Non-profits say India's new rules on foreign funding will hit operations

NEW DELHI (Reuters) - India’s tougher rules on foreign funding for non-profits will severely crimp their activities, the chiefs of some bodies said on Thursday, after human rights group Amnesty International suspended its work in the country, citing government harassment.

Last month’s changes to the law governing overseas contributions include a ban on transfers of money to other groups and a spending limit of 20% on administrative costs, such as staff and offices.

“This is a climate where you can clearly see patterns in which the space for civil society is shrinking,” Amitabh Behar, chief executive of the Indian arm of Oxfam, a grouping of 20 international NGOs, told Reuters.

“It’s being stifled, and the message is very depressing for the not-for-profit sector.”

India has an estimated 3 million registered non-profits, but since 2017 it has cancelled permission for more than 6,600 charities to receive overseas funding, as successive governments have stepped up scrutiny.

On Tuesday, London-based Amnesty International said it was halting work in India, accusing the government of a “witch-hunt” and blocking its bank accounts.

India’s home ministry said the group was circumventing the rules on foreign contributions by illegally receiving money from the British arm.

“The chilling effect is coming from multiple corners and this only brings it home directly to us,” Behar added, referring to Amnesty’s closure.

Prime Minister Narendra Modi’s government has said the rule changes were needed to beef up accountability for the receipt and use of foreign funding, as few groups met basic statutory requirements or used the funds properly.

The government has said it launched criminal investigations into dozens of groups over misappropriation of such funds.

The new ceiling on administrative spending, lowered from a figure of 50%, presents a challenge as the category usually includes staff costs, the non-profit groups said.

Large non-profits typically work with dozens of smaller partners to carry out programmes and projects, and being unable to transfer funds to them would disrupt the sector, the Indian arm of ActionAid said.

“This would restrict the number of ... social workers and organisations serving the vulnerable, and restrict grants given to small organisations already on the FCRA approved list,” said Sandeep Chachra, executive director of ActionAid Association.

He was referring to the Foreign Contribution (Regulation) Act (FCRA), dating from 1976, a time of national emergency declared by then prime minister Indira Gandhi, who was seen as using the law to target critics of a civil rights clampdown.

Today, more than 22,400 bodies registered under the law are authorised to use foreign contributions to pay for cultural, economic, educational, religious or social programmes, the home ministry says.

Over the three years to 2019, they have received 581 billion rupees ($8 billion) in such funds.

Additional reporting by Aftab Ahmed in New Delhi; Editing by Sanjeev Miglani and Clarence Fernandez