Majority Matters: The Issue Of Election Funding In India 

This year is a very crucial year for the global economy and the overall socio-economic equilibrium of the world. Along with a few other significant economies, India-the mother of democracy and the world’s most populous country is going to polls.  Earlier in the month of February 2024, the Supreme Court of India made a significant judgment declaring Electoral Bonds in India as unconstitutional. It is a very crucial judgment that should open the doors for further reforms in political funding and controlling any form of crony capitalism.

So, what is an Electoral Bond and why is it so significant in the fairness of an electoral outcome? In 2017, the then central government introduced a new instrument called an ‘Electoral Bond’, issued by the Reserve Bank of India, which could be bought and deposited in the account of a political party without disclosing the donor’s identity. This seven-year-old election funding system allows individuals and companies to make unlimited and anonymous donations to political parties (Reuters, 2024).

In my recently published book Outlast: How ESG Can Benefit Your Business (Harper Collins, 2021), co-authored with Dr. Mukund Rajan(A Rhodes Scholar who has served as the first Brand Custodian, Chief Ethics Officer, Chairman of the Global Sustainability Council of India's largest corporate house- the Tata Group),we had covered the issue of Election Funding in India.

We stated that while personal enrichment is certainly one objective of corrupt politicians, the most important benefit - and something that many commentators have argued is the fountainhead of corruption in India - is the transmission of funds to the coffers of political parties to fund their election battles. We brought out why Governments must urgently address the corrupting role of big money in political party financing and the undue influence it exerts on our political systems.

We highlighted how the party in government is very likely to receive the majority of corporate funds transferred through Electoral Bonds, given the vast powers of government to influence corporate behaviors, outlined earlier. This is exactly what has transpired, with the ruling party at the center accounting for around 90% of the funds transferred by Indian corporates through Electoral Bonds. According to a recent estimate, a total of 18,299 electoral bonds equivalent to a monetary value of ₹9,857 crore (approximately USD 119 million), were successfully transacted during the period spanning from March 2018 to April 2022, 93% of these were purchased in the denomination of Rs 1 crore (USD Approximately USD 120,500), suggesting these were primarily purchased by corporates. 

We argued for reforms in political finance and cited how as many as 116 countries have introduced direct public funding to political parties. A majority of European countries (86 per cent) provide state subsidies to political parties, with Germany and the UK being the leading examples.

We reiterated that until the key question of transparency in election funding is addressed, it is likely that many businesses in India, certainly the larger and more dominant ones that tend to be more visible, will feel compelled to make their own peace with political parties and, in particular, the ruling dispensation of the day, to avoid facing difficulties in their operations. However, they will also run the gauntlet of judicial and media activism and must be prepared to face close public scrutiny of any actions that tantamount to corrupt practices.

These are a few points to ponder upon especially at this juncture when it is the matter of the future of billions of people whose lives will be impacted by who ascends to power and the policies developed by them.​​​

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