Unraveling the Geographic Imbalance in Corporate Social Responsibility Funds
India’s Corporate Social Responsibility (CSR) framework, a global pioneer in mandating corporate contributions to social good, is witnessing unprecedented growth. In 2025, CSR spending is projected to reach Rs 38,000 crore, yet a stark imbalance persists: six states capture the majority of these funds, while underserved regions struggle for scraps. This article delves into the reasons behind this geographic disparity, its implications, and the path toward a more equitable distribution, offering fresh insights into a critical aspect of India’s development journey.
The Surge of CSR Spending in 2025
India’s CSR ecosystem has matured significantly since the Companies Act, 2013, mandated that companies with a net worth of ₹500 crore, turnover of ₹1,000 crore, or net profit of ₹5 crore allocate 2% of their average net profits to social initiatives. In 2024, CSR expenditure hit ₹34,909 crore, a 13% increase from the previous year, and projections for 2025 estimate a rise to Rs 38,000 crore, driven by robust economic growth and stricter compliance. Yet, this impressive scale masks a troubling trend: the concentration of funds in a handful of states, leaving vast swathes of India underfunded.
The Six-State Dominance
Maharashtra, Tamil Nadu, Karnataka, Andhra Pradesh, Gujarat, and Delhi collectively account for over 60% of CSR spending. Maharashtra alone commands a staggering Rs 5,375 crore in 2024, followed by Gujarat (Rs 4,200 crore), Karnataka (Rs 3,800 crore), and Tamil Nadu (Rs 3,200 crore). These states, home to India’s corporate and industrial powerhouses, benefit from their proximity to corporate headquarters, manufacturing hubs, and urban centers. For instance, Maharashtra’s Mumbai and Pune host major conglomerates, while Bengaluru in Karnataka drives tech-sector CSR contributions.
This concentration is no accident. The “local area preference” clause in Section 135 of the Companies Act, intended to encourage community-focused investments, is often misinterpreted as a mandate to prioritize areas near corporate operations. As a result, urban and semi-urban regions in these six states see a flood of CSR projects, while rural and remote districts, particularly in Aspirational Districts, receive less than 4% of total funds.
Why the Skew Persists
Misinterpretation of Legal Guidelines
The “local area preference” clause, while discretionary, has been treated as obligatory by many companies. This leads firms to channel funds into areas near their factories or offices, where infrastructure and visibility are already robust. Sandeep Ghosh, Director of the Developmental Intelligence Unit (DIU), notes, “Funds are allocated based on convenience rather than need.” This misstep prioritizes operational ease over developmental impact, sidelining regions like Jharkhand, Bihar, and the Northeast, where poverty and infrastructure deficits are acute.
Corporate Comfort Zones
Companies gravitate toward familiar territories, where established networks and logistics simplify project execution. For example, tech giants in Bengaluru fund digital literacy programs in Karnataka, while manufacturing firms in Gujarat support local environmental initiatives. This comfort-driven approach limits innovation and fails to address systemic gaps in underdeveloped areas. Only 30% of rural districts receive CSR funds aligned with their developmental needs, with 23% facing a complete mismatch.
Lack of Data-Driven Decision-Making
CSR allocation often lacks a strategic, evidence-based foundation. Many companies rely on legacy projects or boardroom preferences rather than leveraging data to identify high-need regions. The DIU’s Investing in Tomorrow report highlights that only 47% of CSR projects in rural districts are partially aligned with local priorities, underscoring the need for data-driven frameworks like the Rural Quality of Life (RQOL) index, which uses 69 indicators across health, education, and infrastructure to guide investments.
Sectoral Priorities and Their Role
CSR funds in 2025 continue to prioritize education (44%), healthcare (29%), and environmental sustainability (10%), with rural development trailing at 7%. These sectors align with corporate expertise—tech firms invest in digital education, pharmaceuticals in healthcare infrastructure—but often duplicate government schemes like mid-day meals or sanitation drives. This overlap reduces the potential for transformative impact, as funds rarely address last-mile challenges or foster innovation, such as scalable renewable energy projects or advanced vocational training.
The Plight of Aspirational Districts
NITI Aayog’s Aspirational Districts, spanning states like Bihar, Chhattisgarh, and Odisha, are designed to accelerate development in India’s most backward regions. Yet, these 112 districts receive a mere 2-4% of CSR funds. In 2023, only 47 of the top 100 CSR spenders implemented projects in these districts, contributing just Rs 473 crore out of a total Rs 14,714 crore spent by listed companies. This neglect exacerbates existing inequities, as these regions grapple with poor healthcare, limited education access, and inadequate infrastructure.
Barriers to Equitable Distribution
Weak Community Engagement
CSR projects often adopt a top-down approach, with minimal input from local communities. This disconnect results in initiatives that fail to address nuanced local needs, such as sustainable livelihoods in tribal areas or climate-resilient agriculture in drought-prone regions. Greater collaboration with NGOs and community organizations could bridge this gap, ensuring projects resonate with ground realities.
Inadequate Impact Assessment
Most companies measure outputs—like the number of schools built or people trained—rather than outcomes, such as improved literacy rates or job creation. The 2021 amendments to the Companies Act mandate impact assessments for projects above ₹1 crore, but only 62% of organizations report sufficient funding for monitoring and evaluation. Robust frameworks, like the OECD DAC or ICAI Social Audit Standards, could enhance accountability and guide funds to high-impact areas.
Regulatory Ambiguities
While the Companies Act provides a clear framework, ambiguities around “local area” definitions and compliance requirements lead to inconsistent interpretations. The Ministry of Corporate Affairs could address this by introducing guidelines that incentivize investments in underserved regions, such as tax benefits or recognition programs for companies targeting Aspirational Districts.
The Path to Reform
To address this imbalance, a multi-faceted approach is essential. First, policymakers should clarify the “local area preference” clause to encourage investments in underdeveloped regions. The Social Stock Exchange (SSE), launched to connect corporates with social enterprises, offers a promising platform to channel funds to high-need areas. Second, companies must adopt data-driven strategies, using tools like the National CSR Portal or DIU’s RQOL index to prioritize districts with the greatest developmental deficits.
Collaboration is key. Partnerships with NGOs, local governments, and community stakeholders can ensure projects are tailored to local needs. For instance, Reliance Industries’ Rs 945 crore Rural Transformation program, which reached 2.7 million people in 2024, demonstrates the power of strategic, community-focused initiatives.
Finally, technology can revolutionize CSR impact. AI-driven analytics, blockchain for transparency, and real-time monitoring via IoT can enhance project efficiency and accountability. By 2027, 100% digitalization of impact assessments is projected, enabling precise tracking of outcomes.
A Vision for Inclusive CSR
India’s CSR spending is poised to triple to Rs 1.2 lakh crore by 2035, offering immense potential to drive equitable development. However, without strategic reforms, this growth risks deepening regional disparities. By prioritizing underserved districts, fostering innovation, and enhancing transparency, India can transform its CSR framework into a catalyst for inclusive growth, aligning with the Sustainable Development Goals and uplifting the nation’s most marginalized communities.
