The TLDR: Amnesty International (AI) has decided to cease operations in India citing an “incessant witch-hunt” by the government. The latest move: The Enforcement Directorate froze the organisation’s bank accounts. But Amnesty’s exit is just the most visible effect of the government’s crackdown on foreign-funded non-profit organisations. The most damaging: three new rules that threaten the future of a great many NGOs—especially smaller ones operating at the grassroots.

What happened with Amnesty?

The organisation has been under investigation for improper use of foreign funds—which AI India strongly denies. On September 10, the ED froze all of its accounts, making it impossible for the organisation to continue operations. 

The law: As per the Foreign Contribution Regulation Act, registered non-profits have to get permission to receive foreign donations. The law was put in place to ensure that foreign entities do not fund activities that are detrimental to our “national interest.” Some organisations get a license that can be renewed every five years—while others apply for permission on a case-by-case basis. In 2018-19, 21,490 NGOs declared funds received under the FCRA. 

The government’s claim: Amnesty did an end run around the FCRA requirements. 

• Amnesty International UK transferred funds to a private entity Amnesty International India Pvt Ltd (AIIPL) by classifying it as Foreign Direct Investment. That private entity then transferred those funds to three Amnesty-run NGOs. 
• Amnesty India also directly received foreign funds without FCRA permission. 
• This has nothing to do with politics since the UPA also blocked Rs 5 crore in foreign funds to Amnesty between 2010 and 2013.
• Also this: “India, by settled law, does not allow interference in domestic political debates by entities funded by foreign donations.” Amnesty is free to continue its humanitarian work as long as it is not funded by outside entities.

Amnesty’s claim: The organisation raises its money entirely from Indians—four million of whom supported its work over the last eight years, while 100,000 donated money. The financial freeze is, in fact, punishment for the various human rights reports it has released. The organisation’s statement lays out “a chronology of attacks”:

• In October, 2018, the ED conducted a ten-hour raid—following which its accounts were temporarily frozen.
• In early 2019, the Income Tax department started sending letters to 30 donors: “Apparently, the department did not find any irregularities but the process adversely affected the fundraising campaigns of Amnesty International India.”
• On 22 October 2019, Amnesty testified at a US Congressional hearing on human rights in Jammu and Kashmir. 
• On 15 November 2019, its offices and the residence of one of its directors were raided again by the CBI.
• In August, Amnesty released two reports—one to mark the anniversary of the abrogation of Article 370 in Kashmir; the other on the police’s role during the Delhi violence. Both alleged serious human rights abuses.
• On September 10, all its bank accounts were completely frozen.

In sum: The government is using the FCRA law to shut down inconvenient NGOs that criticise its actions.

Is that true?

Indian governments—irrespective of who is in charge—have been hostile to human rights groups, and obsessed with the idea that they are stooges for an invisible “foreign hand.” The Home Ministry rightly points out that the UPA was also hostile to these NGOs. But the Modi government has taken that campaign to the next level. As The Hindu notes:

“In the past five years, the government has taken action against several foreign donors including U.S.-based Compassion International, Ford Foundation, World Movement for Democracy (WMD), Open Society Foundations (OSF) and National Endowment for Democracy (NED). Ford Foundation was taken off its watchlist after protests from several U.S. Congressmen and the Obama administration. The same year, the registration of Greenpeace International was cancelled on the premise that it compromised the ‘economic security’ of the country by allegedly orchestrating protests at coal plants and at other developmental projects.”

What about the FCRA issue?

The government’s greatest blow against NGOs has received the least attention. Last week, it made three critical amendments to the FCRA rules—all of which are aimed at choking foreign funding to Indian NGOs.

One: Every FCRA-registered NGO has to open a special bank account with a designated branch of State Bank of India in New Delhi. Funds must be received via this one account, and then distributed to other FCRA-registered accounts across the country. There is no good reason for this new rule except to make life more difficult, as The Mint notes:

“...[O]f the 21,490 NGOs that filed FCRA returns for 2018-19, only 1,488 were registered in Delhi. That’s only 7% of NGOs. Thus, this new rule will require functionaries of about 20,000 NGOs, spread across India, to come to Delhi to open a pass-through bank account.”

Two: The NGO that receives the money cannot transfer the money to partner organisations. This is a big deal! Most local NGOs are small and cannot raise foreign funding by themselves. They rely on larger intermediary organisations that fundraise abroad and ‘re-grant’ the money. As one NGO leader explains:

“Thousands of small NGOs, which enable good work and are dependent on legal funds obtained internationally, will shut down—also endangering the livelihoods of those dependent on them for a vocation.”

Point to note: the amount of money received via these ‘re-grants’ is very small. In 2018-19, 4,107 NGOs received Rs 17.68 billion in the form of such re-grants—and half of them received less than Rs 760,000. But taking that money away will be a huge blow for grassroot organisations—many of whom have been critical in fighting the pandemic at the frontline.

Three: Until now, an NGO could spend up to 50% of its funds on administrative expenses—think, office rent, salaries etc. The new rule drastically reduces the cap to 20%. This will have a huge impact on larger NGOs that employ more staff and have higher overheads—and NGO leaders warn that it may “kill” the entire sector.

Four: The new rules also allow the government to indefinitely suspend an NGO’s FCRA certificate while it is under investigation—removing the 180-day limit. This opens the door to long, drawn-out investigations aimed at starving an organisation of funds.

But surely there is a problem with foreign funding…

Yes, charity organisations have been used to do great damage, especially in the poorer parts of the world. But what is striking in India’s case is the brazen double standard. 

One: Foreign funding is A-okay—and even celebrated—for private companies. In fact, the same government cited foreign investment as the primary justification for its controversial changes to labour laws (explained here). Oxfam India CEO Amitabh Behar summed up the policy in one tweet: 

“Red carpet welcome for foreign investments for businesses but stifling and squeezing the nonprofit sector by creating new hurdles for foreign aid which could help lift people out of poverty, ill health and illiteracy.”

Two: The PM-CARES fund has rejected every Right to Information request and does not have to be publicly audited—precisely because the fund says it is not a body established and owned by the government. So it must be an independent NGO, right? Yet the fund is also entirely exempt from any FCRA regulation and can freely accept foreign funds. So no one knows where the money came from or where it is being spent. 

The bottomline: The loss of foreign funding is far more damaging than it may seem. The reason: companies and individuals in India will rarely give money to anything “confrontational”—and in India, that includes the advocacy of basic human rights.

Reading list

The Telegraph has the most detailed report on the specific case against Amnesty India. This 2013 Guardian piece captures the bigger picture on the campaign against NGOs—and how it is being used to stifle dissent. Mint has the best analysis of the FCRA rules with data and charts. This older Mint piece looks at whether Indian NGOs can survive solely on domestic funding. The Wire explains how PM-CARES is ducking every rule in the book.