Govt expands CSR spending scope to boost R&D in India

The decision of the government to expand the scope of CSR towards the funding of incubators is expected to bring stronger connect between startups and industry.

The corporate tax cut announced by the Union Finance Minister Nirmala Sitharaman on Friday, had not only left corporates and stock markets delirious with joy, but also the incubators, across the country.

“The government has also decided to expand the scope of corporate social responsibility (CSR) to two percent spending. Now CSR can be spent on incubators,” the Finance Minister said.

The Companies Act requires firms with a net worth of Rs 500 crore, turnover of Rs 1,000 crore or net profit of Rs 5 crore or more, to set aside two percent of their average net profits over the last three years towards ‘approved’ CSR activities. 

Union Finance Minister Nirmala Sitharaman

The announcement stated that, the money can be invested on incubators, which are engaged in conducting researches in science, technology, engineering and medicine aimed at promoting Social Development Goals (SDGs).

However, this CSR fund can be spent on incubators funded by the Central or State governments or public- sector undertakings, which includes publicly-funded universities, IITs, national laboratories and other autonomous bodies established by government departments.

The news was a big boost for the incubators across the country, as they can now get their to fund from the private sector. According to reports, there are around 140 incubators and accelerators in the country.

Narayan Mahadevan, Co-founder, BridgeLabz said,

“This is a welcome move by the government as it will help encourage startups across the country in securing support from the industry. As incubators ourselves, we recognise the important role played in nurturing the startups ecosystem.”

“With corporates being given further permissions to utilise the CSR funds for funding incubators, it will create a close synergy between the industry and the startup ecosystem. One of the areas to support in this would be to look at the startups and organisations which are helping disadvantaged youth to upskill. It will help uplift and upskill several capable engineers across the country,” he added.

In January 2016, various incubators in India, got a boost from the Government, after the launch of the Startup India programme. Today, various state governments, along with the Centre, are encouraging setting up of incubators.

States like Karnataka, Telangana, and Rajasthan have been in the forefront of setting up of incubators, where government, industry and academic bodies come together to foster innovation and entrepreneurship.

The Indian IT industry’s trade body Nasscom in a reaction to the Finance Minister’s announcement said,

“This will help in improving Indian industry global competitiveness and allow spends on incubators that help boost creation of tech ecosystem.”

(Edited by Suman Singh)