India’s voluntary sector — once a resilient partner to the State and a vital voice for the marginalised — is visibly contracting. The reasons are not mysterious: a tightened regulatory regime around foreign funding, a real and growing funding squeeze, and an erosion of public confidence compounded by internal weaknesses. The consequence is not merely fewer organisations; it is a narrowing of democratic space, reduced innovation in service delivery, and weaker social accountability.
The regulatory squeeze around foreign contributions is the most obvious driver. The government’s sustained use of the Foreign Contribution (Regulation) Act (FCRA), and the 2020 amendments in particular (which limited administrative spending from foreign grants and forbade onward transfers), have fundamentally altered the operating calculus for many organisations. Prosecutions, suspensions and cancellations of licences have followed, leaving thousands of groups unable to access the funds that sustained programmes and paid staff. This is not an abstract change: government data and reporting show large numbers of FCRA licences being denied, expired or cancelled even as a substantial cohort remains registered — a picture of churn, not robust health (Council on Foundations, 2021; The Economic Times, 2023).
The regulatory effect has been both mechanical and chilling. Mechanically, reductions in permitted administrative expenditure and the ban on sub-grants have starved smaller grassroots outfits that depended on pass-through support from larger, foreign-funded intermediaries. Politically, the targeting of prominent think-tanks and rights groups — from actions that led Amnesty International to suspend its work in India to the cancellation of licences of respected policy centres — has conveyed a cautionary signal to organisations that take on governance, accountability or rights issues. The outcome has been predictable: many advocacy and research outfits have scaled back, restructured, or closed (Human Rights Watch, 2022; The Indian Express, 2023).
Funding realities beyond the FCRA have not provided a ready substitute. Aggregate philanthropic studies show that while philanthropy and CSR in India have grown in absolute terms, foreign private giving has remained sluggish and domestic philanthropic flows are often tightly earmarked and transaction-focused. Corporate Social Responsibility (CSR) money—though sizeable—frequently prioritises visible, project-level interventions (education, health infrastructure) over long-term institution-building or advocacy, and smaller local NGOs struggle with access and compliance burdens. Recent industry and philanthropy reports point to slow growth in foreign private funding and persistent mismatches between donor priorities and grassroots needs (Bain & Company, 2024; Dasra, 2025).
Compounding regulatory and funding pressures is a crisis of trust. High-profile allegations of financial misuse in some quarters, amplified by assertive state narratives that portray some foreign-funded NGOs as political actors, have dented public confidence. At the same time, many smaller organisations lack the communications capacity and professional systems to demonstrate transparency and impact, making them especially vulnerable to public scepticism. The result: donors — both institutional and individual — become more risk-averse, and the sector’s social licence narrows (Le Monde, 2024; The Times of India, 2024).
Finally, internal structural weaknesses — high staff turnover, underinvestment in governance and financial management, poor project documentation, and limited use of modern management tools — mean many organisations are ill prepared for a tightening environment. Several sector surveys and media investigations in 2024–25 flagged that a majority of NGOs remain small, locally focussed, and administratively fragile, limiting their capacity to survive shocks, scale, or influence public policy (The Times of India, 2025).
Why this matters
When civil society withers, so does an important check on power. NGOs play multiple roles: service delivery in underserved areas, policy research and critique, watchdog functions that hold the State to account, and the mobilisation of marginal communities. Curtailing these roles reduces the country’s resilience to social challenges and weakens mechanisms by which citizens press for better governance.
A practical roadmap: restoring health without compromising legitimate oversight
A national interest demands a pragmatic rebalancing: robust, predictable oversight against misuse, but not oversight so blunt that it extinguishes valuable public goods. The following prescriptions aim to restore balance quickly and credibly.
Reform the FCRA to restore clarity and proportionality
Amend rules that unduly constrain administrative spending and ban sub-grants; instead, introduce transparent thresholds and sector-sensitive rules that allow core costs and capacity-building. Create a fast, transparent grievance and appeal mechanism for licence cancellations with clear timelines and publicly available reasons. Evidence of harm from the 2020 amendments and licence cancellations informs this prescription (Council on Foundations, 2021; The Economic Times, 2023).
Introduce tiered compliance based on risk and scale
Small, local NGOs with budgets below a threshold should be subject to simplified reporting and lower compliance costs; larger organisations and those engaged in political advocacy should have proportionately higher disclosure requirements. This reduces compliance burdens without abandoning oversight.
Make CSR rules more flexible for institution-building
Recalibrate CSR guidance so that a portion of mandated spend can be channelled toward organisational strengthening (capacity building, audited overheads) and pooled funding mechanisms that support smaller NGOs for monitoring, evaluation and governance. Data on the disconnect between CSR spending and grassroots impact suggests this reorientation (The Times of India, 2024).
Create a public, independent NGO capacity-building fund
Seeded by a mix of domestic philanthropy, CSR contributions and multilateral support, this fund should finance governance upgrades, audit support, digitalisation, and professional development — especially for rural and marginalised groups. Evidence shows many NGOs lack basic management tools and documentation needed to access CSR or institutional funds (The Times of India, 2024).
Enforce transparency and professional standards across the board
Introduce standardised, machine-readable reporting for all registered NGOs (annual reports, audited accounts, programme outcomes). The goal is twofold: rebuild public trust by making work visible, and enable quicker, risk-based regulatory oversight.
Protect legitimate advocacy and research
Establish clear legal protections for research and policy critique that draw a bright line between incitement or illegal acts and legitimate public interest work. This will reduce the chilling effect on institutions that produce evidence essential for policymaking. Recent enforced closures and licence revocations of think-tanks underline the need for this safeguard (The Indian Express, 2023; Human Rights Watch, 2022).
Enable on-lending and pooled pass-through arrangements with safeguards
Rather than an absolute ban on transfers, permit accredited intermediaries to regrant foreign funds to vetted grassroots partners under clear auditing rules. This preserves the vital financial lifeline smaller organisations previously received through sub-grants.
Foster a dialogue platform between government, donors and civil society
Institutionalise an independent trilateral forum to review rules, red-flag genuine security concerns, and co-design compliance mechanisms that do not stifle legitimate development and rights work.
Conclusion
India’s non-profit ecosystem has never been perfect. There have been instances of malpractice that require firm, transparent action. But the response must be proportionate. Heavy-handed restrictions and opaque cancellations have already hollowed out parts of the sector, with measurable effects on advocacy, research and grassroots delivery. Rebuilding will require regulatory nuance, fresh investment in capacity, and a public commitment to openness from both the State and civil society. In a democracy, the space for voluntary, independent association is not a luxury: it is an engine of governance, equity and innovation. Let the remedies restore that engine — not throttle it.
Select sources and data (2024–2025) cited above
Bain & Company (2024) India Philanthropy Report 2024. Bain & Company and Dasra.
Council on Foundations (2021) Analysis of India’s Foreign Contribution Regulation Act (FCRA) Amendments 2020. Washington, DC: Council on Foundations.
Dasra (2025) India Philanthropy Report 2025: Shaping the Future of Giving. Mumbai: Dasra.
Human Rights Watch (2022) India: Rising Restrictions on Civil Society. New York: Human Rights Watch.
Le Monde (2024) ‘India tightens rules on NGOs: public trust and funding in crisis’, Le Monde, 18 June.
The Economic Times (2023) ‘Thousands of NGOs lose FCRA licences amid crackdown’, The Economic Times, 14 September.
The Indian Express (2023) ‘Centre cancels FCRA licence of Centre for Policy Research’, The Indian Express, 28 February.
The Times of India (2024) ‘CSR funds bypass smaller NGOs despite record spending’, The Times of India, 5 March.
The Times of India (2025) ‘Survey shows majority of Indian NGOs remain small and fragile’, The Times of India, 22 January.
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