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30 July 2015, Gateway House

A brief history of Indian CSR

Tracing the history of CSR in India, from Independence to the Companies Act. This a first in a series of articles examining CSR and the Indian Companies Act (2013)

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The 2013 Companies Act for the first time mandates that private corporations join public sector firms in annual donations for Corporate Social Responsibility (CSR).  All firms with net worth above Rs 500 crore, turnover over Rs 1,000 crore, or net profit over Rs 5 crore are required under Section 135 to spend at least 2% of their annual profits (averaged over 3 years) and establish a CSR committee to oversee the spending.

How did CSR work pre-2013?

Time period Economic currents State role Corporate CSR
1850-1914 Industrialisation Colonial, extraction Dynastic charity
1914-1947 Trade barriers for new industries Colonial, exploitative Support freedom struggle
1947-1960 Socialism, protectionism Five year plans Support new state; launch own rural initiatives
1960-1990 Heavy regulations Licence raj; development failures Corporate trusts
1991-2013 Liberalisation Shrinking in production; expanding in social provision Family trusts, private-public partnerships, NGO sponsorship
2013-present Globalisation Need to manage inequality; new reforms to liberalise further Introduction of mandatory 2% rule

Religious traditions of daan, seva, and zakat operated in India for centuries helping to shape the relationship between the privileged and the dispossessed.  The vast majority of philanthropy in India has always been to religious institutions and that continues to be the case.  The earliest industrialists of the 19th Century launched the practices of corporate giving via trusts, and endowed institutions controlled by members of business families.

After the First World War, a new phase of corporate philanthropy arose that drew business leaders into the political fight for independence. The close relationship between M.K. Gandhi and leading industrialists is well-known.  He proposed a model of trusteeship for business in which tycoons should understand their position as fiduciaries of society’s wealth.

In the period immediately after Independence, the role of the Indian State expanded greatly and the corporate sector took a backseat in development efforts.  After some time, the failures of the State to end poverty and support economic growth led to dissatisfaction.  The liberalisation of the Indian economy in 1991 ushered in a new globalised economic environment, with rapid growth in overall wealth and also in inequality.

The rising gap between the wealthiest Indians and those at the bottom sparked innovation in efforts by the corporate sector to address social problems.  It also led the State to think about how to pull in more support from the booming business world.  In the context of a shrinking State, a more globalised economy, and great divisions in economic and social worlds, the landscape of Indian CSR is fascinating

Gateway House and Lehigh University, Pennsylvania, U.S., have teamed up to conduct a study of how these regulations are shaping corporate giving.  Based on dozens of interviews with corporations, lawyers, journalists, consultants and NGOs as well as research on almost 200 of India’s largest corporations we are presenting a series of articles on Indian CSR today.

Nandini Deo is an Assistant Professor at Lehigh University, Pennsylvania, U.S.

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