India’s lower house of parliament approved a legislation that would make companies spend 2 percent of their profit on social welfare.
Under the Companies Bill, firms that reported an average profit of at least 50 million rupees ($912,825) in the last three years will have to allocate the funds. The legislation also seeks to improve corporate governance norms, makes boardroom decisions transparent and holds auditors and directors more accountable.
Corporate Affairs Minister Sachin Pilot said yesterday in the lower house that the bill encourages firms to spend on social welfare “voluntarily.” The government intends to make India an attractive investment destination with this legislation, he said. The proposal requires approval from the upper house and consent of the president before becoming law.
The new law will add momentum to Prime Minister Manmohan Singh’s policy reforms amid forecasts for the slowest pace of growth in a decade and before national elections in 2014. The lower house yesterday also approved changes to banking laws, raising a cap on voting rights and giving more regulatory power to the Reserve Bank of India in a move that may open up the industry to more lenders.