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When India’s FCRA ‘golden ticket’ becomes harder to clinch

January 31, 2022

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Author

Michael Green

Director for Government and Strategic Development
Sannam S4

While recent developments regarding Foreign Contribution Regulation Act (FCRA) registration in India further complicate processes and prospects for nonprofits in India, they should come as no surprise. For years, the regulatory environment has been less accommodating towards even the world’s most prominent charities and environmental groups. Efforts by Oxfam India, the Missionaries of Charity, and Amnesty International to have their FCRA registration renewed have all failed.

And we only know about those examples because the entities involved are globally branded. There are plenty of other nonprofits that the Ministry of Home Affairs didn’t reinstate that occurred under the radar. According to local news reports, in January this year, over 6,000 FCRA licenses were cancelled in bulk. And this comes on the heels of 12,521 organizations ceasing to have their FCRA registrations at the start of 2022, reflecting actions taken in previous years.

At present, a total of 16,888 organizations have their FCRA in India, so it’s hard to clearly distinguish the reasons behind approvals and declines. But, without a doubt, what is going on is part of an overall trend – the Indian government is making it increasingly difficult for nonprofits to operate in India in the traditional manner they may have grown accustomed to. Some local news reports indicate that, due to the government’s sensitivity to past global criticism on issues such as climate change, environmental projects and children’s rights, various international organisations have been placed on the “Prior Reference Category” list. This bars them from funding Indian NGOs without the government’s permission under FCRA law.

That’s not to say there aren’t opportunities. In a country forecasted to have the world’s largest population by 2027, opportunities in the nonprofit realm remain abundant. However, it has become more important to look at the current scenario through a strategic lens rather than focus on the granular details. The key to operating in an evolving sector is to work with the challenges rather than against them.

In the for-profit sector, conducting business and bringing funds in from overseas entails getting approval from the Reserve Bank of India. Considering the rapid economic growth in India, this is a relatively straightforward, well-trodden process that’s pretty transparent. Conversely, in the nonprofit world, the FCRA governs the movement of funds from outside of India into nonprofit entities in India, and having your registration approved or renewed by the Department of Home Affairs ensures that flow of funds. It’s what I like to think of as the golden ticket. Fundraising options and ultimately project impact and scale can expand significantly.

But with the Department of Home Affairs tasked with ensuring internal security and domestic policy, the criteria to be met for approval are less well-defined than those being demanded of corporations. Just reading the news headlines of nonprofits denied FCRA approval or renewal doesn’t give us much insight into why those decisions were made or what’s really happening in that space. The only thing we know for sure is we’re operating in an environment of greater scrutiny, and, as a result, we all need to be better prepared.

We don’t expect the Indian government’s stance to change, at least not anytime soon. So, we advise nonprofits to do a quick audit of their India operations and figure out ways to “de-risk” what they’re doing. We’re increasingly helping nonprofits look for alternative structures and nuanced strategies to ensure they achieve their missions in India, no matter the challenges we see today or anticipate in the future.

Sure, India offers tremendous growth, but keep in mind the element of unpredictability that exists. You need to know how to mitigate risk, even in areas that weren’t perceived as being all that risky in the past. The key to India is not only entering but knowing how to explore and expand a presence. And, in doing so, you can better your chances of clinching that “golden ticket”, in whatever permutation that may be.

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