Recently, a new Developmental Intelligence Unit (DIU) report reveals that 60% of India’s CSR spending (₹29,990 crore, 2022–23) went to six states.

Key Findings of Developmental Intelligence Unit (DIU) Report

• Rising CSR Outlay: In 2022–23, CSR expenditure touched ₹29,989.92 crore, a 12.8% rise over the previous year.
• Concern Raised in the Report: 
  • Regional Allocation Imbalances- 
    • Geographic Concentration: 60% of total CSR funds went to Maharashtra, Tamil Nadu, Karnataka, Andhra Pradesh, Delhi, and Gujarat.
    • Neglect of Aspirational Districts: Aspirational Districts (per NITI Aayog) — mainly in Jharkhand, Chhattisgarh, Bihar, Odisha, Madhya Pradesh, and Northeastern states — received less than 20% of the total pool.
    • Proximity-Driven Allocation: Companies prefer projects near manufacturing hubs, mining units, or corporate headquarters for ease of monitoring and operational convenience.
    • Local Area Clause Misuse: The “local area preference” clause is often treated as mandatory, restricting CSR to business peripheries rather than national priorities.
      • Section 135 of the Companies Act, 2013 suggests that companies should give preference to the local area and areas around where they operate when undertaking CSR activities. However, this is advisory, not mandatory — but has been interpreted by many corporations as an implicit priority requirement.
  • Strategic & Thematic Misalignments- 
    • Duplication of Government Schemes: Significant funds go into mid-day meals, sanitation drives, and basic skill development — areas already covered by public programmes — instead of plugging last-mile service gaps.
    • Weak SDG Integration: CSR allocations often lack direct linkage to India’s Sustainable Development Goals (SDG) 2030 commitments.
  • Governance & Accountability Gaps- 
    • Transparency & Participation Deficit: Minimal community involvement in project design, limited disclosure of allocation rationale, and funding often guided by legacy projects or board preferences instead of data-driven needs.
    • The top-down Approach: This approach in allocating funds results in limited community participation and a lack of nuanced understanding of local needs, aspirations, or systemic gaps.
    • Impact Measurement Issues: Most companies rely on output indicators (e.g., number trained, toilets built) rather than impact metrics (e.g., sustainable employment, improved sanitation outcomes).

About Corporate Social Responsibility (CSR)

• Refers: CSR is the idea that companies should evaluate and take responsibility for their impact on the environment and social welfare.
  • It promotes positive social and environmental change.
• Types of CSR:

CSR in India

• Global First in CSR Legislation: India, the first country to mandate CSR under Companies Act, 2013.
• Decade-long CSR Investment Scale: The CSR has seen over ₹2.21 lakh crore invested (2014–2024). 
• Agriculture-focused CSR Potential: With agriculture employing nearly 45.5% of the workforce and contributing around 18.4% to GDP, interest in channeling CSR funds toward agricultural sustainability is rising.
• Legal Framework: 
  • Legislation: India is the first country to make CSR spending mandatory under Section 135 of the Companies Act, 2013, providing a structured framework for eligible activities.
  • Nodal Ministry: Ministry of Corporate Affairs.
  • Applicability under Companies Act 2013:
    • An annual turnover of ₹1,000 crore or more
    • A net worth of ₹500 crore or more
    • A net profit of ₹5 crore or more
• CSR Spending Provisions:
  • Mandatory Spend: Companies must spend at least 2% of their average net profit over three years on social welfare activities listed in the Companies Act, 2013.
  • Eligible Donations: Currently, companies can donate to non-profit organizations outside of Social Stock Exchanges (SSEs) under their CSR activities but cannot use SSEs for this purpose.
    • A Social Stock Exchange is a platform under the Securities and Exchange Board of India (SEBI) that enables non-profit organisations (NPOs) and for-profit social enterprises (FPEs) to raise funds from investors for projects with measurable social impact.
• Examples of CSR Initiatives by Indian Corporates:
  • Reliance Industries Limited (Reliance Foundation): Through its CSR arm Reliance Foundation, it focuses on rural transformation, education, healthcare, disaster response, sports for development, and arts and culture.
  • Tata Consultancy Services (TCS):  This corporate company invests in education, skill development, employment, and entrepreneurship to bridge the opportunity gap for marginalized groups.
  • ITC (Mission Sunehra Kal); Through this mission, they focus on  sustainable agriculture, water management, and community development.
  • Mahindra & Mahindra: It runs ‘Nanhi Kali’ program that  supports girl child education, alongside initiatives for rural and skill development. 
  • Adani Group: This group runs a sustainable livelihoods program which aims to increase the quality of life in rural areas through various developmental projects. 

Permitted CSR activities under Schedule VII of Companies Act 2013

Sector-Wise Allocation of CSR Funds

Benefits of CSR

• For Sustainable Development- Alignment with SDGs: Corporates are crucial in advancing Sustainable Development Goals through innovation and targeted projects. Example: Skill training for women advances SDG 1 (No Poverty) and SDG 5 (Gender Equality).
  • Environmental Sustainability: Initiatives in degraded ecosystem restoration, renewable energy adoption, and water conservation contribute to climate resilience.
• For Innovation & R&D- CSR for Technology Incubators (2019 Amendment): Contributions to government/PSU-funded incubators or R&D bodies qualify as CSR, spurring India’s innovation ecosystem.
• For Businesses- Enhanced Brand Reputation & Loyalty: Builds consumer trust and attracts like-minded partners.
  • Cost Savings & Operational Efficiency: Sustainable practices reduce waste, emissions, and resource costs.
  • Attracting Responsible Investors: Socially Responsible Investors (SRIs) prefer strong CSR performers.
  • Competitive Advantage: Differentiates firms in saturated markets.
  • Risk Mitigation: Addresses reputational and regulatory risks before they escalate.
• For Employees- Retention & Motivation: Improves loyalty and morale.
  • Employee Engagement: CSR programs involving staff foster pride and purpose.
• For Governance & National Priorities- Public–Private Synergy: CSR complements government schemes in underserved regions.
  • Local Development: Improves infrastructure, health, education, and livelihoods in backward areas.

Challenges in CSR Implementation

• Geographic & Sectoral Disparities- Regional Imbalance: Funds concentrated in industrial hubs (recent data by DIU) with minimal flows to Bihar, Jharkhand, NE states, and Ladakh.
  • Sectoral Imbalance: Education (37%) and health (29%) dominate; environment gets only ~9%.
  • Neglected Sectors: Disaster management, heritage conservation, and slum development receive little attention.
• Structural Causes- Operational Convenience: Funds often deployed near corporate operations to lower logistical and monitoring costs.
  • Capacity Constraints: Backward regions lack credible NGOs and implementation partners.
  • Risk Aversion & Visibility Bias: Preference for short-term, high-visibility projects over systemic reforms.
  • Regulatory Gaps: Current reporting tracks compliance but not equity or developmental impact.
• Governance & Transparency Gaps- Lack of Transparency: Insufficient disclosures limit public scrutiny.
  • Greenwashing: Cosmetic CSR for publicity rather than impact.
  • Weak Monitoring: Focus on outputs (e.g., number of beneficiaries) over long-term social change.
• Planning & Coordination Issues- Short-Term Focus: Quick projects prioritized over systemic change.
  • Poor NGO Coordination: Weak partnerships and regulatory restrictions on NGO reserves.
  • Duplication of Efforts: No central mapping of projects, leading to overlaps.
• Implementation Delays & Compliance Issues- Approval & Fund Allocation Delays: Push preference for quick-fix projects.
  • Low Innovation: Avoidance of high-risk, high-impact projects.
  • Unspent CSR Funds: Some firms report zero spending despite the legal mandate.

Implications of Current CSR Gaps

• Equity Concerns: Skewed CSR flows weaken its redistributive potential and risk widening inter-state disparities.
• Governance Inefficiency: Overlap with government programs limits innovation and complementarity.
• Reduced Developmental Impact: Without targeting high-need districts, CSR’s contribution to poverty reduction, inequality, and SDG targets remains suboptimal.

Way Forward

• Strengthening the CSR Ecosystem- Clarify Legal Provisions: Make “local area preference” discretionary, not binding.
  • Balanced Sectoral Allocation: Incentivise a minimum share (e.g., 25%) for environmental regeneration in operational areas.
  • Pooled CSR Funds: District/state-level CSR trusts to aggregate small contributions for large-scale, strategic projects.
• Legal & Policy Measures- Incentivise Backward-Region Investment: Recognition awards, tax offsets, or matching grants for Aspirational District projects.
  • Expand Eligible Activities: Include innovation, disaster resilience, heritage conservation.
  • Mandatory Audits & Impact Assessment: Integrate CSR into statutory audits and require third-party evaluations for large projects.
• Implementation Reforms- Participatory Planning: Mandate consultations with local communities and panchayats.
  • Collaborative CSR Models: Cross-company partnerships for hospitals, renewable energy parks, climate adaptation.
  • Capacity Building: Train NGOs and local bodies in backward regions for project design and execution.
• Transparency & Reporting- Impact-Based Reporting: Publish long-term outcomes alongside outputs.
  • Align with SDGs: Use development indicators to guide CSR funding priorities.

Conclusion

Grounded in DPSPs and the goal of social-economic justice, CSR since its 2013 mandate faces regional bias and structural gaps. Strategic, equitable, and accountable reforms can make it a driver of inclusive growth and SDG goals.

DOWNLOAD PDF