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How Money influences Politics-I

Aseem Mittal

Elections is India are conducted after every five years. But in these five years all the parties contesting start campaigning as they need to build up a strong manifesto which could challenge the other parties which are contesting. The aim is to extract the maximum votes from all the voters. In India the candidates and their parties take up different techniques to attract voters. The standard of the rallies conducted by these parties has been increasing year after year. In many places politicians undertake unethical activities for getting votes from the people like distributing gifts, liquor and even money. The money spent on these rallies is also huge. In running the elections, a lot of money is pumped in by the political parties. There are some guidelines given by the Election Commission of India regarding the financing in elections but these guidelines do not have any rule which says that there is a limit on the total financing a political party can receive for running an election. This paper will focus on the question of why is there no limit on the total financing a political party can receive for running in elections? I will take into consideration all the institutions laid down by the election commission of India regarding the financing of election. I will take examples of some parties that contest in the elections in India with their financing in the past elections.

Institutions governing Financing of Elections in India

Elections in India are governed by the Election Commission of India. They provide guidelines that the candidates and the political parties need to follow for smooth conduct of elections. The Representation of People’s Act (RPA) 1951 is one of the acts that mentions the laws governing financing of elections in India. Section 77(3) and 29(b) of RPA includes the major clauses for the financing in the elections. “Section 77(3) of the RPA limits the electoral spending by candidates within the limits prescribed by Rule 90 of the Rules, stipulating the maximum election expenditure that can be incurred by a candidate in a parliamentary or assembly election. By the recent Conduct of Elections (Amendment) Rules, 2014, notified on 28th February 2014, the limit for candidate expenditure is between Rs. 54-70 lakhs for parliamentary constituencies, and between Rs. 20-28 lakhs for assembly constituencies” (Law commisson of India 2015). Section 77 (3) helps in governing the spending made by the candidates in the election campaigns. Section 77 includes the clauses for the disclosure of election expenses by the political parties. There is a proper procedure that needs to be followed by a candidate for the disclosure of election expenses which begins with hiring an agent who acts as the treasurer for candidates and all information is disclosed by the agent. This law helps in improving the work of the election commission as they can keep an eye on the kind of expenses which are made by the candidates. But the main issue that India is currently facing regarding the financing of elections is the fact that there is no limit on the financing a political party can receive for running in the elections. “Section 29B of the RPA makes it very clear that there is no limit on political parties accepting contributions from individuals or corporations, so long as the donor is not a government company, or the donation is not a foreign contribution (since it is prohibited under Section 3 of the Foreign Contribution (Regulation) Act, 2010)” (Law commisson of India 2015). This particular section has a lot of affect on the entire funding in the elections of India because with this particular law the political parties can spend as much many as they want and, in these cases, illegal money of some people who are in support of the party is used.  Section 29C of the RPA regulates the disclosure on the donations received by the party. But as there is no cap on the number of donations, the political parties can choose to not disclose these donations. There are many reports which show that the number of donations that the political party discloses varies a lot from the actual number of donations. The maximum donation the parties receive is from the corporate houses. “Section 182(1) of the companies act 2013 states that corporate contributions to political parties are allowed as long as the (non-government) company is three years old; its aggregate contribution in every financial year is below 7.5% of its average net profits during the three immediately preceding financial years; and it is authorized by a Board of Directors’ resolution” (Law commisson of India 2015). This law governs the donations that companies can make to political parties. Big companies are interested in contributing to the parties as once the party comes in power, they get support in their activities which might require such a support. Section 182(3) of the companies act 2013 states the clauses for the disclosure of the donations made by companies to political parties. The companies are required to put all the details of such contributions in their profit and loss account with the name of the party they have given contribution.

History of Financing Elections in India

Financing of elections has a long history in India. As mentioned above money plays a very important role in elections as it is used as means of dominating the election campaigns by the parties. The voters are considered as the most important part of the elections as they are the ones who elect the candidates. So, aim of the parties is to impress the candidates by its manifestos, rallies and speeches. There are also some unfair means adopted by parties to attract the voters. For doing all these activities the party needs money. India has witnessed this increase in the money in every election. As discussed above black money has always played a major role in the election funding process. “Black money was generated by businesses and individuals who evaded corporate and income taxes. Some of this black money tended to be pumped back to political parties and candidates to garner favorable policy decisions” (Gowda 2012). The political parties through their manifestos attract large businesses to contribute. If they favor a particular industry by proposing a policy reform which would be beneficial then large business groups are attracted to make donations. The laws laid down by the election commission of India fails to keep a check on the source of the money that is used by the parties. Corporate financing has been a major source of domination. There have been actions taken by government to restricts in have an influence on politics. “In 1968, Prime Minister Indira Gandhi banned corporate donations to political parties. The ostensible reason for the ban was to prevent large business groups from exercising undue influence on politics” (Gowda 2012).  Corporate financing also has its own history with the financing of elections. Corporate donations give rise to corruption in the election process by pumping in a lot of unaccounted money or black money. “The Birlas were one of the leading donors of the Indian National Congress and the business class as a whole secured some leverage over the shaping of the Congress government’s policy on regulation of the economy after Independence” (Chatterjee 2014). Big political parties get of big business families like Ambani, Birlas, Tatas etc. give a lot of financial support to the party and in return they influence the politics of the country according to their needs. In the past many people have requested that there needs to be a change in the company’s act 2013 regarding corporate financing to political parties. “The Election Commission and various members of civil society have argued that funding and donations by companies to political parties should be made subject to audits and disclosures. All the audited reports by independent auditors should be made public.” (Chatterjee 2014). This shows that on one place it is good that proper laws are made for corporate funding but at the same time when they are misused no proper amendments in the existing laws takes place to make things function properly. “Corporate funding of political parties, despite a long history in India, is yet to adopt the best practices across the world. Two important principles are lacking in the Indian context: a) transparency; and b) shareholder approach. In the interest of transparency, it would be desirable if the members of the Board of Directors are also made to disclose their affiliations, if any, to political parties at the AGM which considers the proposals for political contributions.” (Chatterjee 2014).  The companies who make contributions to the parties need to take permission or discuss this with its shareholders because it can’t be the owner’s decision alone. It is the money that many other people have invested in the company and which is a very large amount of money.

Aseem Mittal is a student of Jindal School of Liberal-arts and Humanities.


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