Purpose of CSR in Current Social and Economic Context of India

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 Economic development can be just, equitable and sustainable only when it is inclusive. The distinction between inclusive growth and inclusive development that most scholars agree on is that the former is limited to income while the latter includes non-income dimensions as well. Underlining its significance, inclusive growth has been incorporated as one of the sustainable development goals. India, asth the world’s fourth fastest growing economy, ranks 60 among the 79 developing economies in ‘Inclusive Development Index’ developed by World Economic Forum. This shows that India is far from leading an inclusive development path in the country. India’s performance in improving education and health indicators paints a dismal picture and validates that there is a long way to go to ensure that the country is following an inclusive development model.It needs innovative policy solutions to realise inclusive development. In 2013, India became the first country in the world to make spending under Corporate Social Responsibility (CSR) mandatory by law. This legislation has created an important opportunity to mobilise resources and build mechanisms to promote inclusive development in the country. This article presents the case of the important role of mandated corporate social responsibility in a plural and fragmented society like India.

Amit Lahiri
Pratik Phadkule

Today, ‘inclusive development’ has become an important concept in the international development literature, but at the ground level, the situation tells a different story. In this regard, the Stockholm Statement by the world’s thirteen leading economists comments that today, global forces hold out both promise and peril. It rightly observes that the expansion of global trade and investment have boosted growth. As a result, several low-income countries have moved to middle-income status. However, at the same time, many social groups in these societies have been left behind in the path of growth and development. If some social groups are not benefitting from the economic growth, then that is not an inclusive growth and inclusive development.

“If some social groups are not benefitting from the economic growth, then that is not an inclusive growth and inclusive development. It becomes instead socially exclusive development. The economic and the social are interconnected spheres and one impacts on the other”

It becomes instead a socially-exclusive development. The economic and the social are interconnected spheres and one impacts on the other. It is important to note that there has been a worldwide consensus on the need for an inclusive approach toward economic growth and development over the past several years. Underscoring its significance, inclusive development is incorporated into the Sustainable Development Goals (SDGs) 2030 of the United Nations. But as noted earlier, World Economic Forum’s (WEF) report reiterates that inclusive growth and development remain primarily anaspiration. No systemic framework has emerged to guide policy and practice. Hence, the CSR mandate in India is indeed an unique case in the world today if seen in the context of the current economic and social context of one of the world’s most populous and fastest growing economies.

“Promoting inclusive development needs innovative policy solutions. Government and free market do have a role to play in promoting inclusive development in a country. However, it is important to note that apart from government and market, civil society is also an important stakeholder in promoting inclusive development”

The term inclusive development became centre stage only in the 21st century though it was used for the first time in academic literature at the end of the 20th century. Asian Development Bank (ADB) literature recognises inclusive development as “ growth coupled with equal opportunities”. It is about creating opportunities and making them accessible to all, not just to the poor. Oxfam defines inclusive development as “a pro-poor approach that equally values and incorporates the contributions of all stakeholders” including marginalised groups in addressing development issues. It promotes transparency and accountability, and enhances development cooperation outcomes through collaboration between civil society, governments, and private sector actors. In India, inclusive development appeared as a policy objective during the Eleventh Five Year Plan in 2007. The document explicitly said that “the Eleventh Plan addresses itself to the challenge of making growth both faster and more inclusive.” It further acknowledged that “the rapid growth achieved in the past several years demonstrates that we have learnt how to bring about growth, but we have yet to achieve comparable success in inclusiveness”. It is evident that the policy objective to promote inclusive development is pursued by the Government of India after the Eleventh Five Year Plan. In 2015, the Government of India reiterated its commitment to securing inclusive growth, leading to sustainable development in Geneva at the Plenary of the 104 Session of United Nations International Law Commission (ILC). The NITI Aayog also came up with an initiative named ‘Samavesh’ to achieve sustainable and more inclusive development in line with Sustainable Development Goals.

“CSR is about working with government, civil society, and the community to improve the lives of people by making growth more inclusive”

However, even after ten years, the policy objective of inclusive development has remained as a mere aspiration in India too. The recent 2017 World Economic Forum (WEF) Report concludes that India lags behind in promoting inclusive development in the country despite its growth in GDP per capita being among the top ten in the world. It records that educational enrollment rates are relatively low across all levels, and it leads to notable differences in performance among students from different socio-economic backgrounds. Similarly, healthcare, basic services, and education require more spending than what has been presently allocated. And thus, India has been ranked 60th among 79 developing economies in the Inclusive Development Index. Apart from the ranking in the indicator, India’s performance in improving education and health indicators paints a dismal picture. Health indicators such as Infant Mortality Rate (41) still lags behind other countries such as Bangladesh (31) and Nepal (29) as also Maternal Mortality Rate, which at 174, is slightly lower than that of Bangladesh (176). In 2016, India ranks at 97 among 118 developing countries in the Global Hunger Index. Thus, chronic hunger, undernourishment, and mortality among children remain major challenges in the country. This validates that there is a long way to go to ensure that the country is following an inclusive development model. It needs innovative policy solutions to realise inclusive development in the country.

Promoting inclusive development needs innovative policy solutions. Government and free market do have a role to play in promoting inclusive development in a country. However, it is important to note that apart from government and market, civil society is also an important stakeholder in promoting inclusive development. In this context, Oxfam rightly suggests that strategy to promote inclusive development needs collaboration between civil society, governments, and private sector actors.

Corporate Social Responsibility (CSR) initiative in India has the potential to become this innovative policy solution to promote inclusive development. The CSR mandated by law compelled companies in India to shell out more than INR 18,625 crores towards social welfare activities in the FYs 2014-15 and 15-16. This money was spent in areas like education, healthcare, sanitation, environmental sustainability, poverty alleviation and skill development. In FY 2015-16, the top three sectors on which the most number of projects were funded and the largest amounts were spent were Health, Eradicating Hunger, Poverty and Malnutrition, Safe Drinking Water, Sanitation (3117 crore), Education, Differently abled, Livelihood (3073 crore) and Rural Development (1051 crore). This trend in CSR spending suggests that the discourse on CSR in India is increasingly about the important role corporates can play in bringing about positive change in the area of human development and social inclusion. It also recognises that CSR is about working with government, civil society, and the community to improve the lives of people by making growth more inclusive. Civil society in India is vibrant with many NGOs and foundations working with a variety of issues that are aligned with suggested areas in CSR law. Companies in India will need the support of NGOs to implement their CSR activities. CSR as mandated by the law, partnership between companies, governments and civil society is supposed to be boosted which will further lead to policy and programme innovations to accelerate inclusive development. Not all NGOs and CSOs are credible and meet the standards, but the listing down of the those who meet the standards have already started. Universities and research organisations/consultancy firms with a rich pool of knowledge and expertise can also be leveraged to develop innovative solutions through corporate social responsibility.

In the two financial years, 18,625 crore rupees (USD 3449.07 million) have been spent on different social sectors by 12,431 companies in different parts of the country. During this time, 1,018 firms were sent notices for not complying to CSR provisions under the Act. It shows that most companies are conforming to the law but several are yet to follow the mandatory provisions of the law. Though India passed the law making spending on CSR mandatory in 2013, some of the companies were engaged in CSR activities long before the law was passed. The law is supposed to encourage other corporates to develop CSR initiatives. There are success stories of CSR contributing to ensure access to opportunities for the less privileged. A study published in 2015 mentions CSR interventions by the following CSR initiatives and their contribution in promoting inclusive development.

Education: In 2015, Project Nanhi Kali by Mahindra and Mahindra, supported the education of over 11 lakh underprivileged girls in ten States. The key outcomes of the project include an increase in both enrolment of girls in schools and curtailing dropouts to less than ten percent. Another initiative, Mahindra Pride Schools, supported 13,000 youth from socially and economically disadvantaged communities by providing them livelihood training.

Health: Tata Steel started Maternal and Newborn Survival Initiative (MANSI) in Jharkhand, a project to reduce child and infant mortality. As reported in 2015, the project improvement in health indicators such as reduction in neonatal mortality by 32.7 percent, reduction in infant mortality (up to the age of one year) rate by 26.5 percent, increase in institutional delivery from 58 percent to 81 percent. The project was proposed to scale up in 1500 more villages of the same districts.

Hunger: Infosys Foundation supported Akshaya Patra Foundation, the world’s largest mid-day meal programme. It serves wholesome food to over 1.6 million children from 13,526 schools across eleven States in India. Akshaya Patra Foundation is also an example of successful partnership between governments, civil society and business houses.

These examples show how a corporate social responsibility initiative can have positive scalable impacts leading to promotion of more inclusive development, giving access to economic opportunity to all, especially the underprivileged.

Amit Lahiri is Chief Sustainability Officer, Associate Director of the IIHEd (International Institute for Higher Education Research & Capacity Building) as well as Exe. Director of the Center for Excellence in CSR & Sustainability at O.P. Jindal Global University. He combines ten plus years of experience in industry with eighteen plus years of experience in the academic sector.

Pratik Phadkule is a Research Associate in Jindal School of Government and Public Policy.