Indian NGOs at the New Crossroads of Funding

When the first Foreign Contribution Regulation Act (FCRA) was passed in 1976, a government of a different political hue was in power than the one that has now proposed the fiercer amendment to the FCRA Act of 2026. However, the underlying political concerns were similar – the fear that foreign powers could destabilize the country by funding civil society organizations (NGOs or NGOs). In this case, there is also an unspoken fear of religious conversions of Christians and other religious minorities. The bill has not yet been approved due to strong reactions from opposition parties and several civil society groups, especially Christian organizations.

The government says the flow of foreign funds into India’s NGO sector operates as a vast, complex and opaque web. Thousands of millions of unmonitored capital flows into the country every year under the banners of development, human rights and social welfare. Much of this money deliberately bypasses state accounting mechanisms and finds its way into politically motivated campaigns, highly selective local enforcement, and aggressive selitization and religious conversion networks.

Proposed legislation, concerns

Under the proposed legislation, if an FCRA certificate is revoked, surrendered or automatically lapses, foreign contributions and any assets generated from them will be vested in a government-appointed “designated authority”. The organization can recover the assets if the registration is renewed within the prescribed period. A permanent transfer will only occur if the registration is not renewed within this period. The bill also provides for a review and appeal to a district judge.

If you don’t get a new certificate within the stipulated time, the assets could be sold or transferred to a government department, with the proceeds going to the Consolidated Fund of India. However, during the transition period, the renewal of registration leads to the return of assets and unused foreign contribution.

NGOs, especially Christian organizations, which the government claims receive a greater share of funding than religious associations, fear that the legislation may not be religiously neutral and that the real victims will ultimately be the beneficiaries served by such charities, which have set up and run a number of schools, hospitals, nursing homes and similar institutions. As some leaders from the North-East and tribal areas have pointed out, such institutions are sometimes the largest or only providers of these services in many areas.

As of 2015, FCRA registrations of 22,496 NGOs have already been cancelled, leaving about 14,466 active registered associations eligible to receive foreign contributions (Ministry of Home Affairs data, September 2026). In fact, the amounts received are higher than in 2006–07 (₹12,289.6 million from private international donors), the last year for which data was available when this writer wrote Foreign Aid to Indian NGOs: Problem or Solution? (2010).

So why the protests? The fact is that different sources of funding have a different impact on organizations and their effectiveness, because as the saying goes: “He who pays the piper makes the call”.

Although the total volume of foreign aid to NGOs is small compared to national budgets, and only a small proportion of NGOs receive such aid, it is highly valued because it is not only an alternative source of funding, but also more flexible than government funding, with fewer restrictions on how it can be used. It is generally tailored to the needs of the NGO through discussions between the NGO and the donor.

The book Foreign Aid to Indian NGOs, which is based on theoretical research and interviews with several NGOs, large and small, suggests that while a few organizations felt that foreign aid had adverse consequences, such as encouraging the adoption of ideas and practices from abroad that were unsuited to Indian conditions, most felt that foreign funds contributed to India’s development and particularly to the growth of the voluntary sector. They brought new ideas, techniques, technologies and organizational improvements. In the absence of adequate government funding and private philanthropy, foreign aid played a positive role.

The need for diversity in funding

Today, however, due to political events in neighboring countries and elsewhere in the world, and without being privy to the government’s secret sources of information about the destabilizing role played by foreign money, it is difficult to pass a definitive judgment on the need and value of foreign aid today.

Opinion | FCRA Bill 2026, a threat to CSOs

There can be no doubt that a vibrant and independent civil society is essential to a healthy democracy and to prevent the abuse of unlimited political power by any section of society. Multiple sources of funding are also necessary so that civil society is not dependent on any single source.

But one can also doubt whether foreign funds are the only answer to the needs of today’s civil society. Firstly, the voluntary sector is now more developed. Second, the situation regarding foreign aid itself has changed. Bona fide foreign donors themselves are withdrawing from giving to India because of their own economic difficulties and the perception that India, which is striving to become the world’s third largest economy, no longer needs their help.

Third, the domestic NGO financing environment has also improved. According to the Forbes 2026 list, there are 3,332 billionaires in the world, of which 229 are in India, the third largest number after the United States and China. The amount they donate to philanthropy has also increased. According to Bain & Company’s India Philanthropy Report, private philanthropy is projected to reach ₹1.43 trillion ($16 billion) in fiscal year 2025. In addition, there is a retail donation of around ₹37,000 per year.

The downside is that demand is growing faster than supply, with projections suggesting the gap could reach ₹18 trillion (US$210 billion) by 2030, according to the same report.

In addition, new philanthropists, especially entrepreneurs and technology leaders, are moving away from traditional areas toward ecosystem building, scientific research, higher education, and comprehensive institutional support.

This is undoubtedly good news for social and economic change, but bad news for NGOs providing traditional education, health and social services.

A glimmer of hope for such NGOs is that following the Companies Act, 2013, which made corporate social responsibility (CSR) spending mandatory for companies above a certain size, CSR spending by these listed companies stood at ₹ 25,22,563 crore in the fiscal year, an increase of 17.5% (latest CRISIL report).

As many companies do not have the internal competence to carry out social development, they rely on NGOs as partners. Although many companies are moving into environmental and other emerging areas, many still find the traditional areas of health, education and rural development more meaningful.

A new opportunity

So, in the final analysis, if the government decides to curtail foreign funding, the future may not be bleak if Indian domestic philanthropy fills the gap.

However, domestic donors, and especially the government, need to be more responsive to the needs of NGOs, learn from foreign donors some of the practices that make their aid so sought after, and engage in a more serious dialogue about funding practices, as opposed to development issues, to improve those practices and address dissatisfaction on both sides. Ultimately, the dynamics of development in India will be changed by the innate generosity that lies dormant in hundreds of dedicated Indians, not by foreign aid, which can be icing on the cake at best.

Pushpa Sundar is the author of several books on philanthropy, the most recent being “Giving with a Thousand Hands: The Changing Face of Indian Philanthropy”.