By: Kevin Kalra, Senior Project Coordinator, Global Business Coalition for Education
“As a young citizen of India, armed with technology and love for my nation, I realize, a small aim is a crime.”
From Ignited Minds by A.P.J. Abdul Kalam, 11th President of India
What is the 2013 Companies Act?
The 2013 Companies Act in India requires corporations to spend “at least 2 percent of the average net profits of the company made during the three immediately preceding financial years” on corporate social responsibility (CSR) activities. For most companies, the law goes into effect in April 2014, making India one of the first countries to legally mandate CSR.
The requirement applies to companies incorporated in India and companies would benefit from a tax deduction. This is anticipated to affect about 8,000 companies – with either a networth of $83 million, turnover of $160 million or net profit of more than $830,000 during the three previous financial years – and generate about $2+ billion for social investments, increasing available funds to address India’s education challenges.
From CSR to Shared Value
The Act will alter how companies engage with public issues. Companies can shift from traditional philanthropy to seeing social investments as a more strategic investment through shared value.
While the Act lists multiple areas for social investment, companies should prioritize their CSR funds for education. By addressing systemic barriers to education quality, the business community can be leaders in shaping India’s long-term economic and social prosperity.
Education is a smart investment
Investing in education is beneficial to both Indian business and society. A recent study shows for every $1 invested in a child’s education, there is a $53 return to a company at the start of employment. Investing in education promotes economic growth, leads to more stable societies, fosters healthy communities and makes it easier to do business – all critical for India’s sustainable development.
Opportunities for change in Indian education
India has already made tremendous progress on school enrollment.[i] From 1994 to 2010, for girls, national enrollment rates increased from ~64% to ~88%. For boys, enrollment rates increased from ~78% to ~92%. There is progress among marginalized groups as well. Lower caste and indigenous children enrollment reflects their respective share in the population.[ii]
But improving learning quality is a challenge in India as indicated in the Government of India’s 12th Five-Year plan.[iii]
Opportunities for change include: [iv]
– Creating a more engaging curricula (not built on rote learning and memorization)
– Improved accountability and teacher management
– Engaging communities in schools
– Improving teacher attendance
– Creating datasets to guide decision-making
– Improving access to school for children with disabilities by making schools handicap accessible
– Utilize stipends to encourage enrollment of vulnerable children, especially child laborers
– Improved school leadership training
Business can lead the way
If 2% of the $2 billion was applied to education in India, companies could enroll India’s 17.8 million out of school children (ages 5 – 13) into school.[v] By using 0.14% of available CSR funds, companies could help enroll 50,000 girls in school. Only 16% of CSR funds would be required to enroll 100,000 children at risk of child labor all 28 states. And by spending 0.25% of available CSR funds, companies could lead the way and enroll 100,000 children with disabilities in school. [vi]
The Companies Act is vague about defining CSR – especially how to “promote education”. And it does not clarify how companies would be penalized for not complying. Regardless, the Companies Act will transform how companies engage with social issues. Investing in education would not be a small aim.
Photo © Ramesh Lalwani
Thanks to Rasika Sridhar Sethi, former Head of Programme Development for ARK in India, for her research assistance.
[i] Vimala Ramachandran, Xanthe Ackerman, and Suhanshu Joshi. (2013). A Report Series to the UN Special Envoy for Global Education – Accelerating Progress to 2015: India. The Good Planet Foundation.
[iii] GBC-Education India Working Group. (2012). Primary Education in Delhi: Analysis of Access and Quality Issues. New Delhi: Accenture.
[iv] Vimala Ramachandran, Xanthe Ackerman, and Suhanshu Joshi. (2013). A Report Series to the UN Special Envoy for Global Education – Accelerating Progress to 2015: India. The Good Planet Foundation.
[v] UNESCO Institute of Statistics and UNICEF. (2014). South Asia Regional Study: Covering Bangladesh, India, Pakistan and Sri Lanka.
[vi] Numbers calculated based on per pupil expenditure of Rs. 1250 (constant 2005/2006 Rs.) and proposals for bringing out of school children into school in A Report Series to the UN Special Envoy for Global Education – Accelerating Progress to 2015: India.