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.
—–
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.
Also read: So, which political parties are receiving electoral bonds? SBI won’t tell us. Whither political transparency?
The scheme
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.
Black money in elections
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.
Why the bonds?
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
What makes Indian elections expensive?
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’.
Also read: Union government will continue with ‘conglomerate capitalist’ policies till electoral bonds scheme is struck down
Electoral bonds cannot achieve their ostensible goal
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.
Arun
Kumar is a Retired Professor of Economics at the Jawaharlal Nehru
University. He is the author of `Demonetization and Black Economy’
(2018, Penguin Random House). He blogs at
http://arunkumarjnu.blogspot.com/
