Budget 2017 — What It Means For NGOs In India

February 14, 2017
By Rang De Team
The Finance Minister Arun Jaitley presenting the Union Budget (Source: The New Indian Express)

In the last week of December 2016, news trickled in that the government had cancelled the Foreign Contribution Regulation Act (FCRA) licenses of 22,000 of the 33,000 non-governmental organisations (NGO) in the country.

The FCRA license allows an NGO to receive funds from abroad and the cancelling of the license led to many organisations grinding to a halt.

Civil society organisations protested against the decision, questioning the basis of the action. Reports emerged that the delivery of key services to marginalised sections of society were hampered; many organisations were forced to shut down operations because they did not have funds to pay their employees.

The Union government’s relationship with the organisations working in the development sector has never been without friction.

The operations of many NGOs delivering key services has ground to a halt, after their FCRA licenses have been revoked

While the decision to ban so many licenses has far-reaching consequences on people and communities living in the margins of society, the Union budget for the financial year 2017–18 has also brought some relief to the masses.

Steps taken to reform the taxation policy was the talk of town but the Union budget brought a renewed focus on farmers and the rural economy while reflecting the big push toward a Digital India.

A greater focus on rural microcredit but women still left out

The Rs 48,000 crore allocated for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) remains the highest so far. This is commendable but the numbers and easy rhetoric conceal that in reality, there is only a marginal increase in the amount allocated. The government had sanctioned 9,000 crore to individual states by December last year, taking the effective funds allocated to Rs 47,500 crore.(IndiaSpend.com)

The effective increase in the budget for the MGNREGA is 500 crores or 1 %

In keeping with the government’s commitment to double farmer incomes by 2021, the government has set a target of Rs 10 lakh crores in terms of agricultural credit.

The allocated budget for the PM MUDRA Yojana which supports micro units has been doubled to nearly 2.44 lakh crores. Banks who have traditionally been reluctant lenders to the agricultural sector in the country have been told to buck up.

Though the renewed focus on farmers and the agricultural sector is a welcome move, a majority of the lending is set to happen through big companies. Large landholding farmers are set to benefit immensely, leaving out the marginal or landless farmers.

Women agriculturists that constitute over 50 % of the workforce in the country still do not qualify for credit in many places.


It will remain a challenge to ensure the penetration of credit facilities to the most remote areas of the country.

The creation of a Micro Units Development Refinance Agency (MUDRA) bank which has been allocated Rs 20k crore is a big boost for the microfinance industry. The MUDRA scheme will specifically support small enterprises run by the marginalised scheduled caste and schedule tribes in the country.

Though a majority of microcredit is availed by women though self-help groups (SHGs), the MUDRA scheme does not have a dedicated corpus for women.

Women constitute more than 50% of the agricultural labour in the country but still cannot avail credit in many places

Smaller institutions not there yet in Digital India push

The one-time cash donations acceptable by political parties and NGOs has also been restricted to Rs 2k, effectively outlawing cash transactions in both spaces.

The process of receiving and disbursal of funds in NGOs is likely to have greater transparency.

Many of the bigger institutions working in the development sector are making, or have already made, a shift to digital transactions but grassroots organisations functioning in remote, rural areas of the country are overwhelmingly dependent on cash transactions for everyday functioning.

The linking of accounts with the Aadhaar card and Aadhaar-enabled payments system will ensure that the funds reach the targeted beneficiaries.

Many national sector banks have also announced schemes to digitise villages but despite the best intentions of the government, it remains unclear how effective the digital payments system is likely to be at the ground level.

We invite you to contribute towards microcredit on our platform that focuses primarily towards fulfiling the needs of women borrowers through the help of organisations working in remote areas of rural India.

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