- Nithin Kamath questions India's mandatory 2% CSR spending effectiveness for social impact
- He argues businesses may lack expertise to identify projects with greatest long-term benefits
- Kamath suggests higher corporate tax could replace CSR mandate for better fund distribution
Zerodha founder Nithin Kamath has questioned whether India's mandatory 2% corporate social responsibility (CSR) spending is the most effective way to create social impact.
In a post on X, Kamath argued that businesses may not always have the expertise or long-term bandwidth needed to identify projects that deliver the greatest impact. Instead, companies could gravitate towards spending in areas where they operate, potentially contributing to the concentration of CSR funds in states such as Maharashtra, Gujarat and Delhi.
Is the mandatory 2% CSR (Corporate social responsibility) spend for companies really necessary, and is it the best way to create social impact?
— Nithin Kamath (@Nithin0dha) September 29, 2026
At @zerodha, we've allocated ~10% of our profits towards what we call "investing for the future," mostly through the @RainmatterOrg.… pic.twitter.com/aYjGJWGKnE
Kamath pointed to another concern: the focus on spending targets rather than outcomes.
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“Planting X lakh trees” may be an easy CSR metric to track, he said, but the bigger question is whether the trees are native species and survive for years. Similarly, constructing a school may be measurable, but the real outcome should be whether students are actually learning.
As an alternative to the 2% CSR mandate, Kamath floated a higher corporate tax rate.
“Maybe instead of a 2% CSR mandate, corporate tax could be 27% instead of 25%,” he said.
Under this approach, the additional tax revenue would be collected by the government and potentially allocated to areas where it can have greater social impact. Kamath suggested this could also distribute resources more evenly across the country, rather than tying CSR spending to the locations of profitable businesses.
At the same time, he acknowledged the obvious question: Would the government allocate the money any better?
Kamath also raised what he called the unintended consequence of the 2% figure, anchoring.
According to him, once companies are told to spend 2% of profits on CSR, that number can become the target rather than simply a minimum requirement. Companies that might otherwise spend 5% or 10% could end up treating 2% as sufficient.
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At Zerodha, Kamath said the company has allocated around 10% of its profits towards what it calls investing for the future, largely through Rainmatter.
For Kamath, the debate is therefore less about how much companies spend and more about what that money achieves.
“Spending for the sake of spending and investing for the future are two very different things,” he said.
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