Daily Financial News Analysis – 29th Sep’19 | PDF Download

CORPORATE SOCIAL RESPONSIBILITY

• The Government of India has finallydone the smart thing by making scientific research eligible for corporate social responsibility (CSR) expenditure.
• As highlighted by NITI Aayog in itsVision 2030 Report, compared to China’s 2% of GDP expenditure on research and 1,113 research professionals per one million people.
• India spends only 0.7% of GDP withonly 218 research professionals per one million.
• While in the US and China, only 30%of spending on research is done by government. The situation in India is the opposite —75% of spending is done by GoI.
• The latest change in CSR criteriaaugurs well, and should spur the National Research Foundation (NRF) to strengthen overall research ecosystem in India by providing much needed non-government funding for research.
• But CSR still has a huge opportunityto deliver a truly unique model for India.
• CSR regulations were introduced in2013. India became the first country to mandate specificspends on CSR for all corporate entities based on income, or profit, or net worth criteria.
•  This was unique when compared to the practicesfollowed in the US, Britain or Europe, where CSR regulations follow a more ‘philosophical’ approach of ‘doing well by doing good’, and is driven through an overall corporate governance framework in which corporates are required to report on specific projects undertaken as socially conscious corporate citizens in the home country and abroad.
• With a cumulative amount ofapproximately ₹47,000 crore being spent by corporates during the four years since the CSR laws came into force in India (FY 2014-15 to 2017-18).
• Corporate community deserves around of applause for spending an average of ₹12,000 crore every year on diverse social projects across the country.
• The cumulative CSR spend is about125% of the central government’s budget for 2019-20 on higher education.
• The average annual spend on CSRduring these four years has been equivalent to the 2019-20 Budget outlay of ₹12,600 crore for GoI’s flagship scheme, Swachh Bharat.
• The recent recommendations made bythe high-level committee on CSR, including
•  tax deductibility for CSR spends,
•  the carry-forward of unspent balance over 3-5 years,
• balancing local area preferences withnational priorities while identifying CSR projects,
•  exemption for companies below a thresholdCSR spend to constitute a CSR committee, etc,
• Size does matter for companies tospare financial and human resources towards CSR projects.
• As per Crisil CSR Yearbook 2019, thebulk of CSR spending — close to 80% — is done by large companies with an annual turnover of ₹1,500 crore or more.
•  Interestingly, such large companies
• constituted approximately 30% of the overall eligible population. Consequently, 70% of currentlyeligible companies contributed only 20% to annual CSR spending in India.
•  Shouldn’t it be simply based onrevenues, provided the entity is making profits at profit before tax (PBT) level.
• Similarly, non-charitable trusts andother non-corporate entities of similar size should be brought under the CSR fold.
• They should also be partners in India’ssocioeconomic growth along with their corporate colleagues.
•  India has gained tremendously through CSR 1.0,which saw corporates come forward in last 4-5 years to build social infrastructure across India.
•  But with data and spending patterns in front of us,CSR 2.0 can help create a sustainable socioeconomic infrastructure to achieve India’s $5 trillion economy goal based on this government’s principle of minimum government, maximum governance.

Benefits for India from Data and Gig Economy

• McKinsey Global Institute report: Digital India:Technology to transform a connected nation
• Indians consumed 100 times more data in 2018 than theydid four years ago.
•  Average per capita consumption at 8.3GB per month.
•  Monthly prices fell to 0.1% of GDP, as compared to 6.1% in2014.
• Data economy can contribute $150 billion to the GDP—if itsfull potential is realised—by 2025.
• In logistics, automation can save 15-25% of the costs.
•  India spends 14% of its GDP on this,higher than China and other comparator economies.
• The data economy is projected toresult in a net addition of 20-25 million jobs.
• While the report highlights the role ofthe government and Aadhaar in advancing this objective.
• The government needs to realise thatdigital innovations have worked because of a conducive regulatory ecosystem.
•  If India is to make any meaningfulprogress, it needs to avoid overregulation.
• Control and flow of data would benecessary for the next wave of startups, and enterprises to work efficiently.
•  With many more gig economyoperations emerging, and the likes of Google making a push for more, data can mean stellar growth, provided the government capitalises on it, and lets the private sector do the same.

Download Free PDF

Sharing is caring!