The Foreign Contribution (Regulation) Act, also known as FCRA, has recently experienced a series of vital amendments, completely changing the landscape for Non-Governmental Organizations (NGOs) in India. This article will delve into the implications, changes and significance of this action led by the Ministry of Home Affairs.
Understanding the FCRA
Adopted during the Emergency back in 1976, the FCRA was designed with the goal of curtailing foreign influence on Indian affairs via independent organizations. The law’s primary mandate involves regulating foreign donations to individuals and associations to ensure their consistent function within the democratic republic.
Every organization or person wishing to receive foreign funds must register under the FCRA, open a dedicated bank account for foreign funds and only use these funds for their designated purpose. Organizations considered of political nature are prohibited from receiving foreign funds under the Act.
This act was amended in 2010 aiming “to consolidate the law” governing foreign funds utilization and “to prohibit” their use for “any detrimental activities to national interest”. Further amendments in 2020 have provided the government with heightened control over NGO’s foreign fund receipt and utilization procedures.
Key Changes in FCRA
Recent changes allow Indian residents to receive up to Rs 10 lakh annually from overseas relatives, up from a previous limit of Rs 1 lakh. Furthermore, individuals now have 90 days to notify the government if they exceed this limit, marking an increase from the prior 30-day period.
Organizations applying for ‘registration’ or ‘prior permission’ to accept funds under the FCRA now have 45 days, up from the previous 30 days. The revised law also stipulates that foreign funds spent on administrative overhead cannot exceed 20% of the total funds, down from the previous 50%.
Five offenses under the FCRA have been made “compoundable”, taking the total to 12. Compoundable offenses are where a complainant can choose to drop charges against the accused. FCRA violations that have now become compoundable include failure to notify about receipt of foreign funds, opening of bank accounts, and failure to publish information on the website.
Significance of the Amendments
These amendments aim to enhance inward remittances while curtailing fund outflows. This is expected to lead to increased fund inflows to India, stabilizing forex reserves and the currency.
Similarly, the government has raised the import duty on gold from 7.5% to 12.5% to discourage gold imports and control the impact on trade deficit and forex reserves. This increase in duty is expected to raise the price of gold in India, decreasing its consumption and import.
Moreover, the rise in fund inflows coupled with reduced gold imports will help shrink India’s trade deficit, which stood at USD 44.7 billion in April and May 2022. For comparison, the trade deficit was recorded at USD 21.8 billion in the same months in 2021.
The Future Outlook
The recent changes in the FCRA and its revised rules are expected to further regulate the flow of foreign funds into India, lending to economic stabilization. However, these changes will also significantly affect NGOs and their functioning, possibly leading to an adjustment period in the sector. It will be important to attentive to not only the economic implications but also social impacts of these developments going forward.
