Impact of CSR funds ‘not widely felt’ despite jump in spending: Ministry of Corporate Affairs

Source: The post is based on the article “Impact of CSR funds ‘not widely felt’ despite jump in spending: Ministry of Corporate Affairs” published in Economic Times on 2nd  July 2023.

What is the News?

The Ministry of Corporate Affairs (MCA) has said that there has been a limited impact of corporate social responsibility (CSR) initiatives despite an increase in such spending in recent years.

What is Corporate Social Responsibility(CSR)?

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Data on Corporate Social Responsibility(CSR):

Source: Economic Times

CSR spending in FY21 amounted to Rs 26,210 crore representing an 80% growth since FY16.

This increase is commendable but the impact of CSR funds is not widely felt, necessitating a strategic and sustainable approach. 

What are the challenges to CSR in India?

Regional disparity: There is a substantial regional disparity in the deployment of CSR funds. 

In FY21, ten states, including Maharashtra, Gujarat, Karnataka, and Andhra Pradesh accounted for over 44% of the CSR funds.In contrast, the eight northeastern states received a meager 0.91% share. 

This regional imbalance is worrisome as the smaller regions often face higher levels of socio-economic challenges and underdevelopment.

The potential reason for such disparity could be the stipulation under the Section 135(5) of the Companies Act 2013 which says that companies should give preference to the areas around which they operate while allocating CSR funds.But this rule is not mandatory. 

Hence, companies can avoid concentrating CSR funds in specific regions by adopting a multi-dimensional approach to CSR.This involves identifying regions with high socioeconomic vulnerabilities and directing resources towards their development.

For this, they can collaborate with local NGOs, community-based organizations, and government agencies to ensure the effective implementation of CSR projects at the grassroots level. 

CSR funding in few specific sectors: Education, healthcare, and rural development have remained the top receivers of the CSR funds. 

According to the official data, between FY15 and FY21, the education sector received about 37% of the total CSR spending. 

The health sector received 30% and Rural development projects received 9.6% of the total CSR expenditure.