In the run-up to India’s 18th Lok Sabha elections, the murky dance of money in politics came into the spotlight after the Supreme Court’s order to unveil electoral bonds data while also anonymous donations to political parties via the instrument.

Yet, the search for transparency continues as campaign expenses climb, suggesting that financial power might weigh more than voter voices. This surge in spending prompts a critical question: In the race for political dominance, is democracy paying the price?

Here are some stark facts that lay bare the financial juggernaut driving India’s electoral behemoth:

  • Skyrocketing costs: N Bhaskar Rao, the head of the New Delhi-based Centre for Media Studies, predicted that political parties and candidates would spend more than Rs 1.2 trillion in the 2024 elections, making it India’s most expensive electoral contest.
  • Spending loopholes: Despite set spending limits for candidates, India’s lack of caps on party expenditure fosters a murky financial environment where well-funded parties can easily sidestep candidate-level restrictions, blurring the lines of electoral integrity.
  • Opaque finances: Candidates rely less on their own money and more on corporate giants, who now bankroll the bulk of campaign costs, sidelining political party funds.
  • Underreported spending: Data reveals the official expenses declared to the Election Commission by winning MPs are a mere sliver of the actual campaign costs, which include all contestants, not just those elected. The disclosed figures are the tip of the financial iceberg, hinting at a deeper, undisclosed cash flow in political funding.

WHY IT MATTERS

Escalating campaign costs risks turning politics into a high-stakes market where financial clout is mistaken for a democratic mandate, undermining the principle that every voter’s voice has equal weight.

IN NUMBERS

For the 2024 Lok Sabha elections, spending is expected to hit Rs 1.2 trillion with nearly 97 crore voters. This means each vote costs about Rs 1,240, a sharp rise from Rs 700 in 2019. This increase highlights how much more is being spent to win votes.

Over two decades and six Lok Sabha elections, campaign spending has ballooned nearly sixfold, from Rs 9,000 crore in 1998 to the 2019 estimate of Rs 55,000 crore, later revised to a staggering Rs 60,000 crore, according to a Centre for Media Studies estimate.

Corporate influence in elections is surging. In the 2020 Lok Sabha, 233 members reported to the ECI that they spent no money on campaigns. Meanwhile, over 70 per cent of sitting members in 2019, across various parties, were bankrolled by external or corporate donors, a sharp rise from 33 per cent in 2014.

Alongside the rise of corporate donations, MPs’ reliance on personal finances for campaign funding has notably decreased. Those using their "own funds" dwindled from 25 per cent in 2014 to 13 per cent of sitting members by 2019.

Furthermore, political parties’ contributions to their candidates’ campaigns have sharply fallen, from 42 per cent in 2014 to 17 per cent in 2019, per the parties’ disclosures to the ECI. This trend persists despite a surplus in party funds, with the ruling party receiving funds more freely. The advent of electoral bonds has played a crucial role in this development and has highlighted opportunities for quid-pro-quo transactions.

Moreover, from 2009 to 2019, the percentage of wealthy candidates increased from 16 percent to 29 percent. Rising campaign costs impact the fairness of elections.

THE HISTORY OF POLITICAL VIOLENCE

The call for political finance reform first came in the 1960s. Early on, the Santhanam Committee on Prevention of Corruption (1964) and the Wanchoo Direct Taxes Enquiry Committee (1971) spotlighted this murky connection. The year 1969 was a pivotal moment in India’s political finance landscape when the Indira Gandhi government banned corporate donations to political parties.

Another game-changing moment came when the Supreme Court ruled that party expenses must count towards a candidate’s limits, tightening the reins on election spending.

In 1975, the government dodged the ruling by tweaking the Representation of the People Act — any money spent by parties or backers, if not directly approved by a candidate, didn’t count towards spending limits. This, in effect, erased any cap on party spending, making individual limits a joke and fuelling a spending arms race. In 1979, political parties received a tax break but had to start filing tax returns. By 1985, Rajiv Gandhi’s government had opened the door for company donations again, overturning a previous ban. Companies could now donate up to five per cent of their average net profits from the past three years to political parties.

In 1996, the Supreme Court’s dual rulings and legislative tweaks began to untangle the web of unregulated party funds. First, a January ruling mandated political parties to file annual tax returns, breaking decades of non-compliance since their 1979 tax-exempt status. Come April, on the eve of the general elections in 1996, the court struck again. It dictated that unaccounted party expenditures would breach candidate spending caps unless parties disclosed audited financials. This move aimed to leash rampant spending, but without mandatory independent audits, reports remained easily doctored, blurring financial truths behind party lines. So, transparency remained elusive until 2008.

The year 2003 sparked a transparency revolution in political finance. It began when the Association for Democratic Reforms sought clarity on candidates’ backgrounds in 2000. Responding, the Delhi High Court mandated the ECI to reveal candidates’ criminal records, education, and finances, including their families. Despite political resistance, this order was enforced on March 27, 2003. The same year, the Bharatiya Janata Party-led National Democratic Alliance government introduced the Election and Other Related Laws (Amendment) Act, a key reform reshaping campaign finance. This law made donations to political parties fully tax-deductible, encouraging transparent contributions. It also mandated that parties report donations over Rs 20,000 to the ECI.

The 2005 Right to Information Act aimed to boost transparency in India, but its effect on political funding has been lukewarm. Despite resistance from all parties, the Central Information Commission’s 2008 ruling, prompted by an ADR request, cracked open the financial records of political entities back to 2004-05. Yet, the transparency win was partial — the absence of mandated independent audits, as the ECI suggested, left an accountability gap.

Since 2014, national parties’ spending on star campaigners for local rallies has surged, reflecting the central leadership’s expanded role in campaigning. Campaigning costs soared from Rs 311 crore in 2014 to Rs 529 crore in 2019. The BJP and Congress, leveraging air travel extensively, dispatched these high-profile figures to over half of the Lok Sabha constituencies, underlining the intensified battle for influence from the skies.

In 2018, the BJP-led NDA government launched electoral bonds, which sparked unprecedented election disputes about donation fairness. But in a landmark February 2024 judgment, the Supreme Court scrapped the electoral bonds and termed them "unconstitutional and manifestly arbitrary."

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