A Case for Mandatory Corporate Social Responsibility (CSR) in India

Abstract

Corporate Social Responsibility (CSR) in India is particularly interesting because there is a long tradition of firms' contribution to society even before the terminology of CSR was introduced, although India is a developing country. More interestingly, it is the first country to enact mandatory CSR in the globe. According to Section 135 of Chapter IX under the Companies Act, which was revised in 2013, a company becomes eligible for CSR with a net worth of more than 5 billion Rupees (approximately USD 75 million), turnover of more than 10 billion Rupees, or net profit of more than 50 million Rupees. All eligible companies under the Act must constitute a CSR committee of the board consisting of at least three directors. The committee must ensure that the company spends at least 2 percent of the average net profit of the company earned during the three immediately preceding financial years, in pursuance of its CSR policy. Since this is the first case in the world of a mandatory CSR provision being introduced, the consequences of the revised Act are of much importance.