The Companies Act’s Mandated Corporate Social Responsibility: A Demi-decade Journey

Five years; it’s been half a decade since the Companies Act of 2013-14 was passed in the Parliament, introducing mandatory CSR contributions for large companies. Assented by the President of India on 29 August 2014, it is the only mandatory CSR law in the world.

According to article 135 of the act, public-sector companies with a net worth above 500 crore rupees and turnover of more than 1000 crore rupees, or net profit of over 5 crore rupees are required to spend at least 2% of their annual profits (averaged over 3 years). The law also instructs firms to establish a CSR committee that will oversee the spending.

CSR in India: Pre-2014 companies act

Although, corporate social responsibility was mandated just five years back, India has traditionally been a responsible country, beginning from the Vedic era when daan and sewa were considered pious acts. Even during the freedom movement and post-independence period, Mahatma Gandhi’s vouching for social services by business tycoons was followed by many in socialist India. Then came the era of market liberalization in 1991 that led to rapid economic growth while sponsoring huge inequality in the country.

Dawn in the socially responsible India

With the 2013’s Companies Act coming into force, India entered a new phase with an aim to create a uniform society. Without a doubt, the CSR spending touched its height in no time, evidenced by the fact that corporates spent almost 50% more in 2018-19 as compared to the amount in 2014-15. From eco-system conservation to skill-building and from social welfare to educational initiatives, various programs in India saw companies spending over 10,000 crore rupees last year. It has also been noted that the Prime Minister’s Relief Fund witnessed a 139% hike in its CSR contribution in the same period.

Education: India’s new CSR love

The high point of this mandated CSR period (2014-19) has been a tremendous contribution in the field of education. The sector attracted the maximum funds, about 15,750 crores, among all other corporate expenditures on CSR in India. Apart from the education sector, healthcare and rural development were the main concerns of companies, attracting over 9,093 crore and 5,466 crore rupees respectively.

According to the Ministry of Corporate Affairs data provided by Mr. Anurag Thakur, the minister of state for finance and corporate affairs, companies in India spent a total of 52,533 crore rupees on CSR activities till June 2019. The breakups of CSR contributions to major fields are as follow:

• Education: Over 15,750 crore rupees
• Healthcare: 9,093 crore rupees
• Rural development projects: 5,466 crore rupees
• Environmental sustainability: 3,723 crore rupees
• Swachh Bharat Kosh: 837 crore rupees
• Prime Minister’s National Relief Fund: 763 crore rupees
• Safe drinking water: 612 crore rupees
• Senior citizens welfare: 91 crore rupees
• Armed force and war widows/dependents fund: 5 crore rupees
• Technology incubators: 71 crore rupees
• Clean Ganga Fund: 1 crore rupees

CSR law: A social awareness program

We have seen how important it is for corporations to prosper in the country so that further development at the community level can be prompted. One of the brightest rays of optimism that has come out of this 5-year tenure is the fact that people in large numbers are coming forward to help the needy ones in the society. The way local small businesses are contributing to NGOs and feeding houses has given a new turn in the way Indian society is going towards holistic betterment.

Future of CSR in India

In addition to financial support, business tycoons have been vocal about the need to make education free and affordable in India. In a country going through such a critical phase of progress and development, over 52,533 crore rupees of corporate social responsibility spending in just five years is a big ray of hope for the future. The tremendous success of CSR in India demonstrates how important it is for the government to aid the progress of corporates which will further prompt numerous CSR initiatives in the country.

With corporate and social developments going hand in hand, New India eyes on becoming a $5 Trillion Economy by 2025.