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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The author is a professor of politics, international relations and critical interdisciplinary studies and director of the Centre for the Study of Democracy at the University of Westminster
Next year, India heads to the polls against the backdrop of a majoritarian political project that is steadily undermining the rights of its citizens — and by extension, subverting the nation’s democratic values.
In 2024, Indian electoral mechanisms will be vital in safeguarding public interest. Political finance, in particular, should be scrutinised.
India’s elections are incredibly expensive; the country’s 2019 general election, which brought the ruling Bharatiya Janata party to power for a second term (and saw a near doubling in spending relative to the 2014 one), was more expensive than America’s 2016 presidential election.
Between these last two general elections, a little-known new instrument of political financing was introduced by the Indian government: electoral bonds.
Electoral bonds represent a sea change in the principles of public accountability that underpin political donations. Prior to 2017, political parties in India had to disclose the identity of any donor who gave more than ₹20,000 (about £200). Now, electoral bonds allow unlimited donations to political parties, without any need for disclosing donor identity.
First announced in the annual budget of 2017-18, such bonds were controversially introduced through a Money bill and other amendments, and issued from 2018 onwards.
Electoral bonds are interest-free bearer instruments issued in multiple denominations (all the way up to ₹10mn or £100,000) that can be purchased by individuals or companies via cheques or digital means from the government-owned State Bank of India, in order to anonymously donate money to any political party that has received at least 1 per cent of the vote share in the previous election to the Lok Sabha (lower house of parliament), or a provincial State Assembly election.
The government’s rationale for these bonds is that they reform political finance by eliminating the use of cash, and creating a channel of legitimate funding for political parties. Plus, donors and receivers are assured of anonymity, which helps them avoid victimisation by any entity.
In reality, these bonds have entrenched opacity and carry significant potential for corruption.
The entirely anonymous nature of the transaction means that neither the donor nor the political party need to disclose the donor’s identity. But critics point out that, while citizens cannot demand this accountability, the government of the day can access the details of the transaction.
Moreover, it seems that the vast majority of electoral bonds are being purchased by corporate entities and wealthy individuals, since those in the highest denomination accounted for more than 91 per cent of the total raised via this mechanism between March 2018 and July 2019.
Despite the reservations of the Reserve Bank of India, the Election Commission of India, the parliament, civil society watchdogs, and critical journalists, electoral bonds have stayed in use, with the Supreme Court refusing to grant an interim stay on them in 2020, and resuming the hearing of petitions only in 2022. The RBI, for example, raised concerns about the possible “misuse” of the bonds, “particularly through the use of shell companies”.
The 28th tranche of electoral bonds were approved for sale earlier this month, ahead of upcoming provincial assembly elections in five Indian states. The Supreme Court has now referred petitions challenging the validity of the electoral bond scheme to a Constitutional bench hearing due on Tuesday.
According to the Association for Democratic Reforms, a petitioner in the case before the Supreme Court, in the first tranche in March 2018, the BJP received 95 per cent of all electoral bonds purchased in the financial year 2017-18. In 2018-19, the party received bonds worth nearly four times those received by the Indian National Congress.
When coupled with the wider scrutiny of the alleged nexus between BJP policymaking and crony industrialists, questions about accountability arise. Large anonymous political donations carry with them the possibilities of money laundering and bribery.
Political funding is a vexed issue in almost any democracy, but the electoral bond as an instrument legitimises opacity in the name of transparency, thus transforming the domain of election financing at a time when it is vital that electoral contests remain competitive and responsive to public interest.
