Q8. Examine critically the recent changes in the rule governing foreign funding of NGOs under the Foreign Contribution (Regulation) Act (FCRA), 1976.

Model Answer:

Introduction

Recent amendments to the Foreign Contribution (Regulation) Act, of 1976, significantly reshaped the regulatory framework governing foreign funding for NGOs in India.

Body

Changes Made in the FCRA About Foreign Funding of NGOs

  1. The amendments mandate NGOs to register on a new online portal for foreign contributions, ensuring greater transparency and compliance.
  2. Only organizations with a minimum of three years of experience can receive foreign funding, limiting new entities from access.
  3. NGOs must now disclose specific details about fund usage, including intended projects, enhancing accountability to authorities and donors.
  4. The act restricts the use of foreign funds for administrative expenses, promoting direct investment in social initiatives over operational costs.

Positive Aspect of New Changes 

  1. Increased transparency fosters trust among donors, encouraging more substantial foreign investment in legitimate NGOs committed to social causes.
  2. Tighter regulations prevent misuse of foreign funds, safeguarding national interests and reducing potential threats from foreign influence in civil society.
  3. Stronger compliance requirements can enhance the operational efficiency of NGOs, prompting them to adopt better financial management practices.

Negative Aspects 

  1. The restrictions may hinder new NGOs from accessing vital funding, stifling innovation and limiting grassroots initiatives in underserved areas.
  2. Increased regulatory burdens can divert NGO resources away from core activities, resulting in decreased service delivery and community impact.
  3. Heightened scrutiny may discourage foreign donors, leading to reduced funding for NGOs addressing critical social issues in India.

Conclusion

‍The recent FCRA changes reflect a complex balance between regulation and support, necessitating careful consideration of their broader implications for civil society.

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