March 22, 2024


Should political donations be kept secret?

The nexus between the corporate world and politics is well known. It’s only a matter of how deep that relationship goes, i.e., how much money companies and rich people donate to parties. Globally, organisations have worked toward breaking that nexus to mixed results. It remains an issue that has no end in sight.

In the aftermath of the Supreme Court’s judgment on electoral bonds, the State Bank of India (SBI) dumped data on political donations, though it took its time. As journalists poured over the information for juicy tidbits and head-scratchers, let’s zoom out a bit. Does this information becoming public do anything good, or should it just remain a secret?


Last month, the Supreme Court called the electoral bonds scheme unconstitutional and struck it down. The scheme allowed people and entities to send unlimited funds to their parties of choice anonymously. While many rejoiced, we’re back to square one, as former Chief Election Commissioner SY Quraishi said. A majority of all donations will now be in cash.

We’re not going to get into the nitty-gritty of the electoral bonds scheme and the Supreme Court’s verdict. Here’s our piece on that. Instead, let’s look at political funding as a whole and its components. Many activists and NGOs have long spoken and written about the ill effects of increasing evidence of corruption and unregulated donations on elections and democracy. In any democracy, the basic concept is people want political parties and governments to represent their views.

In India, as demonetisation was taking hold, Prime Minister Narendra Modi asked political parties to reach a consensus on publicly funded elections. He referred to elections becoming increasingly expensive and the influx of black money into the system. The government introduced some proposals in the Finance Bill, like reducing cash donations from ₹20,000 to ₹2,000. This made tax exemption conditional to mandatory IT filing.

The big one was, of course, the electoral bonds scheme. While the government thought it would help eliminate black money from the system, others saw it as an affront to democracy and transparency. Elections in India have gotten more expensive. Parties and candidates are under increasing pressure to raise more money. Corporate money took hold as the ways and means to raise small donations became difficult, with high transactional costs.

The problems of campaign finance aren’t limited to India. Other countries have taken their own stabs at regulation. US federal law imposes different contribution limits on different types of donors. However, the US Supreme Court’s generous interpretation of the First Amendment (freedom of speech) has hindered legislative attempts on expenditure limits. In the UK, there aren’t any strict contribution limits, but there are on expenditure.

The underlying issue isn’t just how much money is being donated but its sources. The data dump on the electoral bond scheme has thrown up familiar and unfamiliar names. The question is, does this fundamentally change anything?

VIEW: Full transparency needed

India’s political system has traditionally been hostile to transparency in electoral funding. The electoral bonds scheme didn’t do anything to dispel that. RTI responses showed that the government didn’t care about the warnings it received on the scheme if it was implemented. Election watchdogs like the Association of Democratic Reforms (ADR) have been calling for more transparency. One of their studies showed over two-thirds of funds received between 2004 and 2015 were from unknown sources.

The electoral bonds data showed donors came from sectors like telecom, pharmaceuticals, and real estate, where resources are controlled by the government. Of the top five donors, three companies faced probes by the Enforcement Directorate (ED) and income tax officials. Many speculated about rampant quid pro quo, which the Supreme Court noted too.

Many of the donors are individuals. Only some of them are well-known, like steel magnate Lakshmi Mittal. Others are obscure. What this does is, through the work of journalists and organisations, give the public information on who these people are and their motivations for buying the bonds. Keeping voters in the dark about the money and their sources is fundamentally unhealthy for democracy.

COUNTERVIEW: It’s complicated

While the Supreme isn’t wrong in finding flaws in the electoral bonds scheme, the government’s original intention of removing black money from politics is noteworthy. The bonds scheme allowed people and companies to donate money and keep their political affiliations a secret. This is important since while taxation policies are decided by the Centre, companies are also subject to state laws. Their names being public could invite the wrath of all parties.

There’s also the need to reopen accounts of companies and high-net-worth individuals, which is a big taxation and tax assessment undertaking. The electoral bonds scheme had strict rules for the purchase, validity, encashment, and claim for deduction against taxable income. What the court’s verdict does is put the ball in the income tax authorities’ court as far as rebate and adding donations as taxable income is concerned.

With the list of donors out in the open, the political landscape only becomes more muddled. Accusations and counter-accusations will dominate discourse as the BJP and other parties have benefitted from the electoral bonds scheme. The Election Commission, in a tricky position, has spoken about the need for transparency but also batted for donor privacy to prevent harassment. If this saga has taught us anything, it’s a need for a simpler political funding policy.

Reference Links:

  • Towards public financing of elections and political parties in India: Lessons from global experiences – Observer Research Foundation
  • US electoral financing based on pvt fundraising, transparency: Top official – Business Standard
  • Time to Shut the Floodgates of Secret Political Party Funding – The Wire
  • Corporate political donations in India hint at widespread rot – Deccan Herald
  • Keep political donations a secret. Disclosure can lead to states victimising corporations – The Print
  • ECI bonds’ disclosure: Why transparency isn’t enough to fix crisis of party funding in India – The Indian Express

What is your opinion on this?

a) Political donations shouldn’t be kept secret.

b) Political donations should be kept secret.


For the Right:

The Reality of Skill India Mission: Short Courses, No Employable Skills and Rise In Unemployment

For the Left:

How global indices miss India’s chuckle