The government had earlier allowed allowing CSR contributions to central and state disaster relief funds and for certain welfare programmes, but whether such CSR spending had the desired impact or not was debatable.
The 2% mandatory CSR spend is undoubtedly an additional tax on business in India. But, if CSR must be kept mandatory, it is perhaps better to put it to productive use. The government had earlier allowed allowing CSR contributions to central and state disaster relief funds and for certain welfare programmes, but whether such CSR spending had the desired impact or not was debatable. The government has now announced that companies can contribute to public-funded universities, IITs, incubators and autonomous bodies. This broadens the scope of CSR spending for India Inc while ensuring that the spend can have genuine beneficial impact. More important, it will also translate into a route for greater engagement between public universities and industry on R&D. Spending on research and development in India has been stagnant at 0.7% of GDP for the past two decades, whereas the likes of China have surged ahead.
Many Indian universities and research organisations suffer from chronic shortage of resources given limited collaborations. That is also one of the main reasons why none of the Indian universities feature in global top-100 rankings. Despite engineering institutes having on-campus incubation centres, and India being touted as the third biggest start-up hub in the world, universities’ contribution has been minimal. The policy can help universities improve mechanisms for research, which has been another pain point for the economy. According to Clarivate Analytics, only 10 Indians figure among the world’s top 1% highly-cited researchers in two fields. The CSR policy can, thus, be a good step towards fostering innovation,