Forced CSR is illiberal, anti-business

Mandatory CSR is egregious not just because it introduces a pointless state intervention where none is needed, but also, and more so, because it attempts to control all that is personal and private to any individual - instincts, sentiments, munificence, genuine, and spontaneous altruism. It enters the sacred space of the citizen, conscience, and defiles its sanctity. It is the colonization of conscience

The government's direction to companies with any unspent corporate social responsibility (CSR) funds to set up a CSR committee can scarcely be called a move that would enhance the ease of doing business. For the basic principle of forced CSR is fundamentally illiberal and anti-business, as we shall see.

A notification issued by the Ministry of Corporate Affairs stipulates that the amounts unspent in a financial year relating to an ongoing project and any unutilized surplus arising from CSR activities should be deposited by the company in a special bank account, which will be called the Unspent Corporate Social Responsibility Account.

The new CSR rules have increased the expenditure of impact assessment that could be counted towards a company's CSR obligations. Earlier, it was up to 5 per cent of the CSR expenditure or Rs 50 lakh, whichever is lower; now it is 2 per cent of the CSR expenditure or Rs 50 lakh, whichever is higher.

But, as we mentioned earlier, the very concept of forced CSR is unconscionable; it is indeed the epitome of illiberal welfarism, something no votary of individual freedom can condone, let alone support. The first and foremost objection to the idea is that it represents the state's brazen desire to control one of the noblest of human instincts - philanthropy.

Sympathy and empathy for fellow beings is natural; the urge to help fellow human beings is as old as mankind. Twenty five centuries ago, Prince Siddhartha Gautam, moved by the sufferings of men and women around him, sacrificed all the pleasures and privileges that his royal status could bring to him and became Lord Buddha. He was certainly not responding to some fiat by his father to do so.

Similarly, those countless Europeans who gave up comfortable lives to serve humanity as Christian missionaries in Africa and Asia did not do so because of some government diktat. In the last century, a large number of rich youngsters in the West as well as in India became communists and socialists in the mistaken belief that their ideologies would make the world a better place. Many American tycoons have donated huge amounts to set up foundations and charities. Indian business houses have also donated for society. So, why should our government force big industry to become philanthropic?

Mandatory CSR is egregious not just because it introduces a pointless state intervention where none is needed, but also, and more so, because it attempts to control all that is personal and private to any individual - instincts, sentiments, munificence, genuine, and spontaneous altruism. It enters the sacred space of the citizen, conscience, and defiles its sanctity. It is the colonization of conscience.

But India's deep pink state - comprising statist policy and decision makers entrenched in the system - does not believe that corporations have any conscience. Since the institutionalized mindset is inveterately anti-business, the policy framework remains hostile to entrepreneurs. An obvious consequence is price control. The healthcare sector is the worst affected one; price caps on drugs and medical devices are a regular occurrence. The pretexts are well-known - affordable healthcare, helping the poor, etc.

The powers that be, however, also meddle in other sectors to regulate prices. One of the most anti-business decisions the Narendra Modi government has taken so far was the setting up of the National Anti-Profiteering Authority (NAA) in 2017. The objective was to ensure that the consumer benefited from the reduction in rate of the Central goods and services tax. The exercise militated against the spirit of liberalization, for every economist, barring the lal salaam-types, agrees that prices are best determined by the market; politicians and bureaucrats should have nothing to do with them.

The NAA was supposed to be given a two-year term. But then, as Milton Friedman said, nothing is so permanent as a temporary government programme. The NAA got an extension of two years in 2019 - and another one last year.

The moral of the story is that some things don't change in India; anti-business attitude is one of them. Unsurprisingly, India Inc remains a persecuted minority. CSR, and the labyrinthine rules governing it, will remain one of the crosses it will have to bear in the foreseeable future.