Reforming Political Funding

It is welcome that the government has committed itself to reform political funding. But the thinking, in terms of state funding of elections, is flawed. The basic goal in political funding reform should be to achieve complete transparency as to how much parties and politicians spend and how they finance that spending. Reform of political funding is necessary, even if not sufficient , to tackle corruption. Indian democracy is funded by corruption. Politicians take money out of the exchequer , sell patronage and extort money, all in the name of mobilising funds for political activity. They pocket a large part of the collection and pass on the rest to the party and the workers they employ. Since civil servants must collude for misuse of state power , this method of mobilising political funds suborns the bureaucracy and procedural hurdles proliferate as rentseeking opportunities. All the scams rocking the country have this common root.

Finding a new source of political funding away from corruption will not guarantee an automatic end to corruption - that is not the argument. But that will enable non-corrupt politicians and civil servants to fight corruption. All democracies make this traverse from very corrupt to less corrupt ways of conducting public life. The time, it would appear, has come for India to clean up its act on political funding. But precisely how do we go about this? State funding of elections is not the answer. Politics is not just elections. A political party has to keep functioning inbetween elections, its leaders keep travelling, its offices run, its full-time workers have to be paid, its meetings, conventions, etc cost money. All this cannot be funded by the state. For the state to try and fund even a portion of the election expenses of recognised political parties would discriminate against new entrants and restrict competition . Parties can mobilise funds from patrons and wellwishers , but should make that information public. When Sarojini Naidu famously said that it cost the party (the Congress) a fortune to keep Gandhi in poverty , she was setting up a case study on political funding.

Everyone knows that industrialists like G D Birla funded the Congress and the national movement. But it is not clear that they received proper receipts for the money they gave and that the Congress maintained detailed accounts of how precisely they spent the money. This tradition continued after Independence , of industrialists funnelling money to political parties without formal acknowledgement and of parties spending the money without detailed accounting. The difference is that if the purpose was, earlier, to keep one Gandhi in poverty, the money is now used to keep an entire tribe in obscene luxury and insatiable greed. Political expenditure has to be monitored from the ground up. In every locality, explicit political activity can be recorded on a web site, backed with photographs from ubiquitous cell phone cameras. Every party or politician must record, alongside , how much was spent on that activity and where that money came from. This must be open to scrutiny and challenge by rival political parties and voluntary watchdog groups. These locality level figures can then be aggregated at a hierarchy of higher levels, along with activity, expenditure and source of funds at each level, all the way up to the national level.

Each party and politician should be required to account for every paisa they spend or accumulate. At present, only contributions above RS 20,000 are required to be made by cheque. Modern information technology can be deployed to ensure the traceability of every rupee contributed to a party/politician.


One can think of mobile phone-like hand-held devices connected to the telecom network in the hands of tens of thousands of party workers across the country, for recording even small contributions from individually identified donors. A receipt printed out on the device could automatically be recorded at the party's web site and at a central monitoring agency's web site as well. Unrecorded contributions can still be spent on unrecorded activity, of course, but competitive politics should bring to light all such activity, forcing parties to reveal its financing as well. This will raise the cost of collecting money initially, but the benefit would far outweigh the cost. The government can place a bulk order for these devices to achieve economies of scale and then selling them on to parties.

The present ridiculous ceilings on campaign expenditure must be scrapped, not raised. With transparency achieved, public suspicion of excessive money power would cap campaign expenditure where it should be. A central monitoring authority , an expanded and empowered Election Commission , for example, could monitor such claims of expenditure and income, scrutiny , challenge and defence, and reach legally binding conclusions. For this, we need a new law to regulate political parties. We do have laws to regulate trade unions, voluntary organisations , etc but not for political parties. The law should ensure internal elections, audit of accounts, etc. Industry must realise that it is in its collective interest to clean up political funding and make all contributions by cheque. The finance minister can, perhaps, double the deduction allowed for tax purposes, from the present 100% of the contribution. Company accounts are audited , for the common good. So must political party accounts . This is entirely doable , with some political will.