4 min read.Updated: 11 Jan 2021, 08:49 PM ISTRoopa Kudva,Kartik Sahni
We must make capital-raising easier for non-profit and other organizations that provide succour to India’s underprivileged
The special circumstances in which this year’s budget will be presented makes it unique even before it is tabled in the Indian Parliament. Covid has created an unprecedented economic shock. And our population’s low and lower-middle income segments have been disproportionately impacted—income has declined, unemployment is rampant, and many families’ savings have been depleted. It’s not surprisingly then, that expectations from this year’s budget are so great.
As impact investors, we work with purpose-driven entrepreneurs trying to build organizations of sufficient scale to address some key needs of India’s underserved population. These entrepreneurs are from a wide range of for-profit social enterprises and non-profits working in areas like education, health, agriculture, and livelihood and property rights. With a rapidly digitizing India, it has become much easier to reach and serve large segments of the worst affected, particularly the ‘next half billion’—i.e., 500 million low and lower-middle income Indians who have recently come online for the first time or are expected to do so in the next couple of years.
The budget for 2021-22 should look for new ways, and strengthen existing ones, to make philanthropy and entrepreneurship work for them. At the highest level, this involves: 1) making it easier for social enterprises to raise fresh capital; 2) providing safety nets for those social enterprises that have been badly hit by covid; and 3) incentivizing philanthropic and private capital to seek impact-generating social enterprises.
One step in this direction is the social stock exchange proposed by finance minister Nirmala Sitharaman in her budget speech of 2019. This is a globally unique approach to social finance, covering both non-profits and impact enterprises, through a holistic sector-development lens. A high-level working committee appointed by the Securities and Exchange Board of India recently proposed several recommendations on designing such an exchange, instruments for fund-raising, minimum reporting standards, fiscal incentives, and ways to encourage vital sector-level institutions. We’re hopeful that the budget will propose action on some of these recommendations.
In the same vein, the budget should explore other ways to attract capital into the non-profit and social entrepreneurship sectors. This can include incentivizing the flow of capital into existing financial vehicles like alternate investment funds, as well as encouraging new financial tools, like impact and development bonds, where needed.
The budget should also provide an adequate safety net for startups and non-profits that have been adversely affected by the pandemic. Many of these organizations have been at the front line during this crisis. Their survival is crucial to maintain mission continuity, since many of them have built significant expertise and capacity in their respective fields. Special schemes by the government—for example, that make credit available to loss-making entities with a demonstrated track record or promising growth prospects, for example—may be required, particularly because equity investment can be tough to come by, in these times of stress.
Another priority is the continued expansion of digital access among Indians. Amid the uncertain environment created by covid, one trend that has clearly stood out is the growing adoption of digital platforms. The pandemic has caused a perceptible surge in smartphone and internet usage among Indians, accelerating a digital shift. People are increasingly relying on their internet-enabled smartphones to get information about various government schemes, job opportunities and market movements. The last 12 months also saw a massive uptick in the use of the internet for utilitarian services like education and healthcare. The budget should seek to further boost this digital expansion, with a particular focus on closing the digital divides between urban and rural India, and between men and women.
A promising development in India’s efforts to enhance people’s digital access is the Prime Minister Wi-Fi Access Network Interface (PM Wani) scheme announced in December 2020. Its new architecture proposes to create nearly 10 million small Wi-Fi hotspots in the country, anchored by small retailers in low-income areas. If executed successfully, the scheme would not just make high-speed internet available in such areas, but also provide an extra means of income to millions of small retailers. The budget should make the provisions necessary for rolling this policy out aggressively, including the support that small businesses will need to come aboard, such as timely and accurate information, and clearly- defined rules and norms.
Finally, the budget should identify ways to bring more and more government services onto digital platforms, including the adoption of mobile-first methods. With the development of the Jan Dhan-Aadhaar-Mobile trinity and India Stack, we now have building blocks for this. It has already enabled India to quickly execute direct benefit transfer programmes in the wake of the pandemic. The next step is to integrate existing government services into this digital infrastructure, including services like legal recourse (e.g. through online dispute resolution) and public primary healthcare (e.g. through online medical consultations). Direct benefit programmes could be made more effective, too.
A clear focus on supporting the most vulnerable sections of our population will be important to steer India out of the economic turbulence created by the pandemic and into calmer waters. We hope that these priorities are reflected in the budget.
Roopa Kudva & Kartik Sahni are, respectively, managing director and chief of staff at Omidyar Network India.
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