Can India’s ₹11 trillion non-profit economy reach the places that need it most?

A new study, exclusively shared with Mint by non-profit organization Impactica.org, which is building a digital infrastructure for the sector, tries to answer some of these questions.

The study shows that while the sector is growing in size, it struggles with concentrated operations, with funding largely restricted to the richer states. Though non-profit organizations do have a sizeable presence in some aspirational districts, several others are left underserved. Mint explores the details.

According to Budget documents, 262,210 charitable organizations in India filed income tax returns for the 2023-24 fiscal year, reporting a combined expenditure of ₹11.3 trillion on charitable and religious activities. This accounted for 3.78% of India’s GDP, up from 1.95% in FY18, but down from the recent peak of 3.92% in FY20. While charitable activity remains strong compared to the pre-pandemic period, India’s non-profit economy remains smaller than those of advanced economies such as the US, Australia and Canada, where they account for 7-15% of GDP.

New-age non-profit organizations (NPOs), such as technology incubators that cater to the evolving needs of the economy, have seen strong and consistent growth in funds deployed. The report analysed expenditure patterns for 50 incubators supported by the Department of Science and Technology, which showed that funds deployed have grown at a compound annual rate of 17% between FY21 and FY24.

Traditional NGOs focused on last-mile delivery of development initiatives saw a more inconsistent performance, with spending reaching a relative plateau and growing at a modest CAGR of just 6% in recent years. An earlier analysis by Mint in 2023 showed India’s NGOs were in poor financial health, with little money left over after expenditures.

While many NPOs do have operations across India, the trend indicates that philanthropy often flows to regions where established organisations and support networks already exist. “Severely limited NPO numbers and absorptive capacity in NPO deserts create a structural constraint—without local partners, philanthropy cannot reach where it is most needed,” the report noted, adding that there was a need to align funding closely with need rather than convenience.

Bihar, with 13 aspirational districts, has 27% of the state’s NPOs, and Odisha, with 10 districts, has 17.4%. However, the overall picture is far from encouraging. Aspirational districts only account for 5% of total non-profit registrations, with roughly one non-profit for every 14,000 people, compared with the national average of one for every 4,000 people, according to the report. “These aspirational districts lack grant makers, capacity building hubs, and monitoring and evaluation networks, making it hard for new NPOs to emerge or endure,” the report said.

Nearly 60% of these NPOs are less than 15 years old, showing that the sector has expanded rapidly in the past decade and a half. In contrast, organizations with over 50 years of history represent only a small fraction of the sector, with 4.4% in the 50-75 year bracket and an even smaller portion exceeding 75 years, collectively totalling 6,500 non-profits. As philanthropic capital increases, the report suggests, the number of organisations is likely to grow further, especially if barriers to engagement and giving are lowered.