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In this episode of @dilsewithkapilsibal, host Kapil Sibal discusses various facets and implications of the “crooked intent” of the BJP bringing in Electoral bonds. The data revelations are only the beginning. Investigations must follow, to rescue Indian democracy and restore probity in public life, which is at an all-time low. Where is this money coming from? Justice (retd) Madan Lokur, former judge of the Supreme Court, Sitaram Yechury, CPI(M) General Secretary, petitioner in the matter in court and economist Prof Arun Kumar discuss.
https://youtu.be/ipEK3jA6ohE?si=WEid9NK9Rj4CH5xY
India’s democratic model needs an overhaul so that elections are not an expensive affair. Only that can create a more just, transparent and efficient system, argues Prof. Arun Kumar.
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THE electoral bonds scheme has been declared unconstitutional. Various legislative and administrative amendments, implemented to facilitate the scheme, have also been declared unconstitutional. This is a victory for those opposing this scheme.
The government’s argument that the scheme was needed to help reduce the use of black money in elections has not been accepted on grounds of proportionality. The right to privacy of the donors has been held to be less important than the citizens’ right to information about the candidate for whom they were voting.
This is a rare judgment in the last few years that has gone against the establishment’s view. Judgments such as those on Aadhar, demonetisation and Article 370 sided with the establishment’s view even though the court did raise probing questions during the hearings.
Be that as it may, the electoral bonds case was of little consequence for the ruling establishment, even though it has huge significance for transparency and for conducting fair elections.
The government’s argument that the scheme was needed to help reduce the use of black money in elections has not been accepted on grounds of proportionality.
The court has ordered the revelation of names of the recipients and donors— which entity paid and which party received.
Since a vast majority of the bonds were of denomination ₹1 crore and above, these were bought by the rich to donate to their preferred party. The suspicion has been that these payments were bribes in white, to get favours.
There were donations to the opposition parties also but that is an investment in the future, in case a party comes to power. Even if it does not come to power, donations could ensure that the opposition raises inconvenient questions of the government.
The Order to reveal the names is likely to be resisted. An appeal against this could be filed. Attempts will be made to connect donations to the ruling party with favours granted. Donations to the opposition parties that are in power in one state or the other can also be so branded.
But, the ruling party at the Union level is the one that can grant big favours and it has received the vast majority of the bonds. How does all this link up to black money?
In India, huge sums of money are spent on fighting elections. These are way above the election expenditure limits set by the Election Commission of India (ECI), hence illegal.
If these are declared by the candidates, their election will be annulled. So all expenses above the election expenditure limit have to be funded illegally— by black funds.
Election expenditure limits are now ₹95 lakh and ₹70 lakh for a parliamentary constituency and ₹40 lakh and ₹28 lakh for assembly elections. Actual election expenditures are unofficially reported to be around ₹40 crore for a parliamentary constituency and ₹6 crore for an assembly constituency. The actual numbers for a parliamentary and assembly election are respectively 40 and 15 times the allowed limit.
The court has ordered the revelation of names of the recipients and donors— which entity paid and which party received.
The reason for the high expense by candidates is the need for high-power campaigns to overwhelm the citizens to stand a chance to win. Expenses are on maintaining vote banks, bribing voters in cash and kind, hiring workers and musclemen, paying for crowds for rallies and meetings, spending on cutouts and posters, paying media for coverage, etc., and disrupting the opponents’ campaign. These are all substitutes for a lack of adequate attention to constituencies.
Effectively, the expenditure of large sums in elections reflects the weakness of Indian democracy. The public votes for reasons other than the hard work and honesty of candidates.
Instead, candidates have to entice the voters with bribes of various kinds. Also, India is largely feudal, so the public is guided either by those in authority or by emotional issues and not by individual self-interest.
Finally, issues have become complex and the public’s understanding is minimal, which also prevents questioning of authorities. Many can be heard saying, ‘Voting for a losing candidate is wasting the vote.’
The consideration is not a better representation but who appears to be more likely to win irrespective of what they stand for.
Electoral bonds were donated to a political party and not a candidate. So the money went to the party. Since there is no limit on expenditure by a political party, it can get all it needs in white and spend it.
If a part of the donation was given to the candidates then the expenditure would be reduced to come under the ceiling set by the law. So the parties did not need to give the money raised through electoral bonds to the candidates and instead could spend it entirely on a general campaign, organised centrally.
The use of black funds in elections reinforces illegality in society and thereby undermines representation and democracy.
If all the money raised via the bonds was to be given to the candidates, then only ₹95 lakh per candidate could be given for a parliamentary constituency. So, for a parliamentary election, the party would at most need ₹513 crore. But the ruling party has been getting more than a thousand crore rupees per annum since 2019.
Obviously, the money received was used for other purposes, such as setting up offices, running them, logistics and social media cells.
Political parties also engineer defections, topple opposition governments and so on. This cannot be done via legitimate money and requires black money which is donated in cash by the backers of the party.
Also read: Electoral bonds: A landmark judgment in the direction of free and fair elections
This money cannot be shown on the balance sheet of the parties and cannot be caught in an audit of the accounts of the party or the candidates. The ECI cannot catch it.
Businesses in India know how to manipulate incomes and expenditures outside their balance sheets to generate black incomes. Under- and over-invoicing and hawala are used for these purposes.
These methods keep one step ahead of the changes the tax authorities make in the laws and rules with the help of income tax lawyers and chartered accountants. Such methods are also available to political parties and candidates for their financial accounting so that they do not get caught using black funds.
So, apart from the funds made available by the electoral bonds, the parties and the individual candidates continued to use black funds. Thus, the non-availability of funds from electoral bonds will hardly change the funding pattern of the parties and there will be no impact on individual candidates.
In brief, funds received via the electoral bonds were: a) In addition to the money received in black and, b) The amount received was small compared to the total requirement.
The use of black funds in elections reinforces illegality in society and thereby undermines representation and democracy. Parties and individual candidates who accept large sums of black money are indebted to the donors and do their bidding when they get into power.
Currently existing parties and candidates are unlikely to change, so new parties are needed that have dedicated workers.
This is the implicit and explicit understanding between the two parties. A nexus forms. Outwardly, parties and candidates make a show of wanting to curb the use of illegal funds but that is not the reality.
Also read: Electoral bonds: No solution to illegal political funding
Democracy gets diminished when people vote for the corrupt who largely appear at the time of elections and make promises that they do not deliver on once in power.
People do not get genuine representation from their representatives who serve the interests of a few powerful entities. But people are helpless since the candidates put up by the parties for elections are all similar— they are beholden to the vested interests and do their bidding once they come to power.
Politics will be cleaned up if the public does not get swayed by emotionalism, sectarianism, etc., and voted on objective factors impacting them.
Currently existing parties and candidates are unlikely to change, so new parties are needed that have dedicated workers. Citizens have to become politically savvy to look after their long-term interests.
Since this would undermine the current ruling parties, they will create impediments to the emergence of new parties and honest candidates. The entire State machinery is available to them to coerce and harass and defeat their opponents.
In brief, it is not that in a robust democracy, elections need to be expensive. It is in the imperfect democracy that prevails in India where accountability is weak that elections become expensive.
In such a situation, an instrumentality such as the electoral bonds adds to non-transparency without impacting the black economy or the use of black funds in elections.
Actually, to survive, the black economy needs to control politics so that dishonest parties and candidates come to power.
Neither its macroeconomics nor the sectoral allocations are such as to help either the poor or the economy to achieve new heights
The finance minister delivered a rousing speech trying to match the prime minister’s address at the consecration of Ram Mandir in Ayodhya on January 22. It promises to make India a developed nation by 2047 and a $7-trillion economy by 2030. It is said, the economy has done well in spite of the pandemic and the wars. Echoing the prime minister, she talked of benefiting the four ‘castes’ – poor, farmers, women and the youth.
Nirmala Sitharaman has followed through on the president’s address to the parliament, which listed the many achievements of the government in the last 10 years. But one thought that the budget, following the exhortation of the prime minister, would move towards establishment of Ram Rajya. So, it would chart a different path. It would present an honest picture of the economy and take steps to address the issues of poverty and uncivilised conditions of living of the vast majority of the citizens. Without these steps there can be no Ram Rajya.
So, what should the budget have contained? Big increase in allocations for employment and agriculture. That is what is needed by the youth, women and the farmers. It would have also mitigated poverty. The finance minister while announcing many things in the budget should have announced that henceforth workers will get a ‘living wage’ promised in the Constitution. For the farmers, the announcement should have been the implementation of the Swaminathan Commission promised full cost price MSP for all crops.
None of these critical steps were announced. Instead, vague promises have been made which cannot be achieved with the presently structured economy and the budget. Unemployment and poverty would persist so that the lot of the young and women is unlikely to improve.
In effect, the budget will not initiate the Ram Rajya promised by the prime minister just a week back. The first thing to do to move towards Ram Rajya is to be honest about data and one’s intentions. Neither of these are evident in the budget.
The macro aspects
If India is to become a $30-trillion economy in real terms by 2030, a real growth rate of 9.55% is required. Currently the average growth rate over the last 10 years has been about 6%. If this persists, India will only reach $14.1 trillion. The per capita income would also be only $9000, not the required $14,000 at which income a country is considered to be rich. So, why promise what is unlikely? It can only be for effect to get votes. That is not what maryada of the rulers should be.
To boost the economy’s average growth rate, there is need to tackle the macro constraints of the economy. The biggest constraint for a while has been the lack of adequate demand due to rising inequality and lack of purchasing power of the vast majority of Indians.
The budget could have been used to boost overall demand and also make it possible for the poor to have higher incomes through robust employment generation. On both these fronts the budget is lacking. Compared to last year, the overall expenditure is going to rise by only 6.1% which is barely above the rate of inflation, so that not much of a boost is going to come from this factor. The increase in expenditure should have been substantial. The primary deficit is also being sharply reduced from 2.3% to 1.5%. This will also reduce demand.
Regarding employment, capital intensive areas are being promoted not labour intensive ones. Even modern construction is highly capital intensive. What was needed was to boost MGNREGA, education, health and rural development spending, which are all big employers. No scheme for urban employment generation has been announced.
Sectoral aspects
The allocation in the last year’s budget for agriculture was Rs.1.44 lakh crore but what is spent is likely to be Rs.1.4 lakh crore. For the next year it is Rs.1.47 lakh crore which is barely 1.5% above the allocation currently. This will not even cover inflation so in real terms it will be less. So, even the inadequate allocation is not spent, so how can the farmers’ incomes improve?
The poor need education and health to upgrade themselves to be able to get better jobs/work. For education the allocation last year was Rs 1.16 lakh crore which was reduced to Rs 1.09 lakh crore and for next year it is slated to get Rs 1.25 lakh crore. For health the allocation last year was Rs 89,000 crore but what is spent is Rs 79,000 crore. For next year, the allocation is Rs 90,000 thousand crore. Not only are these inadequate compared to what is needed but even these allocations are not spent. One would have expected a quantum jump in the allocations to these sectors but this is not in evidence and even if allocations are made they are not fulfilled.
Also read: Budget 2024: How the Modi Government Has Neglected Social Security Pensions Once Again
Corruption and black economy
The finance minister has promised better governance which is so crucial for proper implementation and better outcomes from the schemes announced. In this regard, Transparency International has just released its report, pointing to India slipping in the rankings. Thus, better compliance is not in sight. That is why in India big announcements do not lead to big outcomes and/or improvements in the lot of the common persons.
For instance, a big scheme has been announced for installation of rooftop solar panels. Such a scheme has been ongoing for some time. Talking to those who install these devices, it becomes clear that the scheme is mired in corruption and non-implementation. So, how to get good intentions to fructify. The black economy has to be brought under control.
If the black economy had been checked in the last few years, as often claimed, direct tax to GDP ratio would have sharply risen. It has barely risen in the last 10 years to 6.1% from 5.7%. So, the black economy is not being dented by the steps taken by the government. No wonder there are daily reports of new cases of corruption. If the black economy could have been controlled, there would be more resources for development and the fiscal deficit would be eliminated. The economy would have become more efficient and growth rate would have risen further.
Conclusion
The optics of the budget presented is an election budget with big claims and promises on which the ruling party is going to campaign. Neither its macroeconomics nor the sectoral allocations are such as to help either the poor or the economy to achieve new heights. Is this not a slap on the face of the citizens who have been promised Ram Rajya, which stands for justice and honesty?
Arun Kumar retired as professor of economics, Jawaharlal Nehru University. He is the author of Understanding Black Economy and Black Money in India.
Source URL : https://thewire.in/economy/union-budget-2024-has-elections-and-not-ram-rajya-in-sight
How do donations via electoral bonds funded by legal or illegal money help curb undue influence on policy makers? Electoral bonds provide an additional of such funds.
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THE Union Government initiated the Electoral Bonds scheme, which was announced in the Union Budget 2017–18, on January 2, 2018. The aim was “to cleanse the system of political funding in the country”. While many other issues are also germane, the moot question is will this goal be achieved.
These are bearer bonds that private entities can buy from a designated bank (presently the State Bank of India) and donate them to a political party. They are supposedly an anonymous way of donating funds to political parties, since the identity of the donor is not disclosed. The bonds become available around the time of elections, presumably to provide ‘legitimate’ funds to political parties.
Data shows that most of the funds go to the ruling party and help them consolidate their hold over power.
To maintain anonymity of donations, the income tax department cannot investigate the donations, the Election Commission cannot ask for their details, and the public will not know who is donating. The then Election Commission was not in favour of such non-transparency. The Reserve Bank of India did not approve of such a scheme. In fact, neither of the two were consulted prior to the announcement of the scheme. In the Parliament, the Finance Minister had mentioned that people wanted anonymity but when asked through the Right to Information Act who these people were, there was no response.
Given the opacity of the bonds (for the public), a quid pro quo is possible between the ruling party and the donor for favours bestowed. In effect, it can be a bribe in white.
While the public and the Election Commission cannot find out who is donating to whom, the party in power can access this information. The bank issuing the bonds has a record of the entity donating and the party encashing the bond. Given that the bank managements are largely under the control of the Union Ministry of Finance, the information can be accessed by the ruling party.
Further, given the opacity of the bonds (for the public), a quid pro quo is possible between the ruling party and the donor for favours bestowed. In effect, it can be a bribe in white. Since there will be no investigation, the donated money could be illegal.
Given these asymmetries and the opacity, public spirited entities went to court against the scheme in 2018. Since then, the matter has been sub judice. The Supreme Court, in its wisdom, has refused to grant an interim stay on the scheme.
To fight Indian elections, whether for local bodies or state or national legislatures, much illegal funds are used. In a survey of 14 successful Parliamentarians in the 1998 Lok Sabha Elections, this author found that the average expenditure was eight times the allowed expenditure. This multiple has increased over time. The Parliamentarians interviewed added that the donors expected favours from them if they won.
Since any expenditure above the election expenditure limit is illegal, it has to be surreptitious. It cannot enter into the book of accounts, and has to be from illegal sources/black incomes. The Election Commission’s checking during elections has made little dent.
The quid pro quo results in subversion of policies and marginalisation of the common voters, who usually receive a bribe to vote for certain candidates. However, what the voters get at the time of elections is peanuts compared to their loss when policies are subverted against them. In contrast, the vested interests funding the candidates make a multiple of their illegal donation. It is the best investment for businesses since they get favourable policies, contracts, and protection from prosecution for wrong doing, among other things.
Clearly, the welfare of the nation and the common people requires freeing the politicians running the government from the influence of the black economy. How do donations via electoral bonds funded by legal or illegal money help curb undue influence on policy makers? The bonds provide an additional of such funds.
Can the use of Electoral Bonds serve the larger purpose of curbing black income generation in the country? A couple of lakh crore rupees are used in various elections in a five year cycle – about Rs. 40,000 crores per annum. Of the current Gross Domestic Product (GDP) of about Rs. 270 lakh crores, it comes to 0.15 per cent. The electoral bonds of a few thousand crore rupees issued annually are an even smaller percentage, both of the GDP and of the black economy. Since electoral bonds are only an addition, they cannot be the solution to the problem of use of black incomes in elections.
Election expenditures over and above the election limits have to be via illegal funds. The electoral bonds can neither be used to fill this need nor do they accrue to the individual candidates, so the need for illegal funds does not disappear.
Auditing of accounts of political parties can hardly stop the use of black incomes in elections. Companies’ accounts are audited, yet they generate black incomes through various means. Political parties also adopt the same devices to hide the actual sums surreptitiously received. Thus, even if the electoral bonds are based on legitimate funds, they cannot prevent the use of illegal funds raised by political parties.
Crucially, election expenditure limits are applied to the candidates and not political parties. The Electoral bonds can only be donated to political parties and not individual candidates. So, the individual candidate’s huge expenditures over and above the election expenditure limit has to be met through illegal funds. The winning candidates will have to continue to honour the quid pro quo and illegality will persist – bonds or no bonds.
Also read: Electoral Bonds: How compromised is our democracy
The rich who donate substantial sums to politicians and parties do so in black since they do not want their name to be up front. They donate to all parties but don’t want the ruling party to know this. The political parties also do not want the public to know which businessmen are obliging them since in a poor country that could tarnish their image. Why do candidates need so much money to fight elections?
Electoral democracy has come to India when feudal consciousness persists. People vote for a variety of reasons, and not just on the basis of the candidate’s performance in the constituency. Often, people vote for candidates of their caste and community, however corrupt they may be. They expect this person to do their right or wrong work. Nowadays, work, whether right or wrong, requires pull. Often, bullies get elected because they can deliver. People say that they do not want to waste their vote, irrespective of the performance or the honesty of the candidates.
Seldom do NGO leaders who help people in myriad ways win elections. At times, candidates who do not even belong to a constituency win because of their equations within the constituency. Clearly, the public is looking for something other than performance when voting.
Candidates try to demonstrate to the people in their constituency that they have clout and can deliver. To show clout, big rallies, road shows, posters, cut-outs, flooding of social media, maintenance of vote banks, and so on are required. Cash and gifts are distributed just before Election Day. All these require a lot of funds.
Delhi Chief Minister Arvind Kejriwal has advised people to take gifts from political parties, but vote for his Aam Aadmi Party’s supposedly honest candidates, but this did not succeed because of the prevailing feudal consciousness: ‘namak khaya hai’.
Indian elections have become expensive since feudal consciousness prevails in society and voting is seldom based on the performance of candidates. So, elections become expensive. Election expenditures over and above the election limits have to be via illegal funds. The electoral bonds can neither be used to fill this need nor do they accrue to the individual candidates, so the need for illegal funds does not disappear.
For political parties, the bonds give additional funds over and above what they collect illegally. Auditing of party accounts cannot help since that is only of the declared funds. Thus, the electoral bonds scheme cannot succeed in cleansing political funding.
