Budget 2022: Exempting CSR funds for education, healthcare to boost inflows to non-profits

As we head towards the Budget announcement for 2022-23, economic indicators show that the country is bouncing back after its GDP plunged to multi-year lows, compounded by the pandemic. Estimated to grow at over 9 percent, it is fair to hope that Finance Minister Nirmala Sitharaman will have resources at her disposal in this year’s Budget to come to the aid of sectors that were most affected by the crisis caused by COVID-19.

The challenges before the finance minister are many. According to recent estimates, 46 million Indians have slipped into extreme poverty during the two years of the pandemic. India’s unemployment rate touched 7.9 percent in December, according to the Centre for Monitoring Indian Economy (CMIE), and this could be far worse in the informal sector. And the third wave has added a layer of uncertainty.

The development sector, which has played a vital role in fighting the ill effects of the coronavirus catastrophe, is looking at this year’s Budget with great hope.

Need for focus on education, health

While structural reforms and large-scale infrastructure projects are crucial for economic growth, the finance minister, one hopes, will considerably increase allocations to public programmes on children and women’s welfare, education, healthcare, and rural and urban employment.

India’s public outlay on education has been stagnant for years. With around 3 percent of the overall GDP reserved for education, it is very low for a country of India’s size. The underfunding does little to help the deep-rooted problems in the sector, such as high drop-out rates and teacher shortages. Add to this inherent crisis, the fallout of school closures during the pandemic - including the yawning digital gap between the haves and have-nots - and it can be considered a national disaster.

The government should make an earnest effort to increase its allocation to at least 6 percent of the GDP. This will allow for massive investments in the rural education system and close the learning gap - digital or otherwise - between rural and urban school goers and wealthy and economically disadvantaged children. A larger education budget should also encourage the private sector and not-for-profit organisations to pitch in with innovative models.

Public healthcare spending saw a spike last year because of the raging pandemic, but it has remained a little above 1 percent of GDP for decades now. Social sector professionals working in the field can see from close quarters the difference in states which have better healthcare budgets doing well on the economic front as compared to those whose health allocations are less.

Encouraging ease of doing good

As the second wave of COVID-19 swept India, the government thought on its feet and cleared many bottlenecks hindering COVID-related work of non-profits. In many states, charitable organisations worked closely with the government to reach the underserved affected by the pandemic. Thousands of NGOs working at the grassroots level acquitted themselves well by bringing healthcare and humanitarian aid to those in need.

Going forward, one hopes that the government will recognise the true potential of the non-profit sector and carry out a few policy changes in the FY 2022-23 Budget.

a) Simplifying rules and regulations for the non-profit sector and its fundraising activities could go a long way in helping law-abiding organisations to do more meaningful work on the ground.

b) In recent years, the country has witnessed a progressive shift in policy orientation and increased emphasis on innovation and entrepreneurship. This could be extended to the non-profit sector, too. Like in several western countries, a provision for federal funding for deserving social sector start-ups working for the welfare of children and women, education and skilling, could go a long way in encouraging aspiring social entrepreneurs with innovative ideas to meet complex challenges.

c) Many NGOs are working to bridge the digital gap for underprivileged children in urban and rural areas. Along with increased allocation for education, the government can provide incentives to NGOs that are helping in bridging this gap and increase Internet penetration in the form of free wi-fi spots in rural India.

d) As the CSR rules have been tightened in recent years, companies and NGOs are forced to spend substantial time and manpower on mandatory paperwork. Reduction in compliance burden will help NGOs and companies to concentrate more on the issues concerning society.

e) India Inc. went out of its way to help both the government and non-profits during the pandemic. In the coming years, CSR and institutional giving will play an important role to scale up various social development programmes by the NGOs and governments. Some policy changes to the GST Act, like exempting CSR funds used for education, healthcare, and the service of the underprivileged, could go a long way in increasing the flow of funds to the non-profit sector.

Over the years, NGOs have played a key role in filling the gaps in various socio-economic development schemes by the government and ensuring that the poorest of the poor in India can participate and contribute to the country’s overall growth. The government can help the sector further scale and reach wider sections of the most vulnerable in the country.

The writer is COO, GiveIndia- a non-profit organisation.

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