NGOs: Description and Regulations

R Vaidyanathan

One of the largest members of the Indian economic action scene is the NGO sector—what is known as the Third Sector (other than Government and Private) in academic circles. A Non- Government Organisation (NGO) is any voluntary, non-profit, citizens’ group which is organised on a local, national or international level. It could be registered as a society, trust or section 25 company even though some co-operatives also claim this label.

Table 1
Type of Activities of NGOs

Age Care Health
Agriculture HIV/AIDS
Animal Welfare Housing and Slums
Art & Craft Micro Finance
Children Population
Cities Poverty
Community Development Rural Transformation
Culture and Heritage Tribal Peoples
Disability Waste Management
Disaster Management Water
Education Women
Environment Others

Two important criteria are that NGOs are supposed to be independent of Government and they are organisations not meant for making profit. They are also expected to be ‘value-based’ organisations.

The types of activities they are involved in are mind-boggling as we see from Table 1. It indicates that the range of concerns of the Third Sector is as large as that of Sovereign States.

The list is indicative and not exhaustive. NGOs are involved in different types of activities and correspondingly the type of organisation could differ as indicated in Table 2.

Table 2
Typical Forms of NGOs

Item Type of NGO
1. Advocacy: These NGOs advocate or campaign on issues or causes. They do not implement programmes/projects. PETA advocates the cause of ethical treatment of animals.
2. Consultancy/Research organisations: They work on Social and Developmental Research and Consultancy.
3. Training/Capacity Building organisations: Training is called capacity building by NGOs and some NGOs work on capacity building of other NGOs.
4. Networking organisations: They provide a network for other NGOs in specific fields. AVARD works on networking NGOs in rural development.
5. Mother NGOs: These are recipients of funds as well as givers. They have a work focus, but instead of implementing projects they identify projects and monitor, evaluate and build capacities of other participating NGOs. CRY is an example.
6. Grassroots organisations: They directly work with the community. In a sense, all Mahila Mandals fall in this category.
7. City-based organisations: They restrict their focus to cities. AGNI in Mumbai could be an example.
8. National organisations: They have a national presence: CRY, Concern India, etc.
9. International organisations: They are parts of an international NGO. Like a mother NGO, they receive and disburse grants. CARE and Oxfam could be examples.
10. Self-help groups: They are formed by beneficiary communities. Typically, women form these groups of tenplus members. In rural Andhra Pradesh and Tamil Nadu, they are increasing in numbers. They are funded even by commercial banks for productive activities. In a sense, they are not typical NGOs.
11. Religious NGOs: Religion-based organisations, many affiliated to international church groups.

The funding for these NGOs could be domestic or international. The international flow of funds is regulated by the Foreign Contributions Regulation Act (FCRA) of the Central Government.

Table 3
Number of associations and amount of money received

Year Associations
under the Act
Amount of
(Rs crore)
1993-94 15,039 1,865
1998-99 19,834 3,402
1999-00 21,244 3,924
2000-01 22,924 4,535
2001-02 24,563 4,872
2002-03 26,404 5,047
2003-04 28,351 5,105

Table 3 provides the trends in the number of registered associations and amount of money received under the Act. It is taken from the records of the Ministry of Home Affairs as presented by them. As is the case with many government statistics, the latest year for which data is available is 2003-04.

Incidentally, of these 28,351 associations only 17,145 associations reported receipt of foreign contributions (including those that filed nil returns) totaling to Rs 5,105 crores. There exists perhaps substantial under-reporting.

The report of the Home Ministry also provides other information regarding the States receiving the largest amounts and their purposes, etc., pertaining to the year 2003-04.

It suggests that important States /UT are Delhi (Rs 857 crores), followed by Tamil Nadu (Rs 800 crores) and Andhra Pradesh (Rs 684 crores) and Karnataka (Rs 529 crores). USA leads in the list of donor countries (Rs 1584 crores) followed by Germany (Rs 757 crores) and UK (Rs 676 crores).

The leading donor agencies are Foundation Vicente E Ferrer (Spain Rs 135 crores), World Vision International (USA Rs 94 crore) and Christian Children Fund (Rs 74 crore).

The largest recipients are the Rural Development Trust, Andhra Pradesh (Rs 126 crores) followed by World Vision of India, Tamil Nadu (Rs 104 crores) and Foster Parents Plan International Inc., Delhi (Rs 57 crore). Among the top 25 recipients each with more than Rs 200 crores as receipts from abroad, nearly 18 are easily identifiable from their names as Christian ‘charity’ organisations.

The interesting information is regarding the purpose of the donations. Establishment Expenses (Rs 639 crores) tops the list followed by Rural Development (Rs 495 crores) and Construction and Maintenance of Schools and Colleges (Rs 222 crores).

Maharashtra, Tamil Nadu, West Bengal, Gujarat and Andhra Pradesh are some of the States with a large number of NGOs. It is curious to note that the poorest states like Bihar and Uttar Pradesh do not have as many numbers.

In Table 4, we have provided the flow of funds on the ‘Invisible Accounts’ which is for religious and charitable donations coming as part of private transfers from abroad. This increased from 581 million US dollars in 2000-01 to 681 million USD in 2003-04. If we take the exchange rate at Rs 45 on an average, then Rs 3,065 crores has come according to RBI data from private transfers during 2003- 04 as religious and charitable donations. This would have increased manifold during the year 2004 after the tsunami effect.

Table 4
Private transfers on the invisible account [$ million]

Item/ Year 2000-01 2001-02 2002-03 2003-04
Religious &
581 632 613 681
Source: India’s Invisibles; RBI Bulletin March 2005

The number of persons employed in NGOs is not separately available. One estimate published by indicates the figure at 19.4 million with West Bengal (1.52mn), Tamil Nadu (1.49mn) and Delhi (1.03mn) leading the pack.

This suggests that the total number of government employees at nearly 20 million (Central, State and Local bodies) and the number employed by NGOs are comparable.

By definition, NGO activity is voluntary and hence one expects that the overheads of the organisations are lean. In financial parlance, the fixed cost is expected to be relatively very small. Contrary to this belief, we find that the Establishment Expenses are the major reasons for receiving donations from abroad. In other words, NGOs are perhaps becoming top heavy like Government Departments wherein a substantial portion of developmental expenses are spent on wages and expenses like telephone, travel (both domestic and international), etc.

Another important aspect is the funding and functioning of NGOs that get funds from domestic sources. Unfortunately, we do not have a full picture of their financing. NGOs are active in pointing out the deficiencies in the functioning of the Government, be they on human rights or wildlife preservation or child labour. It is also important that the activities of the NGOs be transparent, particularly from the point of view of their sources and uses of funds. Since the Companies Act does not cover them, it is not required of them to file annual reports with the Registrar of Companies. They are not part of the Government and hence the Comptroller and Auditor General of India does not audit their accounts. For instance, this writer has tried unsuccessfully for nearly three years to get the annual report including annual accounts of three leading NGOs in this country, who have a very high media presence in newspapers and TV channels.

Russia approved a bill that introduces stringent control over the activities of foreign-funded non-government and noncommercial organisations in a move designed to pre-empt any ‘coloured revolution’ in the country (The Hindu dated 26.12.2005 gives details). It says:

The Kremlin has learnt its lessons from a string of ‘coloured revolutions’ in the former Soviet Republics—the ‘rose revolution’ in Georgia, the ‘orange revolution’ in Ukraine and the ‘tulip revolution’ in Kyrgyzstan—all inspired and orchestrated by Western funded NGOs. The bill allows NGOs to be shut down if they threaten the country’s sovereignty, independence, territorial integrity, national unity and originality, cultural heritage and national interests. There are 450,000 NGOs in Russia representing religious organisations, charities, think tanks, and professional groups. The US Congress has allocated $85 million for the support of democracy in Russia in 2006.

Incidentally, there is an act in the USA called Foreign Agents Registration Act (FARA) and it provides for penalties upto 10 years in jail for anyone acting as a foreign agent without notification to the Attorney General. This FARA was originally passed in 1938 to prevent the spread of Nazi ideas and propaganda.

Hence regulations of NGOs operating within a country are neither new nor something curtailing their freedom. Their activities have grown manifold and hence the issue of accountability becomes very important. This in no way minimises their importance nor questions their functioning. One can argue that they are accountable to their donors, but it is not like a corporate situation where the company is accountable to its shareholders. They have a larger impact on our civil society and hence their role is more than that of giving details to their donors. Particularly in our civil society, which places importance on voluntary efforts and appreciates it, the responsibility is much more.

To start with, they can publish their annual reports including accounts in their websites on a regular basis. It would also facilitate domestic individual donors to decide regarding providing funds to them based on their effectiveness measured by overheads.

We are not suggesting that a Central Government regulatory organisation should be created with large number of retired bureaucrats occupying posts and demanding quarterly statements from the NGOs. We would rather have NGOs create a selfregulatory body, or the community creates a body, which is a creature of their own and to which they are accountable. They can co-opt eminent citizens in this body. This becomes important since it is perceived that some of the NGOs are engaging in religious conversions in a rather aggressive fashion and some others are using the NGO banner for blackmailing well-functioning corporate and Government entities.

Social cohesion might be affected by the activities of some of the NGOs, particularly those which are active in proselytising leading to religious conversion.

Of course, the nature and dimension of such activities may be considered as ‘small’ today but it would be prudent to be proactive and generate credible self-regulating systems to enhance the effectiveness of the third sector. It would not be appropriate to suggest that everything is fine with every NGO in the country. Numbers are growing, causes are getting enlarged and funding particularly from abroad is increasing. Hence, perhaps, the time has come for them to be more transparent and enhance disclosure practices to be like Caesar’s wife. And transparency and regulation and full disclosure are what they demand from corporates and Government. Hence, it might be appropriate to expect the same from them.