Somewhere between 2013 and now, in the labyrinth of policymaking, a good idea took a very Indian detour. The idea was elegant: if companies grow, society should grow with them. Thus arrived the 2 per cent CSR mandate — a polite instruction that companies above a certain size must spend a slice of profits on social good. A moral spreadsheet, with a conscience column.

Like most noble ideas in India, it was swiftly upgraded into a business model.

Before the CSR Act, corporate philanthropy largely flowed outward towards independent NGOs, sectoral foundations, and community organisations. The number of large corporates running their own foundations was limited, and partnerships with external NGOs were the norm. Today, estimates suggest that 60-70 per cent of CSR spending by large listed companies is routed through their own trusts, foundations, or implementing agencies. Thousands of corporate foundations have been created in the last decade alone. Because, naturally, if you are required to give away money, the most efficient solution is to give it… to yourself, structurally speaking. Or should we call it vertically integrated compassion?

To be clear, not all corporate foundations are ineffective. But structurally, when the same entity controls the purse, the project, and the press release, accountability becomes a flexible concept. CSR, in many cases, has become less about redistribution and more about reclassification.

Grassroots NGOs

The original ecosystem of grassroots NGOs has been edged out. These are organisations that operate in remote villages, tribal belts, and urban slums. They have field workers instead of brand managers, trust instead of taglines. Unfortunately, in the current CSR space, storytelling outruns substance.

The numbers tell a charming story. CSR spending has ballooned past ₹25,000 crore, yet the slice reaching scrappy independent NGOs keeps shrinking. The money has just found its way into large, photogenic projects and corporate-run foundations, where costs of execution run higher. The paradox is almost poetic: more being “spent” on social good, while actual impact is largely absent.

And then comes the regulatory subplot.

While corporations have mastered the art of recycling CSR funds within controlled ecosystems, independent NGOs and individual donors find themselves in an increasingly intricate maze. Compliance requirements have tightened. Reporting standards have multiplied. Foreign funding regulations have grown stricter. Individual giving incentives under provisions like Section 80G have become more procedural and less attractive in practice.

The message, intentional or otherwise, is oddly asymmetrical: large corporations may innovate with their interpretation of social good, but smaller actors must comply with it in triplicate.

Volunteers scrutinised

Government has adopted a curious philosophy — trust the balance sheet, scrutinise the volunteer.

Consider the contrast. A large corporation can set up a foundation, route CSR funds into it, “implement” projects, and showcase outcomes — all within a controlled loop. A small NGO must justify every rupee, navigate compliance hurdles, and wait months for approvals that may or may not arrive. Individuals attempting to support these NGOs face their own bureaucratic friction. It is regulation with a selective sense of urgency.

The consequences are predictable. Smaller NGOs struggle to survive. Field programmes shrink. Talent drifts away — not always physically, but intellectually — to more stable ecosystems. Innovation slows, and actual work on ground too.

Worse, some CSR-funded projects begin to resemble commercial ventures with philanthropic branding. Hospitals built under CSR operate on premium pricing models. Educational institutions charge fees that exclude the very communities they were meant to serve. The poor get infrastructure; access remains behind a paywall. It’s a bit like donating a swimming pool to a village and then charging entry fees.

Instead of addressing these structural contradictions, policy seems to have focussed on tightening control where it is easiest — on individuals and independent NGOs. It is the administrative equivalent of solving traffic congestion by regulating pedestrians.

The deeper risk is not just inefficiency, but homogenisation and further erosion of inclusive growth. Even Bangladesh has crossed India in per capita GDP. When social impact becomes centralised within corporate ecosystems, diversity of approach suffers. India’s complexity doesn’t lend itself to one-size-fits-all solutions but requires thousands of small, localised interventions — exactly the kind that independent NGOs and individual donors are best placed to support.

Recalibrate execution

The CSR mandate, in spirit, remains one of the most progressive ideas in corporate governance. But its execution needs recalibration with intent and courage.

First, introduce a mandatory allocation norm within CSR — say, at least 30-40 per cent of CSR funds must be deployed through independent, third-party NGOs. Not affiliated, not controlled, not conveniently connected to any corporation. Truly independent. This would restore balance and better use of funds.

Second, enforce transparency with teeth. Corporate foundations should disclose not just spending, but outcomes, beneficiary profiles, and pricing structures assessed by independent agencies. If a CSR-funded hospital charges market rates, it should not be marketed as social inclusion, and licence must be cancelled.

Third, simplify and incentivise individual giving. Reinstate stronger tax benefits, reduce compliance friction, and create digital public infrastructure for verified NGO donations. If UPI can move billions seamlessly, so can philanthropy.

Fourth, rationalise regulation across the board. Apply consistent scrutiny to all actors — corporate, individual, and institutional. Regulation should be risk-based, not size-biased.

Fifth, protect and enable grassroots NGOs. Create fast-track compliance mechanisms for small organisations with proven track records. Provide capacity-building support rather than compliance punishment. Make FCRA norms easier for the larger benefit of the society; else India’s loss will be Bangladesh’s gain.

Finally, decouple CSR from brand management. Social impact is not a marketing vertical. The more it is treated as one, the less credible it becomes. For all its religious frenzy, charity is not a quiet affair in India.

Inclusive growth is not a quarterly deliverable. It is a distributed effort. India cannot outsource compassion to corporate balance sheets alone. We might risk perfecting a system where money circulates efficiently, reports shine brilliantly, and impact… remains under review.

The writer is a Fortune-500 advisor, start-up investor and co-founder of the non-profit Medici Institute for Innovation

Published on May 5, 2026