Corporate Social Responsibility in India

How the Companies Act May Augment Regional Disparities

In 2013, India adopted a new Companies Act that redefines corporate governance rules in India. Among its many provisions, the Act includes a soft mandate that medium-size and large companies must contribute 2 percent of their profits (averaged across the previous three years) toward corporate social responsibility (CSR). The rules governing how companies are to contribute to CSR are fairly basic and open to interpretation, which worries some companies, fearing that compliance could be used subjectively against them. Other aspects of this CSR mandate appear at odds with the desired  outcome of expanding the total amount of CSR spending. One key example in this regard is the fact that companies are urged to make these contributions in areas where they have operations; yet many of India’s most serious social and health problems are located far away from key industrial centers. This could ultimately augment development disparities already evident in India.