Wherever we may be in other matters in global rankings, in one we are right at the top. India, where 800 million people are still dependent on government doles for a meal, has the dubious distinction of carrying out the most expensive democratic elections in the world. It has been estimated that the 2019 parliamentary elections cost US $2 billion. In addition, parties and individual candidates spent another US $5 billion. It is likely that in the national election due in 2024, these amounts will double.
The nexus between unaccounted money and politics is a malignancy at the very core of our democratic process. It is the beej or seed of all corruption in India. If those who are supposed to make laws against corruption are the products of a corrupt system, how can the rest of the society be clean? When parties take money in cash, or through "electoral bonds" from publicly unidentified donors, they work, irrespective of merit, to reward these 'generous' worthies. When candidates illegally spend many times the prescribed limit on elections, their priority is to milk the state to recoup their "investment".
The tragedy is that all political parties are aware of this malaise, but happily collude in perpetuating it. No law since our Independence in 1947 has been enacted to successfully eliminate this scourge. But the rapid pace of digitisation now presents an opportunity to do so. For this, however, the deceits of the past have to be jettisoned, and a new system of transparent and accountable funding introduced.
First, the deceit. PM Narendra Modi's demonetisation decision in 2016 was meant to eliminate black money in the economy. Apart from causing untold miseries for the common citizen, the ill-prepared move derailed the economy and, by some estimates, reduced our GDP growth by as much as two per cent. It failed simply because the rich and powerful, who had the overwhelming bulk of the black money, found enough ways to convert it into white. But revealingly, in the 2018 Budget, the government brought in the scheme of electoral bonds, which allowed white money to be used for the same nefarious purpose of providing political parties with unaccountable money.
It is important to understand how this works. The electoral bond scheme allowed individuals, associations and corporates to donate money to political parties through time-limited electoral bonds issued by a bank. A year earlier, the government had amended the rules for cash donations by lowering the ceiling from Rs 20,000 to Rs 2,000 for unidentified cash donors. The facade for electoral reform was thus duly created.
In reality, what these purported 'reforms' did was to just allow donors a legitimate channel to anonymously provide the same unlimited opaque funding to political parties. This was done through two last-minute amendments to the electoral bond scheme. The first abolished the provision for firms to declare their political donations in their annual profit and loss statements. This deliberate veil of anonymity ensured that no citizen could ever know which business entity gave how much to which political party.
The second amendment removed the earlier cap on corporate political funding of 7.5 per cent of a company's average net profit over the previous three years. Earlier, the government had retrospectively amended the Foreign Contribution Regulation Act of 2010. Under the previous law, only those foreign firms could contribute to a political party whose majority ownership was Indian. Now this bar was removed.
The net impact of this sleight of hand was that rich donors could, through legitimate banking channels, contribute in cozy anonymity unlimited sums to a political party without anyone except the beneficiary being wiser about this - and richer. The veneer of 'legitimacy' was mind boggling in the scale of its deception. Nothing really changed. Instead of passing cash under the table, the only difference was that unlimited amounts could still be paid to political parties through banking channels fully preserving the donor's anonymity and without any public disclosure. The donor-politician nexus was intact. Ordinary citizens had no right to know what had transpired between them. The beneficiary would know who had opened the purse strings for it, and dispose "favours" accordingly. The donor, without any public scrutiny, could expect to extract from the government the same "special" treatment, which he would otherwise have got through payments in cash. The entire so-called reform was entirely shrouded in secrecy, thus preserving the old corrupt system in the garb of the new.
It is imperative that before the 2024 national elections India has a new system in place for transparent political funding.
The matter of the legality of electoral bonds has long been pending before the Supreme Court. No one can deny that political parties in any democracy need funds, and these are often more than the mandatory amounts registered party workers may have to pay. The challenge is to have a system in place which takes into account this need, but effectively breaks the nexus between unaccountable money and politics.
It is here that the rapid digitisation we have witnessed in recent years can play a crucial role. What we need is a system where a donation of even one rupee is made only digitally and can, therefore, be transparently accounted for. A successful pilot of this kind of funding exists in Bernie Sander's system of digitally transparent crowd funding. The US Democratic Party's Presidential candidate in the 2016 and 2020 elections shunned mega donors and appealed for small denomination donors whose contributions were made digitally, could be tracked, and were fully accounted for. Backed by a professional digital team, he succeeded spectacularly, raising over US 200 million through small (average $27) online donations by citizens.
We need such a system in India, where all political contributions are in the public realm on a website, to preserve our democratic credentials, and root out the pernicious nexus between money bags and politics, especially since there is no reason why it can't be done. Why should, in today's digital age, even donations of Rs 2,000 be unaccounted for?
What this urgent political reform requires is political will. Will our political system, for the sake of future generations, be willing to change?
Pavan K. Varma is author, diplomat and former member of parliament (Rajya Sabha).
Disclaimer: These are the personal opinions of the author.