Chanakya writes that the Indian government is ambivalent about its attitude towards NGOs in the country, which are alternately viewed as either doers of good or as frauds. Either way, they are now indispensable in serving India’s poor.

Are non-governmental organizations (NGOs) in India angels or foes in the nation’s struggle to achieve prosperity? Are microfinance NGOs saviours to the unbanked and credit-starved, or are they simply capitalists exploiting the financially illiterate and vulnerable? What is clear is that the Indian government has historically viewed NGOs with a certain disdain and even downright suspicion. A hostile political environment has restricted the scale, and therefore the impact, of NGOs in India while fanning flames in the debate about their role.

The question begs asking: Why has neighbouring Bangladesh managed to produce mammoth NGOs like Building Resources Across Communities (BRAC) and Grameen Bank while India’s NGO scene remains stagnant? Both of Bangladesh’s star NGOs are internationally feted for their development efforts in and outside Bangladesh, with BRACs founder Fazle Hasan Abed earning British knighthood last year and Grameen’s founder, Muhammad Yunus, winning the Nobel Prize in 2006.

THE POLITICS OF DENIAL

Both BRAC and Grameen developed under the encouragement of a Bangladeshi state that, unlike India, has acknowledged limitations on its ability to provide for its entire population. BRAC was originally formed to provide relief and rehabilitation to refugees of the 1971 liberation war. In 1973, BRAC shifted its focus to local community development, and in 1976, Grameen started Central Bank-sponsored operations to extend credit to the rural poor.  To date, the Bangladeshi government maintains a 3.5 percent stake in Grameen Bank.

The Indian state is much less accommodating to NGOs. As the nation’s politicians know, official recognition and support of these groups would be an admission of the state’s inadequacy in addressing the country’s development needs. Despite India counting among its inhabitants half the world’s illiterate population, soaring numbers of infants without access to standard immunization programs and the highest number of undernourished people in the world, this is not an admission most Indian politicians are willing to make While it is readily evident that the state cannot meet these needs, allowing NGOs to proliferate would give the issues more unfavourable publicity.

A small, pioneering NGO, which shall remain unnamed given its delicate work in India, approached a local government official several years ago with alarming trends on female infanticide in the district. The NGO was shunted and its research dismissed. The aspiring bureaucrat did not want to taint his administrative tenure with such glaring social ills, especially since the same district’s health and family welfare budget was perennially underutilised.

India’s governance record has long been a sensitive topic, and the state now finds itself on the defensive in the debate about NGOs. The state’s disregard for NGOs mirrors its disdain for private enterprise before the economic liberalization of the early nineties.

Foreign aid money further complicates the issue. Many developed countries help fund NGOs and local projects. That the government needs the help of foreign backed NGOs to fulfil basic development needs embarrasses a state that promised “to end poverty and disease, to bring freedom and opportunity to the common man, to create social, economic institutions and to ensure justice and fullness of life to every man and woman,” as Jawaharlal Nehru, India’s first prime minister, said in his famous midnight independence speech.

India is traditionally a heavy hitting aid donor. Since January, India has sent a $1.5 billion development package to Afghanistan and a 46-member earthquake rehabilitation team to Japan. The underlying political message is not lost: the state can take care of its own inside the country and others outside it.

CHANGING ATTITUDES

But while some of India’s reluctance to support NGOs stems from politically motivated denial, there are sound reasons for the nation’s leaders not to give them carte blanche. As seen recently in Andhra Pradesh, some microfinance organizations have misused microcredit intended for the poor to use to find sustainable livelihoods. Their mismanagement has resulted in a new, indebted consumer class with televisions and air-coolers. In tribal belts of India, some religious groups function as NGOs with the principal aim of attracting converts. The tragedy surrounding the killing of a missionary family in Orissa in 1999 was striking evidence of how such activities can take a horrible turn. Of course, there is always the issue of foreign nations using aid money for NGOs as currency for soft diplomacy

Still, the state’s attitude towards NGOs is slowly changing, just as it did towards private enterprise during economic liberalization. The Planning Commission now encourages NGOs to register in a partnership system to streamline cooperation with governmental schemes and ministries. There are now NGOs funding smaller NGOs, and there are even massive foreign NGOs that directly fund entire state schemes.

Despite the progress, the state would prefer its NGOs to remain small, detached and scattered. It wants to avoid the fate of Bangladesh, where Grameen Bank became large enough to make even the NGO-friendly government uncomfortable. Grameen’s founder Yunus had a fallout with the current government when he tried to upend the two-party establishment by launching a political outfit. The government was finally able to exclude Yunus when they realized that he was older than 66, the mandated retirement age.

The Indian state and its ruling class will not tolerate a similar NGO invasion. When microfinance organizations infringed upon the traditional clout of local money sharks and their political backers in 2010, local politicians got loud enough and the state intervened with a heavy hand.

The state’s wariness of NGOs stepping on its traditional turf is only part of the problem. The other part has to do with the peculiar nature of Indian politics, where many politicians run their own NGOs. Perhaps they use NGOs as an instrument to further their interests or perhaps they actually feel that NGOs are more effective than the state — called “the rotten system” by Congress Party scion Rahul Gandhi — in serving the public good. Nitin Gadkari, president of the opposition Bharatiya Janata Party, runs at least six NGOs. Sharad Pawar, agriculture minister and leader of the Nationalist Congress Party, is in facing scandal because of preferential allocation of government land to educational NGOs run by the Pawar family. Sonia Gandhi, chair of the ruling United Progressive Alliance, heads the Rajiv Gandhi Foundation, which aims to fulfil the development vision of her late husband.

On one side, NGOs are a front to further the interests of Indian politicians, who are known for venal corruption; on the other, they wrestle with the state, which, though indeed rotten, has legitimate interests to defend. Whether angels or foes, the debate over NGOs has many more shades of gray than black or white.