How unregulated and undisclosed political funding threatens India's democracy

Arvind Kejriwal’s recent short trip to Dubai and the US gave political parties like the BJP and Congress another chance to bash the new kid on the block. Notwithstanding the Delhi High Court’s dismissal of similar allegations of illegal foreign funding, the established political parties have gone ahead and played the role of the judiciary by terming the Aam Aadmi Party as ‘guilty’ on the counts of violation of the Foreign Contribution Regulation Act (FCRA), and the Representation of People’s Act.

Compare this with another scenario. A report released by the Association for Democratic Reforms (ADR) on December 9 states that 29 out of 45 recognised political parties in India had not submitted the donation report to the Election Commission of India (ECI) till the deadline of November 30, 2014. It further reveals that BJP is the only single party that has not submitted the list of donors contributing more than Rs 20,000 for the financial year 2013-14. Interestingly, Bahujan Samaj Party (BSP) has declared to the ECI that it did not receive even a single donation exceeding the sum of Rs 20 thousand! There was another report published by ADR last year, according to which, 75% of the funds to major political parties come from unknown sources. Also, out of all the known sources, 87% of the donations come from the corporate sector.

The above instances raise the important issue of political finance. World over, democracies – emerging and mature alike – have grappled with the problem of regulating money in the political arena. Money is a necessary evil for the functioning of political parties. But unregulated, undisclosed and opaque political funding can threaten the very fabric of democracy and governance. While a resource-strapped political party may struggle to make a sufficient public outreach program, the parties slushed with illicit money make a merry-go-round! Rather than respond to the aspirations of the masses, they tend to cater to the interests of their financiers.

India - the world’s largest democracy - has its set of problems. You do not have to be a student of political science to understand that India’s polity is infested with 3 Cs: Corruption, Clientelism and Clan. Volumes can be written about the saga of endemic and pernicious corruption in our country. India continues to squirm under the pain of corruption and unaccountability. It has resulted in incalculable damage to the nation in terms of economic and social development. The abysmally high level of graft in India has resulted into what many experts call a ‘revolving door’ electoral democracy. The lack of transparency and accountability has also slowed the process of building up strong institutions of democracy. 
Clientelism manifests in Indian polity in the form of vote buying, distribution of money and gifts and returning favours via jobs,contracts, licenses and permits as well as admissions (in academic institutions). A clientelistic network also puts women candidates at disadvantage because of their lack of access to a personal network, thus creating a gender gap.

The phenomenon of clans in Indian polity is so entrenched that many of us seem to have accepted it as our fate. Notwithstanding the egregious example of the Nehru-Gandhi clan, the syndrome of family rule has literally reduced our federal polity to ‘princely’ states governed by close knit families or their associates. From Jammu & Kashmir to Tamil Nadu, the dynastic rule is a recurring theme. 

The cocktail of corruption, clientelism and clan results in a perpetual power concentration, creation of a coterie and elite dominance. Backed with illicit money, the parties and leaders do not hesitate to resort to electoral fraud and violence to maintain power. In extreme cases, even sham elections happen, further leading to a dysfunctional democracy.

Thus, it emerges that just holding free and fair elections in a peaceful manner does not mean all is well with our democracy. The real issue is how we tackle the underlying problem of political finance - the mother of all sins.

Funding of political parties and elections is an important function in a democracy. What is needed is sufficient amount of funds that comes from clear channels without any strings attached. But over the decades, the influence of money has grown so significantly that it has disturbed the level playing field for political players and alienated masses from political participation. Hyperbolic growth in campaign expenditure has rightly created a perception that electoral politics only belongs to those who have money power, lung power and muscle power. 

The solution lies in tackling the basic malady of money and corruption. We need reforms to bring about regulations in political finance and effective implantation. It goes without saying that open and transparent funding of political parties and candidates is of paramount importance to create a vibrant democracy. Given this, there is a pressing need to curb the loophole of allowing parties not to disclose the source of donation if the amount is less than Rs 20,000. Internal attitude and behaviour of a political party towards finance also matters.

For example, despite all the talks from BJP and the Indian National Congress about how cumbersome it would be to maintain the record of every single donor, the Aam Aadmi Party has shown that this is feasible, by maintaining a list of their donors on their website and updating it in real time. Public funding of political parties and elections is another solution that looks attractive, albeit it may have side effects. Various government panels instituted in the past have taken up the task of coming up with the recommendations on state funding. Notable among those are: the Indrajit Gupta Committee (1998), the 1999 Law Commission of India Report, National Commission to Review the Working of the Constitution 2000, and the Report of the second Administrative Reforms Commission 2007 (Ethics in Governance). State funding will reduce the level of corruption and influence of black money. It will also cut down the costs of elections and provide a level playing field to the political parties. However, one disadvantage of funding the parties through public exchequer is that political parties tend to become complacent and may not work hard to maintain their social base and grass root mobilisation for funding.

The government can also encourage small donor public funding to decrease the influence of wealthy donors, interest groups and criminal groups. Under such a schema, the government would match a political contribution by a citizen with an equal amount or even multiple of that. This will also encourage the political parties and candidates to go for micro-donations via crowd-sourcing. 

As said earlier, internal party workings and its finance behaviour also plays a role when it comes to political finance. A legislative push for more democratisation of political parties should be made. A case in point is the need to introduce the concept of primaries to select candidates for election. This will decrease the incidence of elite representation and dynastic rule within the parties and pave way for more openness and transparency in the functioning of political parties.

Serious efforts to increase the voter registration and turnout would certainly help in reducing the role of the ‘influenced voters’ over the eventual outcome of the elections. Giving more powers, particularly judicial, to the Election Commission would certainly bring more discipline to the entire political process. Lastly, in order to bring the desired traction to the democracy, electoral reforms must be complemented with judicial and economic reforms.

The author is a Chicago-based socio-political commentator.