Donors, philanthropy and partnerships

The first principle

Development needs money, knowledge and legitimacy, and no single actor holds all three. Governments have reach and legitimacy but limited funds and flexibility; donors and philanthropists have money and ideas but no mandate from the people; companies have capital and management skill but answer to shareholders; communities know their own needs but lack resources. Partnership is the attempt to combine these strengths. Its central risk is that whoever brings the money ends up setting the agenda, so that the people development is meant to serve become its passive recipients. The test of every arrangement in this note, from a World Bank loan to a corporate social responsibility (CSR) project, is whether it builds or weakens the community's own control.

The core

Donor agencies

• Multilateral lenders. The World Bank and the Asian Development Bank (ADB) lend for infrastructure, health, education and reform, and they bring technical advice and conditions with their money. India graduated from the World Bank's concessional window, the International Development Association, in 2014, and now borrows mainly on market linked terms.
• Bilateral agencies. Government aid agencies have included the United Kingdom's Department for International Development (DFID), merged into the Foreign, Commonwealth and Development Office (FCDO) in 2020, Japan's international cooperation agency, and the United States Agency for International Development (USAID), which was largely dismantled in 2025.
• United Nations agencies. The United Nations Children's Fund (UNICEF), the World Health Organization (WHO) and the United Nations Development Programme (UNDP) support programmes in immunisation, nutrition and governance, often with technical staff embedded in ministries.
• Private foundations. The Bill and Melinda Gates Foundation works with the Union and state governments on public health, sanitation and agriculture.
• India's 2003 decision. In the Budget of 2003 the government decided to accept bilateral aid only from a few large partners and to prepay some bilateral debt, signalling that India would treat aid as a partnership rather than a dependence.

Does donor dependence reduce community participation?

• How it can. Donors fund projects with fixed timelines, logical frameworks and targets, so programmes are designed by consultants and accountable upward to the donor rather than downward to the community. When the project cycle ends, parallel structures close and the community is left with no ownership; this pattern is called projectisation.
• How it need not. Many donor programmes were themselves built on participation. Community driven development projects, such as the World Bank supported rural livelihood programmes in Andhra Pradesh and Bihar (Jeevika), handed money and decisions to village organisations, and social funds give communities grants for works they choose.
• The deciding factor. Participation depends on design rather than on the source of money: who chooses priorities, who controls funds, and whether the institutions outlast the project.

Dimensions

• Economic. Donor loans, philanthropy, CSR and private investment add to public spending, but they are small compared with government budgets, so their value lies in innovation and risk taking rather than in scale.
• Political. External money can carry an agenda, which is why the State regulates foreign contributions and why aid conditions have long been contested.
• Social. Philanthropy can reach neglected issues, such as mental health or learning outcomes, faster than government, but it may also follow the donor's interests rather than the community's priorities.
• Regional. CSR and philanthropic money concentrate in industrialised states such as Maharashtra, Karnataka and Gujarat, while the North East and the poorest states receive little.
• International. Goal 17 of the Sustainable Development Goals (SDG 17) calls for partnerships among governments, the private sector and civil society, and India now gives development assistance to neighbours and Africa as well as receiving it.

In practice

Public charitable trusts

• Legal basis. Public trusts are governed by state laws, such as the Maharashtra Public Trusts Act, 1950, which require registration with a Charity Commissioner, while the Indian Trusts Act, 1882 covers private trusts for named beneficiaries.
• Tax treatment. Under the Income Tax Act, 1961, Sections 11 and 12 exempt income applied to charitable purposes, Section 12AB provides for registration of trusts, and Section 80G lets donors deduct their donations. The Income Tax Act, 2025, which replaced the 1961 Act from April 2026, carries these provisions forward under new section numbers.
• Examples. Tata philanthropy, now run through the Tata Trusts, helped build institutions such as the Indian Institute of Science and the Tata Memorial Hospital; the Azim Premji Foundation (2001) works with state governments on school education and runs a university.
• Potential for inclusive development. Trusts can fund long term research, hospitals and education where markets do not invest and governments move slowly.
• Concerns. Opacity, misuse for tax avoidance, control by founding families and concentration in a few cities limit their contribution.

Corporate social responsibility

• Section 135 of the Companies Act, 2013. Every company with net worth of ₹500 crore or more, turnover of ₹1,000 crore or more, or net profit of ₹5 crore or more must spend at least 2 per cent of its average net profits of the preceding three financial years on CSR.
• Schedule VII. It lists permitted activities, such as hunger and poverty, education, health, gender equality, environment, rural development and contributions to the Prime Minister's relief funds.
• Companies (Amendment) Act, 2019. Unspent amounts must be transferred to a fund in Schedule VII or, for ongoing projects, to a special unspent CSR account to be used within three years, which made the earlier "comply or explain" rule mandatory.
• Pattern of spending. Spending is concentrated in education and health and in states where companies are located, which limits its value for the poorest regions.

Partnerships across sectors

• Public private partnerships (PPPs). Models include build operate transfer (BOT), the annuity model, where government pays the developer fixed sums, and the hybrid annuity model (2016) for highways, where government pays 40 per cent of the cost during construction and the rest as annuities, so risk is shared.
• Kelkar Committee (2015). It reviewed PPPs after many highway and power projects stalled, and recommended fair sharing of risk, an independent regulator for infrastructure, a framework for renegotiation of contracts, an institute for PPP capacity, and amendment of the anti corruption law to separate genuine errors of judgement from corruption.
• Social sector partnerships. The Pradhan Mantri National Dialysis Programme (2016) uses PPPs in district hospitals, Ayushman Bharat insurance uses private hospitals, and mid day meal kitchens draw on philanthropic partners.
• Social Stock Exchange. The Securities and Exchange Board of India (SEBI) notified a framework in 2022 under which non profit organisations can register on a segment of the stock exchanges and raise money through zero coupon zero principal instruments, with reporting of social impact.
• India's development through partnership. Cooperatives such as Amul, the SHG Bank Linkage Programme, PPPs in infrastructure, CSR, and digital public infrastructure such as the Unified Payments Interface (UPI), on which private apps build services, all show the State setting rules and platforms while other sectors bring capital and innovation.

Issues and way forward

• Agenda setting by funders. Donors and companies tend to fund what is visible and measurable. Aligning funding with district plans and the priorities of gram sabhas would put communities first.
• Exit without ownership. Every externally funded programme should plan from the start how communities or government will carry it forward.
• Accountability of philanthropy. Trusts and CSR projects should publish audited outcomes, not only spending, on public portals.
• Regional imbalance. Incentives or pooled funds could direct CSR money to aspirational districts and the North East.
• Risk in PPPs. Contracts should allocate risk to the party best able to manage it, as the Kelkar Committee advised, rather than pushing all risk onto the private partner or the public.

Common confusions

• CSR and philanthropy. CSR is a legal duty of qualifying companies under Section 135; philanthropy is voluntary giving by individuals, families or foundations.
• Public trust and private trust. A public trust serves the public or a large class of people and is governed by state law; a private trust serves named beneficiaries under the Indian Trusts Act, 1882.
• Annuity and hybrid annuity. In the annuity model the developer finances the whole project and is repaid in instalments; in the hybrid annuity model the government pays 40 per cent during construction.
• Grant and loan. Bilateral grants need not be repaid; World Bank and ADB money for India is mostly loans.

For the exam

• Keyword bank: development industry, donor dependence, projectisation, upward accountability, community driven development, public charitable trust, Section 12AB, Section 80G, CSR, Section 135, Schedule VII, hybrid annuity model, Kelkar Committee, Social Stock Exchange, SDG 17.
• Practise the previous year questions on this topic →
• Use in an answer:
  • Introduction with data: "Under Section 135 of the Companies Act, 2013, every company with a net profit of ₹5 crore or more must spend 2 per cent of its average net profits on social responsibility, which turns corporate giving from charity into a legal duty."
  • Introduction with a report: "The Kelkar Committee (2015) found that public private partnerships fail when risk is placed on the party least able to bear it, a lesson that applies to every partnership in development."
  • Conclusion: "Donor money and philanthropy strengthen development only when communities choose priorities and own the institutions that remain after the funding ends."
  • Conclusion: "India's development has moved from aid to partnership, with the State setting rules and platforms and other sectors bringing capital and ideas, in the spirit of SDG 17."