By Mohd. Ziyaullah Khan
Successive amendments to the Foreign Contribution (Regulation) Act (FCRA) and tightening administrative rules have fundamentally reshaped India's civil society sector, raising critical questions about democratic freedoms, accountability, and the future of grassroots activism. For over a decade, the Narendra Modi government has steadily expanded regulatory control over non-governmental organisations (NGOs), particularly those relying on foreign funding.
While the government argues these measures are essential to ensure transparency, national security, and financial accountability, critics contend they represent one of the most significant restrictions on civil society since Independence. The underlying tension stems from the historical role of NGOs as vital pressure groups that question state policy and demand accountability, a role that naturally invites friction with an assertive ruling regime.
The latest regulatory changes in 2026 continue a pattern that began soon after the Bharatiya Janata Party (BJP) assumed power in 2014. When legislative amendments face political resistance, the government increasingly relies on executive rules and administrative notifications to achieve similar outcomes. Supporters describe these reforms as necessary safeguards against foreign influence, but opponents argue they weaken independent voices, shrink democratic space, and disproportionately affect organisations working among India's poorest and most marginalised communities.
India has long regulated foreign donations through the FCRA, first enacted in 1976 during the Emergency and substantially revised in 2010. The law requires organisations receiving foreign donations to obtain government registration and comply with strict financial reporting requirements. However, under the Modi administration, the FCRA has evolved from a routine regulatory mechanism into one of the state's most powerful tools for managing civil society. International bodies like Amnesty International, Human Rights Watch, and the International Commission of Jurists have repeatedly expressed concern that FCRA enforcement has become increasingly restrictive, functioning primarily to muffle voices that dissent from the ruling regime.
One notable feature of this shift is the strategy of relying on executive rule-making rather than parliamentary legislation. When proposed amendments face opposition in Parliament, governments can introduce similar provisions through subordinate legislation or administrative rules, provided the parent law permits it. Legal experts note that while this practice is constitutionally permissible, excessive reliance on executive rule-making reduces parliamentary scrutiny and public debate. This broader trend extends beyond NGO regulation and reflects a growing preference for governance through executive powers.
The 2026 rules governing FCRA-registered organisations introduce several additional compliance requirements that heighten this executive discretion. Under these provisions, NGOs may undertake only activities specifically listed or approved under government schedules, while restrictions have been tightened regarding office bearers, key functionaries, and foreign nationals holding leadership positions. Trustees and senior office-bearers are subject to expanded disclosure requirements, including the declaration of social media accounts. Furthermore, any activity considered "political" by authorities may attract regulatory action. While proponents argue that these measures increase transparency and prevent the misuse of foreign funds, the broadly worded provisions give authorities considerable discretion in determining what constitutes permissible NGO work.
This build-up follows the transformative changes introduced through the Foreign Contribution (Regulation) Amendment Act of 2020. That amendment centralized all foreign fund inflows by requiring every organization to open a single FCRA account at the State Bank of India’s Main Branch on Sansad Marg in New Delhi. While the government stated this would improve monitoring, it imposed massive logistical burdens on smaller, remote NGOs. Furthermore, the 2020 amendment slashed the ceiling on administrative expenses from 50 percent to 20 percent of foreign contributions. Because administrative expenses encompass salaries, travel, office rent, utilities, accounting, legal services, research costs, and professional consultants, non-profit sector researchers note that excessively low overhead limits cripple institutional capacity. Studies by the Center for Global Development and the Bridgespan Group have highlighted this as the "nonprofit starvation cycle," where unrealistic spending caps reduce organizational effectiveness rather than increase true accountability.
Perhaps the most controversial 2020 amendment was the absolute ban on regranting foreign funds. Previously, larger national organisations served as intermediaries, mobilising international funding and transferring it to smaller, community-based grassroots groups that possessed local knowledge but lacked fundraising capacity. By dismantling these collaborative networks, the amendment severely impacted rural health, education, women's empowerment, disability inclusion, and tribal development.
The Modi government consistently defends this tighter regime as a necessity for preventing money laundering, protecting national security, ensuring transparency, and blocking foreign interference in domestic affairs. The Ministry of Home Affairs argues that foreign funding carries implications beyond ordinary domestic charity, justifying higher standards of oversight. Government data also indicates that thousands of FCRA registrations have been cancelled over the past decade for alleged violations of compliance requirements.
Conversely, civil society advocates, legal experts, and international observers see a rapidly shrinking democratic space. Reports by CIVICUS classify India's civic space as "repressed," and the Varieties of Democracy (V-Dem) Institute has documented declining indicators related to civil society participation and freedom of association in India. Critics point out that these restrictive rules disproportionately affect organisations engaged in environmental advocacy, minority rights, human rights, legal aid, research, policy advocacy, and public accountability. They also question the double standard applied to different sectors; while NGOs face intense scrutiny, a retrospective amendment to the FCRA effectively validated foreign-linked political donations to major political parties like the BJP and Congress following a controversial 2014 Delhi High Court judgment.
International research from organisations like the Organisation for Economic Co-operation and Development (OECD) and the United Nations Development Programme (UNDP) consistently links a strong, independent civil society with improved public service delivery, stronger democratic participation, and better representation for marginalised communities. Governments and NGOs ideally perform complementary roles in reaching vulnerable populations.
The ongoing debate surrounding NGO regulation reflects a fundamental clash between two competing visions of governance: one that prioritises intensive state oversight to safeguard national interests, and another that views an independent civil society as a cornerstone of democratic accountability. The 2026 rules solidify a decade-long trajectory of expanding executive oversight. Ultimately, India's non-profit sector now operates under one of the most tightly regulated foreign funding regimes among the world's major democracies, sending a clear signal that the ruling regime is unwilling to tolerate tough questions from civil society.
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Mohd. Ziyaullah Khan is a freelance content writer and editor based in Nagpur. He is also an activist and social entrepreneur, and the co-founder of TruthScape, a team of digital activists fighting disinformation on social media
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