The Funding of Election Campaigns in India

“He who pays the piper, calls the tune.” Nowhere is this old proverb truer than in the domain of electioneering and campaigning, where money and power are intertwined in the tightest of embraces. Elections and democratic processes – of which campaigns, political research, advertising, party organisations are a necessary and inalienable part – all cost money, hence the inevitable blending of high ideals with questionable practices. India is no exception. But given its size and scale, India confronts some unique challenges.

Months before the country’s general election earlier this year, India’s Supreme Court invalidated what are known as “electoral bonds”, a financial instrument designed to facilitate anonymous donations to political parties. Under the scheme, anyone could buy a bearer bond and donate it to a political party, which would then encash it within 15 days, while keeping the donor’s identity a secret. Even for a country like India, where the political economy of elections had always been notoriously murky, the egregious nature of electoral bonds had marked a new low: USD 2.1 billion had been raised by political parties through anonymous donations between 2018 and 2023 – with close to 60% going to the ruling BJP –, highlighting the galloping role of big money in political life.

The link between political funding and political corruption is manifest.  As the court observed, by allowing companies to secretly donate unlimited campaign funds, electoral bonds could easily lead to relations of “quid pro quo” between ruling parties and corporate entities. Unchecked financial inflows could also lead to regulatory capture and crony capitalism, allowing corporations to wield a disproportionate influence over policy decisions. Moreover, such funds can easily be misused to influence electoral outcomes, subverting and compromising the democratic process itself. The link between political funding and political corruption is manifest. The court’s verdict invalidating the scheme and forcing the banks to disclose donor identities thus came to be seen as a major victory for transparency by activists and campaigners.

Things, however, are more complicated. India’s elections are exorbitantly expensive. The 2019 general election is estimated to have generated expenses of USD 8.5 billion, and spending in the 2024 election was expected to reach USD 16 billion, exceeding the American presidential election of 2020. These figures exclude elections to state assemblies or municipal bodies, where parties and candidates also spend enormous sums of money. And while the largest proportion of this expenditure goes towards regular campaigning – advertising, publicity material, wages of party workers, transport, public rallies, social media – studies indicate that around a quarter of it goes directly to voters in the form of gifts, alcohol or outright cash. Clearly, electoral bonds represent only one part of the equation of campaign finance. Their demise, while welcome, has done little to address the larger questions concerning the financing of political life.

It is an open secret that all-pervasive corruption has disfigured the arena of political competition in India in several ways. First, successful candidates tend to be wealthy and well-resourced, and the expenditure involved often deters those without access to such resources. Second, since it exceeds the limits set by the Election Commission of India, such expenditure requires illicit and unaccounted cash and makes it more likely for candidates to have criminal backgrounds or be funded by illicit activities. Third, this demand for illicit cash spurs serious malfeasance in the allocation of contracts and licences by the government. Fourth, the Election Commission has remained powerless to address the burgeoning tide of illegal money washing over political life. Fifth, the greater the number of people implicated in the entire exercise and the more vested interests appear, the harder it has become to clean things up.

The question of political finance is closely entangled with the ogre of political corruption – and disentangling those threads requires monumental effort The truth is that the question of political finance is closely entangled with the ogre of political corruption – and disentangling those threads requires monumental effort. Judicial intervention can only go so far. In fact, in the absence of resolute enforcement, it would be naïve to rely on easy legislative or judicial remedies at all. Of course, regulatory reforms, stricter transparency laws and a better-equipped Election Commission will help. But to cut through the gordian knot of campaign finance, India needs more than that.

Opacity in political funding tends to corrode the basic tenet of accountability in democracies, fuelling discontent and disillusionment and weakening the moral taboo against corrupt dealing. In turn, the lack of moral opprobrium faced by those engaging in corruption eventually starts eroding the normative foundations of democracy itself. To regain lost ground – to push back against the normalisation of corruption, to reverse the growing role of big money, to empower the common citizen to seek accountability and to encourage political parties in a culture of transparency and scrutiny – India will also need tremendous political willpower on which, ultimately, will depend the future trajectory of Indian democracy.