Money Power and Political Parties: Can State Funding Deepen Democracy?

Political spending in India is unregulated, and political funding opaque and undisclosed.

In 2004, the United Progressive Alliance (UPA)’s Common Minimum Program promised the introduction of state-funded elections “at the earliest;” Sonia Gandhi in 2010 also advocated state financing of elections as a measure to curb corruption in the electoral process. Despite these statements and numerous committees and legal reports advocating the implementation of public-funded elections at the earliest, political will has been largely absent. 

Moreover, the current government has made political parties’ funding even murkier, by introducing electoral bonds, which provide donor anonymity and do not disclose the amount donated. The Association for Democratic Reforms (ADR) is currently challenging its validity in the Supreme Court, and the Election Commission of India (ECI) has also criticised the introduction of bonds, calling it a “retrograde step” which would allow vested interests to influence elections and policymaking.

This reading list looks at the feasibility of state funding of elections, its ability to create a level playing field for parties and candidates, and the possibility of having free and fair elections.

1) Is State Funding a Panacea to Money Power?

Dolly Arora writes that state funding to political parties is a double–edged sword: it could contribute to the growth of democracy by helping parties that would otherwise decline due to resource shortage, but could also dissuade parties from working towards maintaining their social base, and could result in parties disassociating themselves from the masses. 

Theoretically, public funding is expected to introduce responsiveness of party leaders to voters and followers. In practice, it seems to have contributed to the concentration of power in the hands of the national leaders, enabling them to become less sensitive to the needs of the grass roots and the general electorate. At the same time political parties may come to be controlled by the executive because of this dependence.

Further, Arora argues that state funding creates a level-playing field only if it blocks all other funding channels. 

The assumption that bigger parties would not seek or receive any more assistance from other sources once they are provided public funds, and thereby not offer an unfair and uneven competition, is unfounded and lacks empirical support.  To presume that fair competition depends on the availability of a minimum level of resources and cannot be distorted for reasons of the uneven levels of maximum resource availability also appears to be inappropriate.

2) Whom Should State Funding Prioritise?

The success of state funding is contingent upon its dual objective: reducing candidates’ election expenditure and making elections free and fair. B Venkatesh Kumar questions its proposed implementation, arguing that if state funding is introduced in Indian elections, then whom should it be given to? 

If state assistance is extended to independent candidates as well, it can encourage the proliferation of frivolous candidates. On the other hand, if funds are granted to parties alone, it can result in fielding candidates, where a party never did before, because each vote will then entitle it to some additional amount.

Moreover, formulating a criteria to disburse state funds is fraught with difficulties. Kumar argues that state funding would only add to money available to candidates, as it cannot ensure that other monetary resources will not be tapped into. 

If part of the financial assistance, as suggested by some quarters, is disbursed before the elections and a part thereof afterwards, depending upon the result, it will not serve any purpose, as money is required before the elections and not afterwards … In that event state funding would merely pump in additional money into the electoral process … State funding should not be exclusive, and parties and candidates should be free to raise resources from other sources, so long as they conform to the election expenditure limit. 

3) Where Will the Money Come From?

Madhav Godbole writes that in order to fund such an initiative, the government should begin by abolishing schemes which seek to reward Members of Parliament (MoPs) for undertaking their democratically-elected duty. 

Each MP is given Rs 2 crore a year for undertaking development works in his constituency. Apart from its doubtful constitutional validity … Abolition of this scheme can provide about Rs 1,500 crore per year for the proposed state funding of elections. Similar schemes for the members of state legislatures, zilla parishads and municipal councillors, which are in force in some states, could also be abolished to mobilise resources for this initiative.

Further, Godbole emphasises the need for Parliament to pass legislation to regulate the organisation and working of political parties, and whose accounts should be regularly audited by the Election Commission of India (ECI), if state funding is indeed possible. 

 Any infringement of the provisions of the proposed act should lead to derecognition of a political party by the Election Commission. Such laws are on the statute books in a few countries but India, which boasts itself as the largest democracy in the world, does not have such a rudimentary law. Enactment of such a law will have to be a precondition for the state funding of elections.

4) What Are the Concerns with State Funding?

If funding is allocated on the basis of seat share, Rajendra Kondepati argues that India’s first-past-the-post system will disadvantage smaller regional parties. 

The bigger parties could have garnered their votes not because the people supported them but because the voters felt the candidates of smaller parties could not win and therefore transferred their vote to the bigger parties with an objective to ensure that their vote matters (Duverger 1972).

Further, Kondepanti contends that the recipients of state funds in parties also matter: party leadership may monopolise funds at the cost of grass–roots candidates, and considering Indian political parties’ obliviousness to internal democratic principles, funding should come with a condition that parties adopt intra-party democracy.

The main issue with this precondition is that parties are reluctant to adopt intra-party democracy and this reluctance partly explains the lack of progress on state funding proposals despite the parties benefiting from a state funding regime through an easier source of finance (Sridharan 2006).  

5) Is There a Case against Transparency?

Writing after the Central Information Commission’s 2013 decision to hold that political parties are “public authorities,” thereby bringing them within the ambit of the Right to Information (RTI) Act, Anirudh Burman argues that transparency of parties’ financial sources is not a cure for Indian democracy’s ills, and cautions that subjecting parties to the RTI Act could result in it being used as a tool for political warfare.

 As a body seeking to outdo other competing parties, a political party has the right to keep certain parts of its activities hidden from public view … It may be argued that the result of such political churn would be greater transparency regarding all those political activities currently hidden from public view. However, the RTI is currently an instrument of power that ordinary citizens hold against the state. This instrument itself may come under sustained attack from the political elite.  

Read More:
Black Money in Politics: Why the Election Commission Should Seize the Day | V Bhaskar, 2017
Beyond Electoral Bonds | Editorial, 2019
Budget on Political Funding Reforms | Association for Democratic Reforms, 2017

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