India is the only country which forces philanthropy on private businesses. The CSR mandate has a socialist feel-good instinct, and echoes a view that profits are dirty. It assumes that a private business is by default socially irresponsible, and must take a dip in the CSR river to cleanse itself.
The 2% of profits contribution might sound benign, but that total spend has now ballooned to ~$4.5B annually. Just to put this in perspective, it’s:
- ~3x of government support to all IITs combined
- ~2x of government support to all urban renewal programs combined
Not all CSR spend is bad. But my point is regarding the policy design itself:
- Firstly, it does not scale. Welfare projects are not the core competency of a business. Even if a project shows promise, a corporate does not own the last mile delivery for billions—only the state is meant to. Nor does it have incentives / competitive pressures to scale it.
- Secondly, it is not accountable. That spend is not subject to CAG, RTI, Parliament or elections. It instead flows through thousands of tiny bureaucracies, maybe with good intentions, but without any democratic oversight.
I feel the opportunity cost is running far too high. My two cents with 3 ideas.
- Abolish it entirely
- Or route it mandatorily into the RDI Fund
- Or route it mandatorily to the municipal corporation where the company is headquartered
Voltaire’s funny line about the Holy Roman Empire applies. I think that CSR is not quite corporate, not quite social, and not quite responsible.