following this, the leadership recognised the need for food self-sufficiency to safeguard the nation’s independence and strongly promoted Green Revolution technology in the mid-1960s. This became the overriding concern and issues of equity in rural areas, etc., were considered to be secondary.

Former PM Indira Gandhi with M.S. Swaminathan (on her right) inaugurating the Krishi Vigyan Mela at IARI in 1968. The two wars had dented India’s fight against poverty. Gandhi, realising the need for food self-sufficiency, went in for Green Revolution. Photo: MSSRF

In the face of balance of payment crisis, India has had to go to the IMF and the World Bank for assistance and that has required it to follow the conditionalities they impose. The 1980 conditionalities opened the doors for consumerism and massive increase in international borrowings. This resulted in the crisis of 1989-91 which then forced India to change the very path of development that it had chosen at the time of independence.

The national movement had understood that the ‘individual is not to blame for his or her problems’ so policies were based on the idea that the collective would take care of the individual’s problems. This was turned on its head in 1991, under the IMF conditionalities, and the paradigm changed to ‘individual is responsible for her or his problems’. The collective was no more responsible for taking care of the individual’s problems. This put the economy on the path of marketisation and opened up the economy to foreign capital flows.

Foreign investment and MNCs have been welcomed since then.

This, in spite of the earlier experience in the period from the 1950s to the 1970s when the MNCs rather than promote technological development, undermined indigenous technology development. They also impeded the growth of indigenous private industry because of their enormous command over capital.

Foreign capital and dependency

Has India become technologically more independent since 1991? If that was the case, why has India’s dependence on China for its imports of critical items become overwhelming? This also has political and foreign policy implications. India, in spite of the Chinese intransigence at its borders has had to continue to import from them which enriches its industry at the expense of ours. Consider how India backed out of signing the RCEP at the last minute. It was realised that if India joined the grouping it would have served the Chinese interest. But, the dilemma is that staying out of it is not only costly but not a solution. The country has to trade with the same countries who are now a part of RCEP but from outside that group so it does not get the concessions that the grouping gives its members.

Also read: Why India Shouldn’t View its Refusal to Join RCEP as a Victory

MNCs and foreign capital bring with them Western ethos and corporatisation. This has seeped deep into the culture of the country. The best talent goes abroad rather than serve in the country. This is not new. But earlier it was limited to the elite and the big cities. Now it is generalised to most of the population.

US Vice President Kamala Harris talks with Indian Prime Minister Narendra Modi on the balcony of the Eisenhower Executive Office Building, Thursday, Sept. 23, 2021, in Washington. Photo: PTI

This diaspora has become an important constituency in Indian politics – contributing to political parties and campaigning. Recently, the Indian prime minister has held mega events to draw the support (and funding) of the diaspora. While the diaspora does send remittances to the families in India and that helps the Balance of Payments, it also demands policies that marginalise a majority of Indians.

The result is that national interest is not defined by the majority in the country but by the elite and foreign influences.

Can Kamla Harris, the vice-president of the most powerful country in the world, think of serving the interest of the poor of India because she has Indian roots? Actually, the diaspora largely demands concessions for itself and has been a force for the penetration of westernisation into the country’s heartland. The elite may welcome it but it is influence from abroad.

Limited sources of domestic funds

What has raised the hackles of the rulers is the relative independence of many of the NGOs from its control and the resistance they have offered to undemocratic policies and their demand of accountability. They have raised issues on a broad front like, poverty, environmental degradation and poor provision of public goods. Also, many of them have, in a localised way, done what the government should have done (but has not). This exposes policy inadequacy. The National Security Advisor recently propounded that the civil society is the new frontier, that is, it has to be made subservient to the ruling interest.

Also read: NGOs Demand Suspension of FCRA to Speed up Access to Donations, Provide COVID Relief

Foreign funding is needed by NGOs because there are few independent Indian sources. Government funds invariably come with strings which curtails the recipient’s independence. For instance, the so called independent government-supported institutes like, the National Institute of Public Finance and Policy, Institute of Foreign Trade and NCERT are funded by the ministries of finance, commerce and education and act as their arms to push their agenda.

Corporate sector and businesses could be another source of funds. This could come from their corporate social responsibility funds but mostly these are used to promote the interest of the company and its promoters. It is also used to promote an image of philanthropy to project a positive image to counter any negative aspects of the company’s functioning. It is also used to build influence in the ruling circles – those in power are known to monitor the CSR spending of companies. So, little can be given to those who are seen to be opposing government’s and business agendas.

Clearly, influence of foreign money comes through multiple routes. The impact of the foreign powers, the global institutions they control and the MNCs has been overwhelming, especially, in the last 30 years.

While foreign capital has had some benefits it has also been the source of growing inequality and persistence of poverty. While some NGOs may be governed by foreign agendas, many of them have tried to provide localised safety net to the poor. Can all of them be tarred with the same brush without a chance to respond? Many of them have worked at the grassroots with the poor to raise their consciousness about their rights which in a democracy should be lauded since it deepens democratisation and checks authoritarianism of the rulers of the day. But the rulers don’t want that since they see it as a check on their agenda.

In brief, foreign interests and influences come with foreign capital and these are far stronger than what the funds flowing to NGOs bring with them. So, are we now going to see a restriction on foreign capital flows?

Arun Kumar is Malcolm Adiseshiah Chair Professor, Institute of Social Sciences. He is the author of Indian Economy’s Greatest Crisis: Impact of the Coronavirus and the Road Ahead, Penguin Random House, 2020.