Sunday, November 26, 2023

Critics are priceless and not unreasonable | Arun Kumar

 (Published earlier in The Leaflet, November 26, 2023)

A brief but powerful meditation on the politics of reasonableness and unreason.

IS it not reasonable to expect reasonableness in discourse?

A doctor friend set me thinking when she commented that such and such person is reasonable. In TV debates, after a critical comment, the anchor often asks the panelist, is there one thing that the policy maker has done right? In heated conversations, often it is said: be balanced— which is similar to saying be reasonable.

What does it mean to be reasonable? The dictionary meaning is ‘in accordance with reason’ or ‘moderate’. But aren’t these subjective categories? What is ‘in accordance’ with reason or ‘moderate’ is not agreed to by all in society.

Often, it depends on the individual’s situation in society or on society’s stage of development and the dominant discourse set by the ruling elite. Here, the focus is on the economic aspects but this analysis could also be extended to social and political aspects.

System’s idea of reasonableness

In a feudal society, the landlord holds the land and extracts rent from the farmers. Being reasonable might mean not being too exploitative lest it leave the farmers destitute.

Even if moderate, exploitation persists. In this system, any talk of eliminating landlords and giving land to the tillers would be considered unreasonable. But, with the advent of capitalism, (Adam) Smith and (David) Ricardo characterised landlords as wasteful and argued for ending their dominance. Were they being unreasonable? In the old framework, yes, but not in the evolving framework.

What does it mean to be reasonable? The dictionary meaning is ‘in accordance with reason’ or ‘moderate’. But aren’t these subjective categories? What is ‘in accordance’ with reason or ‘moderate’ is not agreed to by all in society.

Capitalism is even more wasteful than feudalism. Enormous waste is generated by consumerism deliberately promoted by advertisements and the example set by the corporate culture and government. The result is environmental damage, climate change and extreme weather events. But, would the ruling elite accept this as a reason to eliminate capitalism and go for, say, a Gandhian alternative? Undoubtedly much needs to be fleshed out about such an alternative, especially, given the technological changes that have occurred since M.K. Gandhi’s time.

Also read: How viable is Gandhi’s village today?

Talk of a Gandhian alternative to create a better world is considered unreasonable by the current ruling elite. They are already well off and not sure that in the new world their privileges will survive.

So, in their self-interest, they are status quoist and would characterise talk of alternatives as not only utopian but unreasonable. Clearly, reasonableness is associated with individual and class interest and not societal interest.

Gandhi in Hind Swaraj critiqued British parliamentary democracy. He argued that political parties work for narrow interests and not for society as a whole. He argued that leaders work for their self-interest and the PM for the narrow interest of his backers.

Further, the members of Parliament do not have the freedom to represent public interest since they have to follow the party whip. So, politics is all about exercising power to serve the interests of the financiers of the party. This is visible in post-Independence India where politics is controlled by black money and vested interests.

So, the current ruling dispensation would characterise Gandhi as unreasonable. But not openly. He was striking at their interests. He was asking people to reject the present set of rulers— not through violence since he believed in non-violence. He propagated change through making people conscious about who they should choose as their representatives. In today’s circumstances, this would even be termed as seditious.

Individual’s idea of reasonableness

The ruling elite identify with the existing system since that has given them privileges that they may lose in an alternative. Thus, they would term any major change as unreasonable and would work against it.

Since the elite set the public discourse, critics of the system are in a minority and overwhelmed by the dominant narrative. It requires courage for critics to stand against the tide since they have to pay a price for their defiance.

Also read: GDP growth: The gap between reality and rhetoric

But workers in a capitalist system would not consider the critique to be reasonable? For workers, there is a daily struggle for survival while for the well-off, the goal would be to preserve and advance their gains.

Because of low wages, the elite can afford servants, drivers, gardeners and office peons. Life is comfortable. For the workers, a higher salary or wage is essential to improve the prospects of their family. This proposition is not unreasonable for workers but the elite would consider this as unreasonable. But the workers do not set the agenda of the public debate and get marginalised and so do the critics.

In a feudal society, the landlord holds the land and extracts rent from the farmers. Being reasonable might mean not being too exploitative lest it leave the farmers destitute.

In brief, the individual’s viewpoint on reasonableness depends on her situation in society. Some members of the elite may accept the need for an alternative but such critics of the establishment comprise a tiny minority and are branded as unreasonable by the ruling elite.

Critics of policy

Should not the policies that sustain rapacious capitalism and lead to growing inequalities be critiqued? Can this be termed as unreasonable? In public debates, the critics are often asked, is there not something right that is being done by a policy?

A trick question that sidesteps the important time dimension. Namely, over what time frame is the policy under discussion being analysed? While in the short-run, a policy may appear to be necessary, but over the long-run, they may lead to growing problems, like environmental decline and growing inequality.

The role of policy is to make things better. Even if the government does not do much, the economy has its own momentum. Technology is changing and new and better products become available.

Automatically, there will be transition from typewriters to word processing and landlines to mobile phones. The role of policy should be to optimise change, enhance people’s welfare and resolve society’s problems.

By definition, governments justify their actions. Using selective data, they present their policies in a positive light and downplay the negatives. A phalanx of media, politicians and favoured experts rise to reinforce the government’s views. The government spends enormous resources to create a climate of acceptability in society.

Also read: Technological challenges to becoming a developed country by 2047

In contrast, critics who point to alternative facts or faulty official methodology and hold a mirror to the policy makers are branded as unreasonable.

Since the elite set the public discourse, critics of the system are in a minority and overwhelmed by the dominant narrative. It requires courage for critics to stand against the tide since they have to pay a price for their defiance.

What is needed is data-based critique of policy pointing to its long term consequences for society. This has to be theoretical since it is about the future for which data has not been generated yet. Only projections from the past are possible.

Hence, one is talking of a hypothetical change. A critique then helps devise better policies or prevent society from going astray. After all, many ‘solutions’ proposed by policy makers from which some sections gain materially have turned out to be ‘non-solutions’ leading to growing social problems.

Consider the completely misconceived policies of demonetisation and Goods and Sales Tax (GST). The problems these policies have led to in the long-term were ignored for short-run considerations. In the short-run they seemed to be rational and reasonable to the ruling elite but critics pointed to the problems that will follow in the long-run. Were they unreasonable?

Conclusion

In brief, calling something unreasonable is relative to one’s position in the system and is often determined by the self-interest of the ruling elites. In spite of all the ‘social progress’ since Gandhi’s times, we now recall what Gandhi cautioned us about and the alternative he proposed is becoming more relevant.

Society needs critics who look at the long-term perspective since they point to the pitfalls and the correctives required. There are perks for being with the system so it is costly. But critics come for free— they are priceless.

Society needs critics who look at the long-term perspective since they point to the pitfalls and the correctives required. There are perks for being with the system so it is costly. But critics come for free— they are priceless.

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/

Tuesday, November 14, 2023

Video: Gandhian thought's relevance today

 


MSMEs in India: Nation’s Progress Depends on Them | Arun Kumar

Published in ’Communique’ Pp.35-39 Annual. September 2023. (Magazine of Apex Chamber of Commerce and Industries of NCT Delhi) also reproduced in Mainstream Weekly (November 11 & November 18, 2023)

 o o

Introduction: Diverse Economy

Indian economy is the most diverse in the world. The usual sectors primary, secondary and tertiary are there but these are further sub-divided between public and private and organized and unorganized sectors. The primary, secondary and tertiary sectors are further sub divided into agriculture, manufacturing, finance and so on. So, there are roughly 27 sectors to contend with.

Beyond these sub-divisions there are the large, medium, small and the micro sectors in non-agriculture sector. In agriculture there are the large, medium, marginal farms and the landless. The technologies they use and the productivity they have are also vastly different so that the incomes differ widely across sectors. The divides are also between the rural and urban areas and backward and advanced states.

The largest sector in GDP is the tertiary sector, then the secondary and lastly the primary sector. Agriculture provides 46% of the employment but only contributes 14% of the GDP. Since it is largely in rural areas, they have a much lower income than the urban areas. Unorganized sector of which agriculture is an important part employs 94% of the work force but contributes 45% to the GDP. Thus, incomes here are very low compared to the organized sector where 6% of the workers work and produce 55% of the output.

Agriculture has a large amount of disguised unemployment since work on the farm is declining with mechanization in agriculture. More use of tractors, harvester combines and threshers are displacing labour. Such labour has nowhere to go since non-farm employment is not available. Unorganized sector in non-agriculture is often a residual sector because those who do not find work resort to some kind of self-employment to sustain their family.

Unorganized Sector: Issues

The share of employment in the unorganized sector has hardly changed in the last 30 years. This is a result of the increasing mechanization and automation in the modern organized sectors. While most of the investment goes there, it generates little work. So, people remain stuck in the unorganized sector. In this sector to, while investment is low it is also mechanizing, like, in agriculture. So, employment generation here is also inadequate.

The unorganized sector consists of the small and the micro sectors. The average employment in a micro sector unit is 1.7 workers. In agriculture every small farm (below 5 hectares) has the entire household involved. Consequently, there are no scale economies and they mostly depend on low technology, resulting in low productivity. They also do not have the wherewithal to upgrade technology. They also lack marketing and finance. Often, they have to borrow at high interest rates from the informal money markets. The result is high costs and low profits. To increase profits, they have to squeeze wages.

The unorganized sector producers supplying to the large and medium scale businesses do not pay them in time and squeeze the sector, resulting in working capital shortage. It could ultimately lead to closure of the unit.Automatic word wrap
In brief, the unorganized sector constitutes a low profit and low wage island in the economy. Due to the low per capita income, they consume very little. This reduces demand in the economy. The impact is substantial since it employs the vast majority. That slows down the economic growth.

Role of Education and R&D

Imports from China are impacting the market for both the organized and the unorganized sectors. This is because the Chinese are able to produce at scale and their labour is highly productive so that they are able to produce cheaply. Not only are they producing high technology goods like APIs but also India’s cultural symbols, like Ganesh statues and Diwali lights.

Technological up gradation and entrepreneurship depend on the quality of education. The vast majority of children get poor education. This is testified to by the ASER reports since 2005. Many businesses say that youth is unemployable. According to NHFS-5 literacy has risen in the country to about 80%. Most children are in school but teaching and infrastructure are poor so that very few enter higher education and its quality is found wanting. The definition of literacy needs to be changed to `capacity to absorb modern technology’ and not just ability to read and write.

R&D is not only weak, investment in it is small by world standards. Consequently, we mostly import technology. That further sets back R&D in the country. It leads to a) inability to absorb modern technology, b) innovate, c) weak entrepreneurship and d) lack of employment. There is also `Jugad’ and poor quality production.

Mechanization and Artificial Intelligence are already posing a challenge to the unorganized sector. Due to their small scale of operations, they cannot afford to adopt it even if they had the skill to do so. This challenge is only going to grow in the coming years and one needs to prepare for it from now.

Policies

Of late, this sector has been hurt by policies. First, demonetization in 2016, then structurally faulty GST in 2017, NBFC crisis in 2018 and the sudden lockdown in 2020. Each of them damaged the unorganized sector while favouring the organized sector. It has not recovered from these shocks. Unfortunately, this decline in the contribution of this sector to GDP is not measured. It is assumed fallaciously that the unorganized sector is growing at the same rate as the organized sector. That may have been true prior to the shocks but not after that. The methodology of measurement of GDP needed to be changed but it has not happened. The result is that the contribution of the unorganized sector is overstated.

Since GDP growth is overstated it looks good. Consequently, the government has not taken special steps to boost the unorganized sector. The result is that this sector is marginalized in data and therefore in policy. Not only this, Government’s focus in on boosting big industry and businesses. That shows in the rise in stock markets which have become the barometer of the health of the economy. The unorganized sector is not represented in the stock market which consists of only a few thousand companies. The unorganized sector has 6 crore entities.

As demand shifts from the unorganized to the organized sector, it is like colonization by the organized sector. The result is the narrowing of the base of the economy’s growth. Consumption and private investment slow down. The economy then gets dependent on the other two engines of growth – net exports and public expenditures. These two helped in achieving high growth between 2003 and 2008. After that there is has see-sawed due incorrect policies.

Consequences of Neglect of Unorganized

The growth of the organized sector at the expense of the unorganized sector has huge consequences. Because the latter employs 94% of the workers, its decline has led to growing unemployment. Even before the pandemic, official data showed that unemployment had reached a 45 year high. Labour force participation rate is abysmally low. 190 million individuals in the relevant age group have stopped looking for work. The position of women and educated youth is particularly worrisome.

Consequence can also be seen in the dramatic rise in inequality in the economy with a large number of billionaires in a poor country. India is at 139 position in the world rankings of per capita income. The result is economic, social and political instability which spoils the investment climate. The government argues that the UN, IMF and Moody’s also certify that the economy is doing well. But these are not data gathering agencies. Their analysis is based on the official data and they replicate the errors in the official data.

Reforms required

The above points to the linkage between the various problems facing the economy and the decline in the unorganized sector. Most of these problems are policy induced. So, there is urgent need to change policies and support the unorganized sector. Currently policy is promoting the organized sector and doing little for the unorganized sector.

There is need to support the unorganized sector by promoting access to finance, technology and marketing. Cooperatives need to be formed to enable this to happen. Government’s steps in this direction are rather inadequate. Expenditures on education and R&D need to be sharply increased. GST is a last point tax. So, it should be collected at the last point only and not at each intermediate point of production and distribution. That will simplify the tax without causing any loss of revenue. As Arun Jaitley used to say 5% of the units pay 95% of the GST. The complications associated with ITC, e-way bill and so on will then get eliminated, business climate in the country would improve and the unorganized sector will revive.

(Author: Arun Kumar, is a retired Professor of Economics, JNU, New Delhi, and is the author of ’Ground Scorching Tax’. 2019)

Thursday, November 9, 2023

Four Videos in Hindi on -- Economy & unorganised sector, Indian Agriculture, Demonetisation & Politics

 1.    Video in Hindi on Issue of the state of the economy with reference to the unorganized sector. 


https://youtu.be/5HIOr7gW0RE?si=nYWf_dbgSmAazxej  
 
2.    Video in Hindi on the problems of Indian agriculture and Reforms needed.

https://youtu.be/rUeTt1IuF0U?si=FdPsOFHkpfNq4n6Z  
 
3.    Video in Hindi on Policy Induced Crisis - demonetization and GST. And, Is population a burden?

https://youtu.be/LFz9npG9ZVw?si=W26P83CgK0UPP3hP
 
4.    Video in Hindi on why Freebies are a result of loss of credibility of politicians and parties.

https://youtu.be/qAJjCJ2Bu8k?si=U7lbPD9VBKXjzFrX

TEDx talk on Truth and Facts | Arun Kumar


 

Wednesday, October 25, 2023

Links to articles, discussions and interviews by Arun Kumar from July to September 2023

 

links to select recent articles, discussions and interviews after three months.

 

1.     Challenges of becoming a developed economy by 1947. In the Leaflet Sept 17. It is at: https://theleaflet.in/technological-challenges-to-becoming-a-developed-country-by-2047/

 

2.     Interview on India’s economic performance. Channel 4 PM September 17. It is at:  https://youtu.be/j_ieEocgqzE

 

3.     Interview on G20 outcome failure and Indian Economy. It is at Jeevansathi.com Sept 15. It is at: https://youtu.be/Ms3ITm1ypdo?si=wSyXvWmshRDdWJ3I

 

4.     G20 serving the interest of the Global landlords. In the Wire Sept 14. It is at: https://thewire.in/world/g20s-new-delhi-declaration-serving-the-interest-of-the-global-landlords

 

5.     Talk on `Adani Scandal - PM silence’. Organized by SundarayyaVignana Kendram. Sept 5, 2023. It is at: https://fb.watch/nr_kCJTdKX/?mibextid=RUbZ1f

 

6.     GDP `discrepancies’ explained. Two articles

a. In News9live on Sept 3. It is at: https://www.news9live.com/opinion-blogs/decoding-the-significance-of-7-8-gdp-growth-for-indian-economy-expert-speaks-2270756

b. In the Wire on September 5. https://thewire.in/economy/understanding-gdp-growth-through-discrepancies-and-why-the-major-push-is-not-visible

 

7.     Discussion on likely further revelations on Adani affair. On HindiSatya.com. August 25, 2023. It is at: https://www.google.com/search?sca_esv=569887179&tbm=vid&q=Hindi+Satya.com+With+Mukesh+Kumar+on+Adani+affair&sa=X&ved=2ahUKEwjr9uPixtWBAxWjS2wGHdZcC9sQ8ccDegQIDRAH&biw=1024&bih=710&dpr=1.25#fpstate=ive&vld=cid:4bc75314,vid:r4NglZUPOB8,st:0

 

8.     Discussion on de-dollarization and the Emerging World Order with Air Marshal Matheswaran. Organized by the Peninsula Foundation. August 22, 2023. It is at: https://youtu.be/Fsrnh1QCyXM?si=K273Tfi74svjVZqQ

 

9.     The truth of the official claims: Data is incorrect. In the Wire on August 18, 2023. It is at: https://thewire.in/economy/the-hollowness-of-modi-governments-tall-claims-and-self-praise-on-economy

 

10.  What should G20 agenda should be from people’s perspective?. Talk at the Conference titled We20: People’s Summit on G20 in New Delhi. August 18. It is at: https://wgonifis.net/2023/08/18/economists-social-movements-political-leaders-give-clarion-call-to-stand-up-to-the-anti-people-policies-of-g20/

 

11.  In Hindi How can India become 3rd largest economy soon? In the Hindustan. August 17, 2023. It is at: https://www.livehindustan.com/blog/latest-blog/story-hindustan-opinion-column-17-august-2023-8583185.html

 

12.  Discussion on Hurdles to Becoming an Economic Superpower. Mint. August 16. It is at: https://www.youtube.com/live/YnF2N7FBORM?feature=share

 

13.  In Hindi. What is wrong with Economic Policies? Analysis of the PM’s Address on Independence Day. ABP, Uncut. August 15. It is at: https://youtu.be/cj_eMbD71T4

 

14.  In Hindi. Mood of the Nation: Economic Aspect. Public India August 12. It is at: (From 1 hour onward). https://www.youtube.com/watch?v=P2z7O4tjMOQ

 

15.  Panel discussion on release of Neerja’s book, `How Prime Minister’s Decide’. August 8. It is at: https://youtube.com/live/BgFG-cfmLUs?feature=share

 

16.  Reduction in Multi-dimensional Poverty in India: Is it for real? In the Leaflet, August 6, 2023. It is at: https://theleaflet.in/is-the-decline-in-multidimensional-poverty-in-india-real/

 

17.Minimum Guarantee Bill of Rajasthan Govt. – an Analysis. In the Wire, August 5, 2023. It is at: https://thewire.in/rights/rajasthan-minimum-guaranteed-income-bill-intent-marginalisation

 

18.  India for Democracy Conclave. Talk on economic inequality and other aspects. August 4. It is at: https://youtube.com/live/GyZxHbYrdmw?feature=share

 

19.  In Hindi. Why India will not the 3rd largest economy anytime soon. Article in the Print on the 28th July and interview in The Public on 27th July. It is at:

a.      https://youtu.be/yCDD2k6GTHg

b.     https://hindi.theprint.in/India/economist-rfuses-pm-modi-claims-that-india-will-become-3rd-economy-in-the-world-in-bjp-3rd-term/575018/

 

20.  Long article on ‘Intricacies of GST’ and why it has not fulfilled its promises. In Mainstream, July 29. It is at: http://www.mainstreamweekly.net/article13636.html

 

21.  Development gone rogue – Underlying causes of high floods in Delhi. In the Wire, July 20. It is at: https://thewire.in/environment/development-rogue-flood-delhi 

 

22.  Why 28% tax on Online Gaming is justified. At News9live, July 12. It is at: https://www.news9live.com/deep-dive/imposing-28-gst-on-online-gaming-will-not-lead-to-the-collapse-of-the-industry-expert-opines-2210136

 

23.  Interview on technology from US under the Indo-US Accord during PM’s visit. The Public on July 2, 2023. It is at: https://www.youtube.com/watch?v=ZXHVv-uPHsM

 

24.  Assessing Impact of Six Years of GST. In the Leaflet. July 1, 2023. It is at:

https://theleaflet.in/a-taxing-tale-assessing-the-impact-of-six-years-of-gst/

 

25.  Long Article: Modi Rule vs Nehru’s Era: Comparing the Incomparable. In Mainstream. July 1. It is at: http://www.mainstreamweekly.net/article13565.html

 

26.  How much employment needs to be generated in India? In the Hindu. June 29. It is at:https://www.thehindu.com/data/data-how-much-employment-generation-does-the-economy-need/article67030514.ece

 

27.  Asymmetric technology relation between India and US and what it tells about our R&D. In the Wire. June 28. It is at: https://thewire.in/tech/indias-weak-r-and-d-culture-behind-asymmetric-indo-us-deal.

 

28.  Brief talk on decoding current inflation.  At Lallantop. June 28. It is at: https://www.youtube.com/watch?v=vs8RhVOyF_4

 

29.  Interview on Rich Indians leaving India and Broader Issues at HW News. June 20. It is at: https://youtu.be//SutPv0MCCuQ

 

30.  Short Interview in Hindi on why rich Indians are leaving the Country in large numbers. In the Wire, June 17. It is at: https://youtu.be/CJPllYj8vtk

 

31.  Article on Why PLI scheme is sub-optimal. In the Wire. June 16, 2023. It is at: https://thewire.in/government/pli-scheme-subsidies-demand-shortage-jobs

 

32.  Panel discussion in Hindi on India’s federal structure being damaged. It is at News Time, June 16. At https://www.youtube.com/live/k9nisfsVw7Q?feature=share   

 

33.  Article in Hindi on strengthening Indo-US relations. Hindustan June 15, 2023. It is at: https://www.livehindustan.com/blog/latest-blog/story-hindustan-opinion-column-15-june-2023-8305724.html

Monday, January 30, 2023

Electoral bonds: No solution to illegal political funding | Arun Kumar (Jan 30, 2023, The Leaflet)

 The Leaflet

Electoral bonds: No solution to illegal political funding

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/