Social Capital-A shared Destiny | Famous Books for UPSC Exam (Summary & Tests) PDF Download

 Page 1


1
INTRODUCTION
1.1 Collective efforts and cooperative action have been a part of human behaviour right 
from the early days of civilisation. Gradually such collective action led to formation of 
small habitations, communities, villages and thereafter large cities and metropolises.  
They in turn, created complex social groups and governmental organisations. In course 
of time, government and society became too big and formalized and somewhat distant 
from the common man. Thus evolved a need for mutual networking and interaction for 
solution of issues.
1.2 The term ‘Social Capital’ was first used by L.J. Hanifan, a State Supervisor for Rural 
Schools in Virginia in 1916. He used it in the context of the community’s involvement in  
the successful running of schools.
1
 As a concept, it received entry in social science literature 
in the 1980s. Soon it assumed an economic connotation and came to be accepted as a factor 
of production in the development theory. It refers to those institutions, relationships, and 
norms that shape the quality and quantity of a society’s interaction. It consists of trust, 
mutual understanding, shared values and behaviour that bind together the members of a 
community and make cooperative action possible. The basic premise is that such interaction 
enables people to build communities, to commit themselves to each other, and to knit the 
social fabric. A sense of belonging and the concrete experience of social networking (and 
the relationships of trust and tolerance that evolve) can bring great benefits to people. 
Social capital now stands accepted as a necessary element of development theory. In many 
cases it provides a cogent explanation for the failure of economic policies. The notion that 
a set of macro-economic policies supported by appropriate institutions would necessarily 
transform an economy often does not work in actual practice. Policies and institutions 
operate in an ensemble which is strongly conditioned by sociological parameters. Socio-
cultural elements influence political and economic factors to behave in ways that considerably 
change the pace of  the economic processes. Social Capital and T rust are elements of cohesion 
in society and entrepreneurship and are vital for setting in processes that expand social, 
economic and political opportunities. They lead to formation of specialised groups and 
organisations generally known as Social Capital Institutions or the third Sector.
xviii
SCBs State Cooperative Banks 
SCs Scheduled Castes
SERP Society for Elimination of Rural Poverty
SEWA Self Employed Women’s Association
SFMC SIDBI Foundation for Micro Credit
SGSY  Swarna Jayanti Gram Swarojgar Yojana 
SHG Self-Help Group
SHPI Self-Help Promoting Institution
SIDA  Swedish International Development Cooperation Agency
SIDBI  Small Industries Development Bank of India
SKS Swayam Krishi Sangam
SME Small and Medium Enterprise
SRFS Sanghamitra Rural Finance Services
STCCS  Short-term Rural Cooperative Credit Structure
STs Scheduled T ribes
SUDA State Urban Development Agency
TANWA Tamilnadu Women in Agriculture Programme
TNWDP Tamilnadu Women’s Development Project 
TSOs Third Sector Organisations
UK United Kingdom
USA United States of America
VO Voluntary Organisation
WTO World T rade Organisation
Page 2


1
INTRODUCTION
1.1 Collective efforts and cooperative action have been a part of human behaviour right 
from the early days of civilisation. Gradually such collective action led to formation of 
small habitations, communities, villages and thereafter large cities and metropolises.  
They in turn, created complex social groups and governmental organisations. In course 
of time, government and society became too big and formalized and somewhat distant 
from the common man. Thus evolved a need for mutual networking and interaction for 
solution of issues.
1.2 The term ‘Social Capital’ was first used by L.J. Hanifan, a State Supervisor for Rural 
Schools in Virginia in 1916. He used it in the context of the community’s involvement in  
the successful running of schools.
1
 As a concept, it received entry in social science literature 
in the 1980s. Soon it assumed an economic connotation and came to be accepted as a factor 
of production in the development theory. It refers to those institutions, relationships, and 
norms that shape the quality and quantity of a society’s interaction. It consists of trust, 
mutual understanding, shared values and behaviour that bind together the members of a 
community and make cooperative action possible. The basic premise is that such interaction 
enables people to build communities, to commit themselves to each other, and to knit the 
social fabric. A sense of belonging and the concrete experience of social networking (and 
the relationships of trust and tolerance that evolve) can bring great benefits to people. 
Social capital now stands accepted as a necessary element of development theory. In many 
cases it provides a cogent explanation for the failure of economic policies. The notion that 
a set of macro-economic policies supported by appropriate institutions would necessarily 
transform an economy often does not work in actual practice. Policies and institutions 
operate in an ensemble which is strongly conditioned by sociological parameters. Socio-
cultural elements influence political and economic factors to behave in ways that considerably 
change the pace of  the economic processes. Social Capital and T rust are elements of cohesion 
in society and entrepreneurship and are vital for setting in processes that expand social, 
economic and political opportunities. They lead to formation of specialised groups and 
organisations generally known as Social Capital Institutions or the third Sector.
xviii
SCBs State Cooperative Banks 
SCs Scheduled Castes
SERP Society for Elimination of Rural Poverty
SEWA Self Employed Women’s Association
SFMC SIDBI Foundation for Micro Credit
SGSY  Swarna Jayanti Gram Swarojgar Yojana 
SHG Self-Help Group
SHPI Self-Help Promoting Institution
SIDA  Swedish International Development Cooperation Agency
SIDBI  Small Industries Development Bank of India
SKS Swayam Krishi Sangam
SME Small and Medium Enterprise
SRFS Sanghamitra Rural Finance Services
STCCS  Short-term Rural Cooperative Credit Structure
STs Scheduled T ribes
SUDA State Urban Development Agency
TANWA Tamilnadu Women in Agriculture Programme
TNWDP Tamilnadu Women’s Development Project 
TSOs Third Sector Organisations
UK United Kingdom
USA United States of America
VO Voluntary Organisation
WTO World T rade Organisation
3
1.3 Theoretically, social capital organisations are supposed to play four crucial roles in 
society:
2
 
(i) The Service Role:- It encourages people to cope with a public problem at 
the primary level. People tend to let non-profit organisations lead the way in 
responding to critical public needs. The non-profit sector thus functions as a 
first line of defense, a flexible mechanism through which people concerned 
about a social or economic problem can begin to respond, without having to 
convince a majority of their fellow citizens that the problem deserves a more 
general, government response. Non-profit organisations are also available to 
sub-groups of the population who desire a range of public goods that exceeds 
what the government or society is willing to support. Non-profit organisations 
have a readymade role in planning hospitals, universities, social service agencies 
and civil organisations.
(ii)  The Value Guardian Role:- The role of the non-profit sector is to function as a 
“value guardian” in society, as exemplar and as embodiment of a fundamental 
value emphasizing individual initiative for the public good just as private 
economic enterprises serve as vehicles for promoting individual initiative for 
the private good. In the process, non-profit bodies foster pluralism, diversity 
and freedom. These values go much beyond purposes such as improving health 
or enhancing school enrolment. They are important as expressions of what has 
come to be regarded as a central feature of modern society – a sphere of private 
action through which individuals can take initiative, express their individuality, 
and exercise freedom of expression and action. 
(iii)  The Advocacy/Social Safety-Valve Role:- Non-profit organisations also play a 
vital role in mobilizing public attention to societal problems and needs. They 
are the principal vehicle through which communities can give voice to their 
concerns. In fact, most of the social movements that have animated western 
society over the past century – the movement for women’s suffrage, protection 
of civil rights and the initiative to protect environment, all took shape within 
the non-profit sector. By highlighting social and political concerns, by giving 
voice to under-represented people and by integrating these perspectives into 
social and political life, these organisations function as a kind of safety-valve that 
helps to preserve democracy and maintain a degree of peace in the contemporary 
polity and society. 
(iv) The Community Building Role:- Finally, non-profit organisations play a vital 
role in creating and sustaining social cohesiveness through bonds of trust 
and reciprocity that seem to be pivotal for a democratic society and a market 
economy to function effectively. 
1.4 There are several ways in which social capital can improve government performance. 
First, it can broaden government accountability; government must be responsive to citizens 
at large rather than to narrow sectarian interests. Secondly, it can facilitate agreement where 
political preferences are polarized. Thirdly, it induces innovation in policymaking. Finally, it 
enhances the efficiency of delivery of many services at the local level through involvement 
of residents. 
1.5 Accountability of the government is the most important means by which social capital 
influences performance. Trust and civic minded attitudes can improve governmental 
performance by affecting the level and character of political participation, reducing “rent-
seeking” and enhancing public-interested behaviour. 
1.6 Social capital can bring convergence among different players on important issues. 
Political leaders in the developed regions are more willing to compromise with the views 
of opponents. Where trust and norms of reciprocity are stronger, opposing sides are more 
likely to sit together and resolve their disputes. On the other hand, where fewer citizens are 
motivated by a sense of civic obligation to stay informed and to participate in political life, 
the chances of a dispute settlement between two opposite sides become weak.
1.7 Social capital also leads to greater innovation and flexibility in policymaking. The more 
civic regions are far more successful than the less civic regions in responding to problems 
and challenges of the community and the State. 
1.8 Public service delivery can be efficiently administered, if social network groups are in 
operation and they mobilise people around common issues. Women’s Self-Help Groups / 
Micro-Credit Institutions in Andhra Pradesh and Tamil Nadu and Kudumbashri in Kerala 
are fine examples of collective participation which have led to better implementation of 
development programmes in these States. 
1.9 In concrete terms, the growth of social capital leads to evolution of a healthy civil society 
manifesting as a distinct entity in the space between public sector (government) and the 
business (markets) – often called the third sector or non-profit sector. Depending on the 
strength and vivacity of civil society, third sector organisations can assume the following 
four major forms:-
(a) Small community based initiatives with modest funding e.g. Resident Welfare 
Associations. Such a network is usually dependent on pure voluntary action of 
Social Capital – A Shared Destiny Introduction
   s 
Page 3


1
INTRODUCTION
1.1 Collective efforts and cooperative action have been a part of human behaviour right 
from the early days of civilisation. Gradually such collective action led to formation of 
small habitations, communities, villages and thereafter large cities and metropolises.  
They in turn, created complex social groups and governmental organisations. In course 
of time, government and society became too big and formalized and somewhat distant 
from the common man. Thus evolved a need for mutual networking and interaction for 
solution of issues.
1.2 The term ‘Social Capital’ was first used by L.J. Hanifan, a State Supervisor for Rural 
Schools in Virginia in 1916. He used it in the context of the community’s involvement in  
the successful running of schools.
1
 As a concept, it received entry in social science literature 
in the 1980s. Soon it assumed an economic connotation and came to be accepted as a factor 
of production in the development theory. It refers to those institutions, relationships, and 
norms that shape the quality and quantity of a society’s interaction. It consists of trust, 
mutual understanding, shared values and behaviour that bind together the members of a 
community and make cooperative action possible. The basic premise is that such interaction 
enables people to build communities, to commit themselves to each other, and to knit the 
social fabric. A sense of belonging and the concrete experience of social networking (and 
the relationships of trust and tolerance that evolve) can bring great benefits to people. 
Social capital now stands accepted as a necessary element of development theory. In many 
cases it provides a cogent explanation for the failure of economic policies. The notion that 
a set of macro-economic policies supported by appropriate institutions would necessarily 
transform an economy often does not work in actual practice. Policies and institutions 
operate in an ensemble which is strongly conditioned by sociological parameters. Socio-
cultural elements influence political and economic factors to behave in ways that considerably 
change the pace of  the economic processes. Social Capital and T rust are elements of cohesion 
in society and entrepreneurship and are vital for setting in processes that expand social, 
economic and political opportunities. They lead to formation of specialised groups and 
organisations generally known as Social Capital Institutions or the third Sector.
xviii
SCBs State Cooperative Banks 
SCs Scheduled Castes
SERP Society for Elimination of Rural Poverty
SEWA Self Employed Women’s Association
SFMC SIDBI Foundation for Micro Credit
SGSY  Swarna Jayanti Gram Swarojgar Yojana 
SHG Self-Help Group
SHPI Self-Help Promoting Institution
SIDA  Swedish International Development Cooperation Agency
SIDBI  Small Industries Development Bank of India
SKS Swayam Krishi Sangam
SME Small and Medium Enterprise
SRFS Sanghamitra Rural Finance Services
STCCS  Short-term Rural Cooperative Credit Structure
STs Scheduled T ribes
SUDA State Urban Development Agency
TANWA Tamilnadu Women in Agriculture Programme
TNWDP Tamilnadu Women’s Development Project 
TSOs Third Sector Organisations
UK United Kingdom
USA United States of America
VO Voluntary Organisation
WTO World T rade Organisation
3
1.3 Theoretically, social capital organisations are supposed to play four crucial roles in 
society:
2
 
(i) The Service Role:- It encourages people to cope with a public problem at 
the primary level. People tend to let non-profit organisations lead the way in 
responding to critical public needs. The non-profit sector thus functions as a 
first line of defense, a flexible mechanism through which people concerned 
about a social or economic problem can begin to respond, without having to 
convince a majority of their fellow citizens that the problem deserves a more 
general, government response. Non-profit organisations are also available to 
sub-groups of the population who desire a range of public goods that exceeds 
what the government or society is willing to support. Non-profit organisations 
have a readymade role in planning hospitals, universities, social service agencies 
and civil organisations.
(ii)  The Value Guardian Role:- The role of the non-profit sector is to function as a 
“value guardian” in society, as exemplar and as embodiment of a fundamental 
value emphasizing individual initiative for the public good just as private 
economic enterprises serve as vehicles for promoting individual initiative for 
the private good. In the process, non-profit bodies foster pluralism, diversity 
and freedom. These values go much beyond purposes such as improving health 
or enhancing school enrolment. They are important as expressions of what has 
come to be regarded as a central feature of modern society – a sphere of private 
action through which individuals can take initiative, express their individuality, 
and exercise freedom of expression and action. 
(iii)  The Advocacy/Social Safety-Valve Role:- Non-profit organisations also play a 
vital role in mobilizing public attention to societal problems and needs. They 
are the principal vehicle through which communities can give voice to their 
concerns. In fact, most of the social movements that have animated western 
society over the past century – the movement for women’s suffrage, protection 
of civil rights and the initiative to protect environment, all took shape within 
the non-profit sector. By highlighting social and political concerns, by giving 
voice to under-represented people and by integrating these perspectives into 
social and political life, these organisations function as a kind of safety-valve that 
helps to preserve democracy and maintain a degree of peace in the contemporary 
polity and society. 
(iv) The Community Building Role:- Finally, non-profit organisations play a vital 
role in creating and sustaining social cohesiveness through bonds of trust 
and reciprocity that seem to be pivotal for a democratic society and a market 
economy to function effectively. 
1.4 There are several ways in which social capital can improve government performance. 
First, it can broaden government accountability; government must be responsive to citizens 
at large rather than to narrow sectarian interests. Secondly, it can facilitate agreement where 
political preferences are polarized. Thirdly, it induces innovation in policymaking. Finally, it 
enhances the efficiency of delivery of many services at the local level through involvement 
of residents. 
1.5 Accountability of the government is the most important means by which social capital 
influences performance. Trust and civic minded attitudes can improve governmental 
performance by affecting the level and character of political participation, reducing “rent-
seeking” and enhancing public-interested behaviour. 
1.6 Social capital can bring convergence among different players on important issues. 
Political leaders in the developed regions are more willing to compromise with the views 
of opponents. Where trust and norms of reciprocity are stronger, opposing sides are more 
likely to sit together and resolve their disputes. On the other hand, where fewer citizens are 
motivated by a sense of civic obligation to stay informed and to participate in political life, 
the chances of a dispute settlement between two opposite sides become weak.
1.7 Social capital also leads to greater innovation and flexibility in policymaking. The more 
civic regions are far more successful than the less civic regions in responding to problems 
and challenges of the community and the State. 
1.8 Public service delivery can be efficiently administered, if social network groups are in 
operation and they mobilise people around common issues. Women’s Self-Help Groups / 
Micro-Credit Institutions in Andhra Pradesh and Tamil Nadu and Kudumbashri in Kerala 
are fine examples of collective participation which have led to better implementation of 
development programmes in these States. 
1.9 In concrete terms, the growth of social capital leads to evolution of a healthy civil society 
manifesting as a distinct entity in the space between public sector (government) and the 
business (markets) – often called the third sector or non-profit sector. Depending on the 
strength and vivacity of civil society, third sector organisations can assume the following 
four major forms:-
(a) Small community based initiatives with modest funding e.g. Resident Welfare 
Associations. Such a network is usually dependent on pure voluntary action of 
Social Capital – A Shared Destiny Introduction
   s 
2
1.3 Theoretically, social capital organisations are supposed to play four crucial roles in 
society:
2
 
(i) The Service Role:- It encourages people to cope with a public problem at 
the primary level. People tend to let non-profit organisations lead the way in 
responding to critical public needs. The non-profit sector thus functions as a 
first line of defense, a flexible mechanism through which people concerned 
about a social or economic problem can begin to respond, without having to 
convince a majority of their fellow citizens that the problem deserves a more 
general, government response. Non-profit organisations are also available to 
sub-groups of the population who desire a range of public goods that exceeds 
what the government or society is willing to support. Non-profit organisations 
have a readymade role in planning hospitals, universities, social service agencies 
and civil organisations.
(ii)  The Value Guardian Role:- The role of the non-profit sector is to function as a 
“value guardian” in society, as exemplar and as embodiment of a fundamental 
value emphasizing individual initiative for the public good just as private 
economic enterprises serve as vehicles for promoting individual initiative for 
the private good. In the process, non-profit bodies foster pluralism, diversity 
and freedom. These values go much beyond purposes such as improving health 
or enhancing school enrolment. They are important as expressions of what has 
come to be regarded as a central feature of modern society – a sphere of private 
action through which individuals can take initiative, express their individuality, 
and exercise freedom of expression and action. 
(iii)  The Advocacy/Social Safety-Valve Role:- Non-profit organisations also play a 
vital role in mobilizing public attention to societal problems and needs. They 
are the principal vehicle through which communities can give voice to their 
concerns. In fact, most of the social movements that have animated western 
society over the past century – the movement for women’s suffrage, protection 
of civil rights and the initiative to protect environment, all took shape within 
the non-profit sector. By highlighting social and political concerns, by giving 
voice to under-represented people and by integrating these perspectives into 
social and political life, these organisations function as a kind of safety-valve that 
helps to preserve democracy and maintain a degree of peace in the contemporary 
polity and society. 
(iv) The Community Building Role:- Finally, non-profit organisations play a vital 
role in creating and sustaining social cohesiveness through bonds of trust 
and reciprocity that seem to be pivotal for a democratic society and a market 
economy to function effectively. 
1.4 There are several ways in which social capital can improve government performance. 
First, it can broaden government accountability; government must be responsive to citizens 
at large rather than to narrow sectarian interests. Secondly, it can facilitate agreement where 
political preferences are polarized. Thirdly, it induces innovation in policymaking. Finally, it 
enhances the efficiency of delivery of many services at the local level through involvement 
of residents. 
1.5 Accountability of the government is the most important means by which social capital 
influences performance. Trust and civic minded attitudes can improve governmental 
performance by affecting the level and character of political participation, reducing “rent-
seeking” and enhancing public-interested behaviour. 
1.6 Social capital can bring convergence among different players on important issues. 
Political leaders in the developed regions are more willing to compromise with the views 
of opponents. Where trust and norms of reciprocity are stronger, opposing sides are more 
likely to sit together and resolve their disputes. On the other hand, where fewer citizens are 
motivated by a sense of civic obligation to stay informed and to participate in political life, 
the chances of a dispute settlement between two opposite sides become weak.
1.7 Social capital also leads to greater innovation and flexibility in policymaking. The more 
civic regions are far more successful than the less civic regions in responding to problems 
and challenges of the community and the State. 
1.8 Public service delivery can be efficiently administered, if social network groups are in 
operation and they mobilise people around common issues. Women’s Self-Help Groups / 
Micro-Credit Institutions in Andhra Pradesh and Tamil Nadu and Kudumbashri in Kerala 
are fine examples of collective participation which have led to better implementation of 
development programmes in these States. 
1.9 In concrete terms, the growth of social capital leads to evolution of a healthy civil society 
manifesting as a distinct entity in the space between public sector (government) and the 
business (markets) – often called the third sector or non-profit sector. Depending on the 
strength and vivacity of civil society, third sector organisations can assume the following 
four major forms:-
(a) Small community based initiatives with modest funding e.g. Resident Welfare 
Associations. Such a network is usually dependent on pure voluntary action of 
Social Capital – A Shared Destiny Introduction
2
NON-PROFIT ORGANIZATIONS: AMERICA’S INVISIBLE SECTOR - Lester M. Salamon, Center for Civil Society Studies, Johns Hopkins 
University
Page 4


1
INTRODUCTION
1.1 Collective efforts and cooperative action have been a part of human behaviour right 
from the early days of civilisation. Gradually such collective action led to formation of 
small habitations, communities, villages and thereafter large cities and metropolises.  
They in turn, created complex social groups and governmental organisations. In course 
of time, government and society became too big and formalized and somewhat distant 
from the common man. Thus evolved a need for mutual networking and interaction for 
solution of issues.
1.2 The term ‘Social Capital’ was first used by L.J. Hanifan, a State Supervisor for Rural 
Schools in Virginia in 1916. He used it in the context of the community’s involvement in  
the successful running of schools.
1
 As a concept, it received entry in social science literature 
in the 1980s. Soon it assumed an economic connotation and came to be accepted as a factor 
of production in the development theory. It refers to those institutions, relationships, and 
norms that shape the quality and quantity of a society’s interaction. It consists of trust, 
mutual understanding, shared values and behaviour that bind together the members of a 
community and make cooperative action possible. The basic premise is that such interaction 
enables people to build communities, to commit themselves to each other, and to knit the 
social fabric. A sense of belonging and the concrete experience of social networking (and 
the relationships of trust and tolerance that evolve) can bring great benefits to people. 
Social capital now stands accepted as a necessary element of development theory. In many 
cases it provides a cogent explanation for the failure of economic policies. The notion that 
a set of macro-economic policies supported by appropriate institutions would necessarily 
transform an economy often does not work in actual practice. Policies and institutions 
operate in an ensemble which is strongly conditioned by sociological parameters. Socio-
cultural elements influence political and economic factors to behave in ways that considerably 
change the pace of  the economic processes. Social Capital and T rust are elements of cohesion 
in society and entrepreneurship and are vital for setting in processes that expand social, 
economic and political opportunities. They lead to formation of specialised groups and 
organisations generally known as Social Capital Institutions or the third Sector.
xviii
SCBs State Cooperative Banks 
SCs Scheduled Castes
SERP Society for Elimination of Rural Poverty
SEWA Self Employed Women’s Association
SFMC SIDBI Foundation for Micro Credit
SGSY  Swarna Jayanti Gram Swarojgar Yojana 
SHG Self-Help Group
SHPI Self-Help Promoting Institution
SIDA  Swedish International Development Cooperation Agency
SIDBI  Small Industries Development Bank of India
SKS Swayam Krishi Sangam
SME Small and Medium Enterprise
SRFS Sanghamitra Rural Finance Services
STCCS  Short-term Rural Cooperative Credit Structure
STs Scheduled T ribes
SUDA State Urban Development Agency
TANWA Tamilnadu Women in Agriculture Programme
TNWDP Tamilnadu Women’s Development Project 
TSOs Third Sector Organisations
UK United Kingdom
USA United States of America
VO Voluntary Organisation
WTO World T rade Organisation
3
1.3 Theoretically, social capital organisations are supposed to play four crucial roles in 
society:
2
 
(i) The Service Role:- It encourages people to cope with a public problem at 
the primary level. People tend to let non-profit organisations lead the way in 
responding to critical public needs. The non-profit sector thus functions as a 
first line of defense, a flexible mechanism through which people concerned 
about a social or economic problem can begin to respond, without having to 
convince a majority of their fellow citizens that the problem deserves a more 
general, government response. Non-profit organisations are also available to 
sub-groups of the population who desire a range of public goods that exceeds 
what the government or society is willing to support. Non-profit organisations 
have a readymade role in planning hospitals, universities, social service agencies 
and civil organisations.
(ii)  The Value Guardian Role:- The role of the non-profit sector is to function as a 
“value guardian” in society, as exemplar and as embodiment of a fundamental 
value emphasizing individual initiative for the public good just as private 
economic enterprises serve as vehicles for promoting individual initiative for 
the private good. In the process, non-profit bodies foster pluralism, diversity 
and freedom. These values go much beyond purposes such as improving health 
or enhancing school enrolment. They are important as expressions of what has 
come to be regarded as a central feature of modern society – a sphere of private 
action through which individuals can take initiative, express their individuality, 
and exercise freedom of expression and action. 
(iii)  The Advocacy/Social Safety-Valve Role:- Non-profit organisations also play a 
vital role in mobilizing public attention to societal problems and needs. They 
are the principal vehicle through which communities can give voice to their 
concerns. In fact, most of the social movements that have animated western 
society over the past century – the movement for women’s suffrage, protection 
of civil rights and the initiative to protect environment, all took shape within 
the non-profit sector. By highlighting social and political concerns, by giving 
voice to under-represented people and by integrating these perspectives into 
social and political life, these organisations function as a kind of safety-valve that 
helps to preserve democracy and maintain a degree of peace in the contemporary 
polity and society. 
(iv) The Community Building Role:- Finally, non-profit organisations play a vital 
role in creating and sustaining social cohesiveness through bonds of trust 
and reciprocity that seem to be pivotal for a democratic society and a market 
economy to function effectively. 
1.4 There are several ways in which social capital can improve government performance. 
First, it can broaden government accountability; government must be responsive to citizens 
at large rather than to narrow sectarian interests. Secondly, it can facilitate agreement where 
political preferences are polarized. Thirdly, it induces innovation in policymaking. Finally, it 
enhances the efficiency of delivery of many services at the local level through involvement 
of residents. 
1.5 Accountability of the government is the most important means by which social capital 
influences performance. Trust and civic minded attitudes can improve governmental 
performance by affecting the level and character of political participation, reducing “rent-
seeking” and enhancing public-interested behaviour. 
1.6 Social capital can bring convergence among different players on important issues. 
Political leaders in the developed regions are more willing to compromise with the views 
of opponents. Where trust and norms of reciprocity are stronger, opposing sides are more 
likely to sit together and resolve their disputes. On the other hand, where fewer citizens are 
motivated by a sense of civic obligation to stay informed and to participate in political life, 
the chances of a dispute settlement between two opposite sides become weak.
1.7 Social capital also leads to greater innovation and flexibility in policymaking. The more 
civic regions are far more successful than the less civic regions in responding to problems 
and challenges of the community and the State. 
1.8 Public service delivery can be efficiently administered, if social network groups are in 
operation and they mobilise people around common issues. Women’s Self-Help Groups / 
Micro-Credit Institutions in Andhra Pradesh and Tamil Nadu and Kudumbashri in Kerala 
are fine examples of collective participation which have led to better implementation of 
development programmes in these States. 
1.9 In concrete terms, the growth of social capital leads to evolution of a healthy civil society 
manifesting as a distinct entity in the space between public sector (government) and the 
business (markets) – often called the third sector or non-profit sector. Depending on the 
strength and vivacity of civil society, third sector organisations can assume the following 
four major forms:-
(a) Small community based initiatives with modest funding e.g. Resident Welfare 
Associations. Such a network is usually dependent on pure voluntary action of 
Social Capital – A Shared Destiny Introduction
   s 
2
1.3 Theoretically, social capital organisations are supposed to play four crucial roles in 
society:
2
 
(i) The Service Role:- It encourages people to cope with a public problem at 
the primary level. People tend to let non-profit organisations lead the way in 
responding to critical public needs. The non-profit sector thus functions as a 
first line of defense, a flexible mechanism through which people concerned 
about a social or economic problem can begin to respond, without having to 
convince a majority of their fellow citizens that the problem deserves a more 
general, government response. Non-profit organisations are also available to 
sub-groups of the population who desire a range of public goods that exceeds 
what the government or society is willing to support. Non-profit organisations 
have a readymade role in planning hospitals, universities, social service agencies 
and civil organisations.
(ii)  The Value Guardian Role:- The role of the non-profit sector is to function as a 
“value guardian” in society, as exemplar and as embodiment of a fundamental 
value emphasizing individual initiative for the public good just as private 
economic enterprises serve as vehicles for promoting individual initiative for 
the private good. In the process, non-profit bodies foster pluralism, diversity 
and freedom. These values go much beyond purposes such as improving health 
or enhancing school enrolment. They are important as expressions of what has 
come to be regarded as a central feature of modern society – a sphere of private 
action through which individuals can take initiative, express their individuality, 
and exercise freedom of expression and action. 
(iii)  The Advocacy/Social Safety-Valve Role:- Non-profit organisations also play a 
vital role in mobilizing public attention to societal problems and needs. They 
are the principal vehicle through which communities can give voice to their 
concerns. In fact, most of the social movements that have animated western 
society over the past century – the movement for women’s suffrage, protection 
of civil rights and the initiative to protect environment, all took shape within 
the non-profit sector. By highlighting social and political concerns, by giving 
voice to under-represented people and by integrating these perspectives into 
social and political life, these organisations function as a kind of safety-valve that 
helps to preserve democracy and maintain a degree of peace in the contemporary 
polity and society. 
(iv) The Community Building Role:- Finally, non-profit organisations play a vital 
role in creating and sustaining social cohesiveness through bonds of trust 
and reciprocity that seem to be pivotal for a democratic society and a market 
economy to function effectively. 
1.4 There are several ways in which social capital can improve government performance. 
First, it can broaden government accountability; government must be responsive to citizens 
at large rather than to narrow sectarian interests. Secondly, it can facilitate agreement where 
political preferences are polarized. Thirdly, it induces innovation in policymaking. Finally, it 
enhances the efficiency of delivery of many services at the local level through involvement 
of residents. 
1.5 Accountability of the government is the most important means by which social capital 
influences performance. Trust and civic minded attitudes can improve governmental 
performance by affecting the level and character of political participation, reducing “rent-
seeking” and enhancing public-interested behaviour. 
1.6 Social capital can bring convergence among different players on important issues. 
Political leaders in the developed regions are more willing to compromise with the views 
of opponents. Where trust and norms of reciprocity are stronger, opposing sides are more 
likely to sit together and resolve their disputes. On the other hand, where fewer citizens are 
motivated by a sense of civic obligation to stay informed and to participate in political life, 
the chances of a dispute settlement between two opposite sides become weak.
1.7 Social capital also leads to greater innovation and flexibility in policymaking. The more 
civic regions are far more successful than the less civic regions in responding to problems 
and challenges of the community and the State. 
1.8 Public service delivery can be efficiently administered, if social network groups are in 
operation and they mobilise people around common issues. Women’s Self-Help Groups / 
Micro-Credit Institutions in Andhra Pradesh and Tamil Nadu and Kudumbashri in Kerala 
are fine examples of collective participation which have led to better implementation of 
development programmes in these States. 
1.9 In concrete terms, the growth of social capital leads to evolution of a healthy civil society 
manifesting as a distinct entity in the space between public sector (government) and the 
business (markets) – often called the third sector or non-profit sector. Depending on the 
strength and vivacity of civil society, third sector organisations can assume the following 
four major forms:-
(a) Small community based initiatives with modest funding e.g. Resident Welfare 
Associations. Such a network is usually dependent on pure voluntary action of 
Social Capital – A Shared Destiny Introduction
2
NON-PROFIT ORGANIZATIONS: AMERICA’S INVISIBLE SECTOR - Lester M. Salamon, Center for Civil Society Studies, Johns Hopkins 
University
the group. But, if the group seeks to expand its activities, it will need external 
financial support. 
(b) Large structured groups with well defined organisational patterns and goals. 
They do not have an apparent profit motive, but generally work on financially 
sustainable basis. Such an organisation does have a financial base of its own, 
but often gets considerable support from external agencies as well e.g. Societies, 
T rusts, and Waqfs.
(c) There is a third category which is in business, but for certain well defined social 
objectives. In such organisations, surpluses are ploughed back and reinvested 
in the activity itself. They may need to interact with the government also e.g. 
Cooperatives.
(d) The fourth set of social capital institutions are regulatory professional groups/ 
associations consisting of qualified people who join together to run their 
profession in accordance with certain laid down principles and policies e.g. 
the Bar Council of India and the Institute of Chartered Accountants.
1.10 Though, social capital as an element of human entrepreneurship came into focus in the 
western world only during the last two decades, cohesiveness and community institutions 
have been part of life and culture in our country right from the early days of Indian 
civilisation. The archeological remains at Mohenjodaro and Harappa indicate existence of 
an advanced form of community life where people were linked extensively both socially as 
well economically with one another. The management of village commons, streets, irrigation 
tanks, ponds etc. was based primarily on a spirit of cooperation and mutual assistance. 
The Maurya and Gupta empires saw emergence of effective community organisations in 
the form of Sabhas and Village Councils, where local citizens could sort out many of their 
problems through mutual understanding and consultation. In the far South, it was the 
Sangam era lasting for about seven centuries between 200 BC to 500 AD when the first 
signs of organised inter-community and intra-community systems and the concept of 
State sector appeared. During the later periods, under the rule of the Chalukyas, Pallavas, 
Cholas and Pandyas, merchants, artisans and peasants jointly participated in the activities 
of the ‘nadu’ and ‘periyanadu’ and created new community and social formations that were 
explicitly visible till as late as the 15th century under the Vijayanagar rule. 
1.10.1 Through the rise and fall of empires, this environment of mutual interaction and 
cooperative behaviour continued and to a large extent it may be given the credit of sowing 
the seeds of social and cultural nationalism across the sub-continent. 
5
1.11 In its terms of reference pertaining to (TOR No. 8) “Social Capital, Trust and 
Participative public service delivery”, the Commission has been specifically required to 
look into the following:
a) Ways of investing and promoting social capital at all levels of government as 
an instrument of enhancing governmental effectiveness.
b) Improve and strengthen the capability of the administration to proactively 
partner with local community, particularly in remote areas.
c) Better synergy between the government and the Civil Society Institutions.
d) Increase the people-centric ness of the administrative approaches.
e) Ensuring greater involvement of people’s representatives and community at 
large in the conceptualisation and execution of programmes.
1.12 The Commission has examined items (a), (b) and (c) in considerable detail in this Report. 
All forms of social capital institutions which are currently in existence on the basis of either 
State enactments or Union laws have been discussed in the context of their institutional design, 
regulatory environment and their interface with the government. Chapter 3 of this Report 
deals with issues concerning Societies and T rusts. The Commission has suggested drafting of 
a model law which could be enacted by the State Governments with minor modifications. 
The Report also suggests some changes with regard to registration and exemption of these 
Bodies under various provisions of the Income Tax Act. The Commission has also examined 
the Foreign Contribution Regulation Act (FCRA), 1976 and the Foreign Contribution 
Regulation Bill, 2006 in detail and has suggested amendments in the latter. One of the key 
recommendations stipulates that organisations receiving foreign contribution equivalent to less 
than Rs.10.0 lakh in a year (the figure to be reviewed from time to time) should be exempt 
from registration and other reporting requirements. The organisations, instead, should be 
asked to file an annual return of foreign contributions received by them and its utilisation at 
the end of the year. This step will allow the authorities to concentrate more on organisations 
receiving larger foreign funding. It is also proposed in this Chapter that there is need to set up 
an independent accreditation agency for the voluntary sector. Chapter 4 of the Report deals 
with the growth and expansion of SHG (Self-Help Group) movement in India. Here the 
Commission recommends stepping up efforts to form more and more such groups in the less 
financially included areas. It has to be accompanied by suitable expansion of the NABARD 
network. The Commission has also taken note of the sentiments expressed by various civil 
society/stakeholders groups on the Micro-Financial Sector (Development and Regulation) 
Bill, 2007 and suggests that there is need to modify some of its provisions. Chapter 5 of the 
Introduction Social Capital – A Shared Destiny
Page 5


1
INTRODUCTION
1.1 Collective efforts and cooperative action have been a part of human behaviour right 
from the early days of civilisation. Gradually such collective action led to formation of 
small habitations, communities, villages and thereafter large cities and metropolises.  
They in turn, created complex social groups and governmental organisations. In course 
of time, government and society became too big and formalized and somewhat distant 
from the common man. Thus evolved a need for mutual networking and interaction for 
solution of issues.
1.2 The term ‘Social Capital’ was first used by L.J. Hanifan, a State Supervisor for Rural 
Schools in Virginia in 1916. He used it in the context of the community’s involvement in  
the successful running of schools.
1
 As a concept, it received entry in social science literature 
in the 1980s. Soon it assumed an economic connotation and came to be accepted as a factor 
of production in the development theory. It refers to those institutions, relationships, and 
norms that shape the quality and quantity of a society’s interaction. It consists of trust, 
mutual understanding, shared values and behaviour that bind together the members of a 
community and make cooperative action possible. The basic premise is that such interaction 
enables people to build communities, to commit themselves to each other, and to knit the 
social fabric. A sense of belonging and the concrete experience of social networking (and 
the relationships of trust and tolerance that evolve) can bring great benefits to people. 
Social capital now stands accepted as a necessary element of development theory. In many 
cases it provides a cogent explanation for the failure of economic policies. The notion that 
a set of macro-economic policies supported by appropriate institutions would necessarily 
transform an economy often does not work in actual practice. Policies and institutions 
operate in an ensemble which is strongly conditioned by sociological parameters. Socio-
cultural elements influence political and economic factors to behave in ways that considerably 
change the pace of  the economic processes. Social Capital and T rust are elements of cohesion 
in society and entrepreneurship and are vital for setting in processes that expand social, 
economic and political opportunities. They lead to formation of specialised groups and 
organisations generally known as Social Capital Institutions or the third Sector.
xviii
SCBs State Cooperative Banks 
SCs Scheduled Castes
SERP Society for Elimination of Rural Poverty
SEWA Self Employed Women’s Association
SFMC SIDBI Foundation for Micro Credit
SGSY  Swarna Jayanti Gram Swarojgar Yojana 
SHG Self-Help Group
SHPI Self-Help Promoting Institution
SIDA  Swedish International Development Cooperation Agency
SIDBI  Small Industries Development Bank of India
SKS Swayam Krishi Sangam
SME Small and Medium Enterprise
SRFS Sanghamitra Rural Finance Services
STCCS  Short-term Rural Cooperative Credit Structure
STs Scheduled T ribes
SUDA State Urban Development Agency
TANWA Tamilnadu Women in Agriculture Programme
TNWDP Tamilnadu Women’s Development Project 
TSOs Third Sector Organisations
UK United Kingdom
USA United States of America
VO Voluntary Organisation
WTO World T rade Organisation
3
1.3 Theoretically, social capital organisations are supposed to play four crucial roles in 
society:
2
 
(i) The Service Role:- It encourages people to cope with a public problem at 
the primary level. People tend to let non-profit organisations lead the way in 
responding to critical public needs. The non-profit sector thus functions as a 
first line of defense, a flexible mechanism through which people concerned 
about a social or economic problem can begin to respond, without having to 
convince a majority of their fellow citizens that the problem deserves a more 
general, government response. Non-profit organisations are also available to 
sub-groups of the population who desire a range of public goods that exceeds 
what the government or society is willing to support. Non-profit organisations 
have a readymade role in planning hospitals, universities, social service agencies 
and civil organisations.
(ii)  The Value Guardian Role:- The role of the non-profit sector is to function as a 
“value guardian” in society, as exemplar and as embodiment of a fundamental 
value emphasizing individual initiative for the public good just as private 
economic enterprises serve as vehicles for promoting individual initiative for 
the private good. In the process, non-profit bodies foster pluralism, diversity 
and freedom. These values go much beyond purposes such as improving health 
or enhancing school enrolment. They are important as expressions of what has 
come to be regarded as a central feature of modern society – a sphere of private 
action through which individuals can take initiative, express their individuality, 
and exercise freedom of expression and action. 
(iii)  The Advocacy/Social Safety-Valve Role:- Non-profit organisations also play a 
vital role in mobilizing public attention to societal problems and needs. They 
are the principal vehicle through which communities can give voice to their 
concerns. In fact, most of the social movements that have animated western 
society over the past century – the movement for women’s suffrage, protection 
of civil rights and the initiative to protect environment, all took shape within 
the non-profit sector. By highlighting social and political concerns, by giving 
voice to under-represented people and by integrating these perspectives into 
social and political life, these organisations function as a kind of safety-valve that 
helps to preserve democracy and maintain a degree of peace in the contemporary 
polity and society. 
(iv) The Community Building Role:- Finally, non-profit organisations play a vital 
role in creating and sustaining social cohesiveness through bonds of trust 
and reciprocity that seem to be pivotal for a democratic society and a market 
economy to function effectively. 
1.4 There are several ways in which social capital can improve government performance. 
First, it can broaden government accountability; government must be responsive to citizens 
at large rather than to narrow sectarian interests. Secondly, it can facilitate agreement where 
political preferences are polarized. Thirdly, it induces innovation in policymaking. Finally, it 
enhances the efficiency of delivery of many services at the local level through involvement 
of residents. 
1.5 Accountability of the government is the most important means by which social capital 
influences performance. Trust and civic minded attitudes can improve governmental 
performance by affecting the level and character of political participation, reducing “rent-
seeking” and enhancing public-interested behaviour. 
1.6 Social capital can bring convergence among different players on important issues. 
Political leaders in the developed regions are more willing to compromise with the views 
of opponents. Where trust and norms of reciprocity are stronger, opposing sides are more 
likely to sit together and resolve their disputes. On the other hand, where fewer citizens are 
motivated by a sense of civic obligation to stay informed and to participate in political life, 
the chances of a dispute settlement between two opposite sides become weak.
1.7 Social capital also leads to greater innovation and flexibility in policymaking. The more 
civic regions are far more successful than the less civic regions in responding to problems 
and challenges of the community and the State. 
1.8 Public service delivery can be efficiently administered, if social network groups are in 
operation and they mobilise people around common issues. Women’s Self-Help Groups / 
Micro-Credit Institutions in Andhra Pradesh and Tamil Nadu and Kudumbashri in Kerala 
are fine examples of collective participation which have led to better implementation of 
development programmes in these States. 
1.9 In concrete terms, the growth of social capital leads to evolution of a healthy civil society 
manifesting as a distinct entity in the space between public sector (government) and the 
business (markets) – often called the third sector or non-profit sector. Depending on the 
strength and vivacity of civil society, third sector organisations can assume the following 
four major forms:-
(a) Small community based initiatives with modest funding e.g. Resident Welfare 
Associations. Such a network is usually dependent on pure voluntary action of 
Social Capital – A Shared Destiny Introduction
   s 
2
1.3 Theoretically, social capital organisations are supposed to play four crucial roles in 
society:
2
 
(i) The Service Role:- It encourages people to cope with a public problem at 
the primary level. People tend to let non-profit organisations lead the way in 
responding to critical public needs. The non-profit sector thus functions as a 
first line of defense, a flexible mechanism through which people concerned 
about a social or economic problem can begin to respond, without having to 
convince a majority of their fellow citizens that the problem deserves a more 
general, government response. Non-profit organisations are also available to 
sub-groups of the population who desire a range of public goods that exceeds 
what the government or society is willing to support. Non-profit organisations 
have a readymade role in planning hospitals, universities, social service agencies 
and civil organisations.
(ii)  The Value Guardian Role:- The role of the non-profit sector is to function as a 
“value guardian” in society, as exemplar and as embodiment of a fundamental 
value emphasizing individual initiative for the public good just as private 
economic enterprises serve as vehicles for promoting individual initiative for 
the private good. In the process, non-profit bodies foster pluralism, diversity 
and freedom. These values go much beyond purposes such as improving health 
or enhancing school enrolment. They are important as expressions of what has 
come to be regarded as a central feature of modern society – a sphere of private 
action through which individuals can take initiative, express their individuality, 
and exercise freedom of expression and action. 
(iii)  The Advocacy/Social Safety-Valve Role:- Non-profit organisations also play a 
vital role in mobilizing public attention to societal problems and needs. They 
are the principal vehicle through which communities can give voice to their 
concerns. In fact, most of the social movements that have animated western 
society over the past century – the movement for women’s suffrage, protection 
of civil rights and the initiative to protect environment, all took shape within 
the non-profit sector. By highlighting social and political concerns, by giving 
voice to under-represented people and by integrating these perspectives into 
social and political life, these organisations function as a kind of safety-valve that 
helps to preserve democracy and maintain a degree of peace in the contemporary 
polity and society. 
(iv) The Community Building Role:- Finally, non-profit organisations play a vital 
role in creating and sustaining social cohesiveness through bonds of trust 
and reciprocity that seem to be pivotal for a democratic society and a market 
economy to function effectively. 
1.4 There are several ways in which social capital can improve government performance. 
First, it can broaden government accountability; government must be responsive to citizens 
at large rather than to narrow sectarian interests. Secondly, it can facilitate agreement where 
political preferences are polarized. Thirdly, it induces innovation in policymaking. Finally, it 
enhances the efficiency of delivery of many services at the local level through involvement 
of residents. 
1.5 Accountability of the government is the most important means by which social capital 
influences performance. Trust and civic minded attitudes can improve governmental 
performance by affecting the level and character of political participation, reducing “rent-
seeking” and enhancing public-interested behaviour. 
1.6 Social capital can bring convergence among different players on important issues. 
Political leaders in the developed regions are more willing to compromise with the views 
of opponents. Where trust and norms of reciprocity are stronger, opposing sides are more 
likely to sit together and resolve their disputes. On the other hand, where fewer citizens are 
motivated by a sense of civic obligation to stay informed and to participate in political life, 
the chances of a dispute settlement between two opposite sides become weak.
1.7 Social capital also leads to greater innovation and flexibility in policymaking. The more 
civic regions are far more successful than the less civic regions in responding to problems 
and challenges of the community and the State. 
1.8 Public service delivery can be efficiently administered, if social network groups are in 
operation and they mobilise people around common issues. Women’s Self-Help Groups / 
Micro-Credit Institutions in Andhra Pradesh and Tamil Nadu and Kudumbashri in Kerala 
are fine examples of collective participation which have led to better implementation of 
development programmes in these States. 
1.9 In concrete terms, the growth of social capital leads to evolution of a healthy civil society 
manifesting as a distinct entity in the space between public sector (government) and the 
business (markets) – often called the third sector or non-profit sector. Depending on the 
strength and vivacity of civil society, third sector organisations can assume the following 
four major forms:-
(a) Small community based initiatives with modest funding e.g. Resident Welfare 
Associations. Such a network is usually dependent on pure voluntary action of 
Social Capital – A Shared Destiny Introduction
2
NON-PROFIT ORGANIZATIONS: AMERICA’S INVISIBLE SECTOR - Lester M. Salamon, Center for Civil Society Studies, Johns Hopkins 
University
the group. But, if the group seeks to expand its activities, it will need external 
financial support. 
(b) Large structured groups with well defined organisational patterns and goals. 
They do not have an apparent profit motive, but generally work on financially 
sustainable basis. Such an organisation does have a financial base of its own, 
but often gets considerable support from external agencies as well e.g. Societies, 
T rusts, and Waqfs.
(c) There is a third category which is in business, but for certain well defined social 
objectives. In such organisations, surpluses are ploughed back and reinvested 
in the activity itself. They may need to interact with the government also e.g. 
Cooperatives.
(d) The fourth set of social capital institutions are regulatory professional groups/ 
associations consisting of qualified people who join together to run their 
profession in accordance with certain laid down principles and policies e.g. 
the Bar Council of India and the Institute of Chartered Accountants.
1.10 Though, social capital as an element of human entrepreneurship came into focus in the 
western world only during the last two decades, cohesiveness and community institutions 
have been part of life and culture in our country right from the early days of Indian 
civilisation. The archeological remains at Mohenjodaro and Harappa indicate existence of 
an advanced form of community life where people were linked extensively both socially as 
well economically with one another. The management of village commons, streets, irrigation 
tanks, ponds etc. was based primarily on a spirit of cooperation and mutual assistance. 
The Maurya and Gupta empires saw emergence of effective community organisations in 
the form of Sabhas and Village Councils, where local citizens could sort out many of their 
problems through mutual understanding and consultation. In the far South, it was the 
Sangam era lasting for about seven centuries between 200 BC to 500 AD when the first 
signs of organised inter-community and intra-community systems and the concept of 
State sector appeared. During the later periods, under the rule of the Chalukyas, Pallavas, 
Cholas and Pandyas, merchants, artisans and peasants jointly participated in the activities 
of the ‘nadu’ and ‘periyanadu’ and created new community and social formations that were 
explicitly visible till as late as the 15th century under the Vijayanagar rule. 
1.10.1 Through the rise and fall of empires, this environment of mutual interaction and 
cooperative behaviour continued and to a large extent it may be given the credit of sowing 
the seeds of social and cultural nationalism across the sub-continent. 
5
1.11 In its terms of reference pertaining to (TOR No. 8) “Social Capital, Trust and 
Participative public service delivery”, the Commission has been specifically required to 
look into the following:
a) Ways of investing and promoting social capital at all levels of government as 
an instrument of enhancing governmental effectiveness.
b) Improve and strengthen the capability of the administration to proactively 
partner with local community, particularly in remote areas.
c) Better synergy between the government and the Civil Society Institutions.
d) Increase the people-centric ness of the administrative approaches.
e) Ensuring greater involvement of people’s representatives and community at 
large in the conceptualisation and execution of programmes.
1.12 The Commission has examined items (a), (b) and (c) in considerable detail in this Report. 
All forms of social capital institutions which are currently in existence on the basis of either 
State enactments or Union laws have been discussed in the context of their institutional design, 
regulatory environment and their interface with the government. Chapter 3 of this Report 
deals with issues concerning Societies and T rusts. The Commission has suggested drafting of 
a model law which could be enacted by the State Governments with minor modifications. 
The Report also suggests some changes with regard to registration and exemption of these 
Bodies under various provisions of the Income Tax Act. The Commission has also examined 
the Foreign Contribution Regulation Act (FCRA), 1976 and the Foreign Contribution 
Regulation Bill, 2006 in detail and has suggested amendments in the latter. One of the key 
recommendations stipulates that organisations receiving foreign contribution equivalent to less 
than Rs.10.0 lakh in a year (the figure to be reviewed from time to time) should be exempt 
from registration and other reporting requirements. The organisations, instead, should be 
asked to file an annual return of foreign contributions received by them and its utilisation at 
the end of the year. This step will allow the authorities to concentrate more on organisations 
receiving larger foreign funding. It is also proposed in this Chapter that there is need to set up 
an independent accreditation agency for the voluntary sector. Chapter 4 of the Report deals 
with the growth and expansion of SHG (Self-Help Group) movement in India. Here the 
Commission recommends stepping up efforts to form more and more such groups in the less 
financially included areas. It has to be accompanied by suitable expansion of the NABARD 
network. The Commission has also taken note of the sentiments expressed by various civil 
society/stakeholders groups on the Micro-Financial Sector (Development and Regulation) 
Bill, 2007 and suggests that there is need to modify some of its provisions. Chapter 5 of the 
Introduction Social Capital – A Shared Destiny
the group. But, if the group seeks to expand its activities, it will need external 
financial support. 
(b) Large structured groups with well defined organisational patterns and goals. 
They do not have an apparent profit motive, but generally work on financially 
sustainable basis. Such an organisation does have a financial base of its own, 
but often gets considerable support from external agencies as well e.g. Societies, 
T rusts, and Waqfs.
(c) There is a third category which is in business, but for certain well defined social 
objectives. In such organisations, surpluses are ploughed back and reinvested 
in the activity itself. They may need to interact with the government also e.g. 
Cooperatives.
(d) The fourth set of social capital institutions are regulatory professional groups/ 
associations consisting of qualified people who join together to run their 
profession in accordance with certain laid down principles and policies e.g. 
the Bar Council of India and the Institute of Chartered Accountants.
1.10 Though, social capital as an element of human entrepreneurship came into focus in the 
western world only during the last two decades, cohesiveness and community institutions 
have been part of life and culture in our country right from the early days of Indian 
civilisation. The archeological remains at Mohenjodaro and Harappa indicate existence of 
an advanced form of community life where people were linked extensively both socially as 
well economically with one another. The management of village commons, streets, irrigation 
tanks, ponds etc. was based primarily on a spirit of cooperation and mutual assistance. 
The Maurya and Gupta empires saw emergence of effective community organisations in 
the form of Sabhas and Village Councils, where local citizens could sort out many of their 
problems through mutual understanding and consultation. In the far South, it was the 
Sangam era lasting for about seven centuries between 200 BC to 500 AD when the first 
signs of organised inter-community and intra-community systems and the concept of 
State sector appeared. During the later periods, under the rule of the Chalukyas, Pallavas, 
Cholas and Pandyas, merchants, artisans and peasants jointly participated in the activities 
of the ‘nadu’ and ‘periyanadu’ and created new community and social formations that were 
explicitly visible till as late as the 15th century under the Vijayanagar rule. 
1.10.1 Through the rise and fall of empires, this environment of mutual interaction and 
cooperative behaviour continued and to a large extent it may be given the credit of sowing 
the seeds of social and cultural nationalism across the sub-continent. 
4
1.11 In its terms of reference pertaining to (TOR No. 8) “Social Capital, Trust and 
Participative public service delivery”, the Commission has been specifically required to 
look into the following:
a) Ways of investing and promoting social capital at all levels of government as 
an instrument of enhancing governmental effectiveness.
b) Improve and strengthen the capability of the administration to proactively 
partner with local community, particularly in remote areas.
c) Better synergy between the government and the Civil Society Institutions.
d) Increase the people-centric ness of the administrative approaches.
e) Ensuring greater involvement of people’s representatives and community at 
large in the conceptualisation and execution of programmes.
1.12 The Commission has examined items (a), (b) and (c) in considerable detail in this Report. 
All forms of social capital institutions which are currently in existence on the basis of either 
State enactments or Union laws have been discussed in the context of their institutional design, 
regulatory environment and their interface with the government. Chapter 3 of this Report 
deals with issues concerning Societies and T rusts. The Commission has suggested drafting of 
a model law which could be enacted by the State Governments with minor modifications. 
The Report also suggests some changes with regard to registration and exemption of these 
Bodies under various provisions of the Income Tax Act. The Commission has also examined 
the Foreign Contribution Regulation Act (FCRA), 1976 and the Foreign Contribution 
Regulation Bill, 2006 in detail and has suggested amendments in the latter. One of the key 
recommendations stipulates that organisations receiving foreign contribution equivalent to less 
than Rs.10.0 lakh in a year (the figure to be reviewed from time to time) should be exempt 
from registration and other reporting requirements. The organisations, instead, should be 
asked to file an annual return of foreign contributions received by them and its utilisation at 
the end of the year. This step will allow the authorities to concentrate more on organisations 
receiving larger foreign funding. It is also proposed in this Chapter that there is need to set up 
an independent accreditation agency for the voluntary sector. Chapter 4 of the Report deals 
with the growth and expansion of SHG (Self-Help Group) movement in India. Here the 
Commission recommends stepping up efforts to form more and more such groups in the less 
financially included areas. It has to be accompanied by suitable expansion of the NABARD 
network. The Commission has also taken note of the sentiments expressed by various civil 
society/stakeholders groups on the Micro-Financial Sector (Development and Regulation) 
Bill, 2007 and suggests that there is need to modify some of its provisions. Chapter 5 of the 
Introduction Social Capital – A Shared Destiny