The Foreign Contribution Regulation Act, 2010, and the rules there under have been receiving much attention in light of the tighter scrutiny of foreign funded NGOs recently. FCRA is a regulatory tool that enables monitoring and control of foreign funding. It was first devised by the Indira Gandhi Government, and then revived in a strict new avatar under the erstwhile United Progressive Alliance Government.

The most prominent characteristic of this law is in its inherent vagueness. It fails to define ‘political activities’ even as it prohibits funding from all ‘foreign sources’ for it. And in India, a rule of thumb is that when interpretation of regulation is left completely up to the imagination of the state, the net result is nearly always discretionary and prohibitive. For this legacy, the previous Government is squarely accountable.

Meanwhile, the new Government has been actively experimenting with the FCRA and its implementation. The latest casualty, Greenpeace, will no longer be able to use its FCRA account to receive foreign money. Greenpeace is an international NGO that mobilises communities for causes such as stopping the use of nuclear energy that can indeed be construed as some form of ‘political action’.

In fact, even a cursory look at the related Internet discussion forums highlights that literate and digitally empowered India is largely supportive of the move. Greenpeace may find it useful to conduct a survey of public opinion on its own style of functioning. In fact, questions on the FCRA’s prohibitive nature are trivialised by the Greenpeace narrative.

Many organisations under the FCRA scanner are home-grown NGOs that intervene in development where the state has failed to deliver. There is a fundamental reason why India has lakhs of NGOs: It is severely underdeveloped. And it follows that while some NGOs may be set up as shell entities to leverage what they see as ponzi schemes in the form of Centre or State-run social schemes, others are doing legitimate work. In recognition of this, it is incumbent upon the state to focus its efforts on making its own development institutions and processes robust. Once this happens, it will naturally lead to a sifting of wheat from the chaff.

What must make Prime Minister Narendra Modi uncomfortable is that India’s most powerful fair-weather ally, the US, has been vocal in its critique of the FCRA’s (mis)use. Recently, an iconic US business leader was the latest to talk to Mr Modi on his aggressive ring-fencing of the NGO ecosystem. While it should be nobody’s case that Mr Modi tailor his domestic agenda based on US concerns, or even the concerns of what he may perceive to be liberal biases in Indian media reportage, there are at least three things that he must consider in the context of the FCRA.

First, all legislation should be enacted and implemented in the context of the state’s own inherent capacities to interpret them effectively. The problem with FCRA, as stated at the outset, is the lack of precision in defining key terms embedded within. This gives the state a discretionary lever that is less-than-optimal given the imperative of transparency in the state’s functioning. If an Act is promulgated, with all parameters clearly defined, it cannot be questioned since it has parliamentary legitimacy.

Conversely, all Acts promulgated by Parliament are not necessarily legitimate in practice if their interpretation is left to the whims and fancies of the state apparatus.

Second, an unforeseen challenge with the FCRA has been the negative spill-over effect it has had on unrelated areas. The Corporate Social Responsibility clause in the Companies Act, 2013, read with Rule 3 of the CSR Rules 2014, makes CSR mandatory for foreign or Indian companies with more than 51 per cent of foreign direct investment to comply with the extant provisions if they cross various specified financial thresholds.

However, given that the FCRA is a special legislation, it supersedes the Companies Act, 2013. Inadvertently, the FCRA provisions are prohibitive for CSR activities as well. For instance, if a foreign company decides to engage in CSR activity through a third party which in turn engages with a non-FCRA-compliant NGO, it will be in violation of Indian laws.

Some important questions are linked to this second challenge. Can CSR goals ever be achieved if the state makes it this hard for companies to fulfil their obligationsIJ How many FCRA-compliant NGOs are equipped to work with the private sector to discharge such obligationsIJ Why should the state, by virtue of making chartered accountants’ and administrative functions indispensable in the context of the various technical compliance requirements of the FCRA, in effect decide on the size an NGO has to be before it can raise foreign fundsIJAnd does the state believe that all companies, no matter what their core sector of work, can become experts in de-constructing the complex development terrain in IndiaIJ

Third, no country’s regulation, no matter how advanced, is able to keep pace with technological change. In India, this challenge is particularly acute. For instance, the proliferation of e-commerce and taxi companies such as Ola and Uber has made the question of liability of technological intermediaries a central one. In the case of FCRA, a hypothetical example can help illustrate the challenges of regulating something without defining it.

To wit, if an Indian NGO was to receive bitcoins from an unidentified foreign source, and it was to exchange those bitcoins on the Internet with a group of people who then carry out a protest against the state, where will liability be establishedIJ Are bitcoins, that are generated by a mathematical algorithm and not issued by any ‘foreign Government’ in particular, a ‘foreign source’IJ And are there not better ways to regulate in the 21st century given that the Internet is an uncharted jurisdictionIJ

One way to begin to answer the last question is to pivot the way, the state thinks about transparency. Instead of obsessively focussing on the supply side, why does the state not begin to think about ring-fencing itself from foreign interference by regulating the demand sideIJ In an answer to a recent public interest litigation filed in the Supreme Court, the Centre replied that “if political parties are held to be public authorities under the Right to Information Act, it would hamper their smooth internal working”.

And this view no doubt has broad support in Parliament. No political party would want an FCRA-type scanner turned on itself, whether for the aam aadmi or otherwise. Is this not indicative of a deeper hypocritical malaiseIJ In the absence of any evidence to the contrary, one should assume so.

(The writer is a partner at Koan Advisory Group and a visiting fellow at the Observer Research Foundation, New Delhi)