'Electoral bonds' no more: India's Supreme Court vs BJP's political funding tool
Plus, on the Election Tricycle: Old men in politics
The Indian Supreme Court has done little to keep a check on the excesses of the Union Government over the last few years, sometimes producing befuddling decisions even as its judges deliver lectures on democracy outside the court. Which is what made Thursday’s news such a surprise.
From The Hindu (emphasis added):
“The Supreme Court today struck down the electoral bonds scheme that allows anonymous donations to political parties as unconstitutional. It asserted that the scheme violates the right to information under Article 19(1)(a) of the Constitution. The five-judge Constitution Bench also quashed the amendments made to the Income Tax Act and the Representation of People Act which made the donations anonymous…
Notably, the State Bank of India was ordered to furnish details of the electoral bonds received by political parties to the Election Commission of India (ECI) by March 6. The ECI will subsequently publish such details on its official website by March 13.”
The move undercuts one of the major reforms to India’s political funding system brought in by the ruling Bharatiya Janata Party in 2017, and upholds the principle that Indian citizens ought to know who is funding their political parties. What that actually means, in action, remains to be seen.
But first, some background.
Prime Minister Narendra Modi first came to power in 2014 on an anti-corruption plank, with the BJP at the time somewhat hesitant about the all-out Hindutva platform that it subsequently embraced wholeheartedly. In 2016, Modi began to speak of reforming the system of political funding in India, widely believed to be heavily dependent on corruption and the use of ‘black money’, i.e. illicit funds that are unaccounted for and untaxed.
Indian elections are expensive. The Centre for Media Studies estimated that $8.6 billion was spent by parties, candidates and regulatory bodies over the course of the 2019 election, comparable to the $11.1 billion spent in the presidential and congressional elections in the US in 2016. Much of this spending is illicit – well above the caps on expenditure officially set by the Election Commission of India – and hard to scrutinise, because there is little transparency in political contributions.
In 2017, former finance minister Arun Jaitley announced a new way of funding for political parties that his party claimed would “bring about greater transparency and accountability”: Electoral bonds.
These would essentially be gift vouchers, which anyone could purchase from the State Bank of India and hand over to any political party to encash. Most importantly, they would be anonymous. No record needed to be kept of who bought the bonds, and no public declaration needed to be made by a political party of which individual or corporate entity had donated bonds to them.
That anonymity had a caveat: While the public would not be informed of who was buying and who was donating, the State Bank of India – run by the Union Government – could track this cash. Meaning the party ruling in New Delhi would have an immense informational advantage that could tilt the electoral playing field.
As an analysis from the Association of Democratic Reforms points out, the BJP received more money from electoral bonds than 30 other parties combined.
The BJP-run government was warned against using this tool from the beginning. Not just by activists and civil society organisations, but also the Election Commission of India – which said the bonds would have a serious impact on the transparency of political funding (before then altering its view) – and the Reserve Bank of India, which said it would set a bad precedent. A series of reports by the Huffington Post in 2019, based on responses received by Right to Information activist Lokesh Batra revealed just how opaque and problematic the system was.
The Union Government – which had previously argued in the Supreme Court that Indian citizens have no fundamental right to privacy – defended its reform by arguing that citizens have no right to information regarding the funding of political parties.
“People donating to a political party usually don’t like to disclose their identity as they fear repercussions from rival political parties. By purchasing electoral bonds, they can keep their identity secret,” former finance minister Jaitley said, in Parliament.
The crux of the BJP’s argument was that it was making political funding ‘cleaner’ by encouraging donors to go to SBI, instead of relying on cash donations, since this was more likely to be ‘white money’. It undercut this very argument by also doing away with a number of other provisions that prevented shell companies or foreign firms from channeling money into political parties.
As Milan Vaishnav (whose book Costs of Democracy: Political Finance in India, co-edited with Devesh Kapur, is a vital read on money and politics in India) wrote in 2019, “special interests may desire anonymity, but why the government feels the need to accommodate their demands is not altogether clear.”
One part of the BJP’s argument was a practical, pragmatic one about reforms: If it simply turned to fully declared political contributions, the argument went, no one would use the tool. However, Instead of engaging with other parties or wider civil society organisations that have studied political finance, the BJP’s solution was to unveil a reform that embraced opacity, denied the right of citizens to receive information about political funding and had built-in advantages for the ruling party. Coupled with the BJP’s willingness to use investigative agencies for political outcomes, the move’s effect was only to further tilt the playing field.
The scheme was challenged in the Supreme Court by the Association for Democratic Reforms way back in 2017, and more than Rs 16000 crore, or $216 million, of bonds have been bought in that time, the vast majority going to the BJP. Seven years after it was launched and challenged, the Supreme Court concluded that the BJP’s reasoning for a deliberately opaque system was unconstitutional. Among other things, the majority judgment said, simply:
“We are of the opinion that the information about funding to a political party is essential for a voter to exercise their freedom to vote in an effective manner.”
The actual implications of this decision for political funding in India will take some time to assess.
In the longer run, parties, including the BJP, have discussed ideas like public funding of election campaigns or a ‘National Election Fund’ to which donors can contribute, after which money is then distributed to parties based on a set formula. But arriving at any consensus around this in the current moment will be complex.
Even the short-term impacts are unclear. What instrument will now be used those who were hoping to contribute through bonds in an expected sale before the general elections due in April-May? The Supreme Court hasn’t just struck down the scheme, it has also ordered the Election Commission to make public details of all of those who bought the bonds over the last seven years. But will that information tell us anything, or simply be a listing of who bought the bonds (since the SBI didn’t formally map out who they were then donated to, though it could trace this information?) Has the delay in resolving this vital constitutional matter done irreversible damage to Indian political funding, given the head start the BJP clearly got over the last seven years?
As should be evident, this is surely not the last time we’ll be talking about political funding in India on this newsletter.
The Election Tricycle
On this week’s episode of the Election Tricycle (Subscribe on Apple, Spotify, Others), we speak about old men in politics. In particular we chat about Joe Biden in the US, Narendra Modi’s mostly forgotten ‘75’ age limit for BJP politicians (now that he’s 73) and how age issues play out in the UK where politicians are often younger politicians and have to figure out what to do after being PM.
If you enjoy the show, please do listen, subscribe, share and send us feedback! What issues would you like to hear about? What questions do you want answered? What other elections should we try to tackle?
‘Legal Apparitions’
On India in Transition, a publication from the Centre for the Advanced Study of India at the University of Pennsylvania – where I’m a Consulting Editor – we have an interesting piece from Yugank Goyal on situations where people who find official, legal procedures (in this case divorces) too cumbersome, and so conduct informal processes that still mimic the legal system.
"How are disputes resolved when formal legal processes are difficult to follow and customary norms of dispute resolution have not quite evolved? I uncover that in certain types of cases; people resolve the dispute informally while adopting a formal court-like structure, almost mimicking official procedures. People set up dispute resolution processes that are cosmetically similar to the formal system and behave “as if” the entire process is legal…
Laws can be tyrannical or cumbersome. But people can be ingenious. When they can’t transact informally, they may simply transact “as if” they have done it formally. Cosmetics of legal performative may well be as strong as the substance of it. How society “uses” laws reveals a deeper understanding of society itself. Legal apparitions are therefore unique ways in which laws come to be used. Indeed, mimetic applications of imagined law underscore the importance of legal consciousness and extend the framework of legal pluralism. If laws are constructed with an imaginary society in mind, society can also evolve with an imaginary law in mind.”
If you’d like to pitch to India in Transition, where were take pieces from scholars across the social sciences on contemporary India, get in touch!
On the next edition…
I should have more links on a number of topics – Uttarakhand’s Uniform Civil Code, the North-South taxation debates, the farmer protest outside Delhi, Modi’s visit to the UAE and Qatar – in the next few editions. If there are pieces on those subjects or others that you found compelling, send them in!
Can’t Make This Up
With farmers protesting once again on the borders of Delhi, there was this remarkable news:
In a first of its kind action in any part of the country, the Haryana government Tuesday deployed drones to reach deep and drop teargas shells on farmers who tried to breach the barricades set up to stop them from marching to Delhi as part of a planned protest.
Which was then followed by this:
How useful the kites were against the drones might be unclear, but reportedly they did enough to deter the police from continuing to use them.