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Politics

Electoral bonds - boon or bane for India?

Murali Krishnan New Delhi
February 12, 2018

Indian PM Narendra Modi's government has announced the roll out of an electoral bond scheme aimed to make political funding more transparent in elections. But will it work? Murali Krishnan reports.

Indien Narendra Modi macht ein Selfie in Ahmedabad
Image: picture alliance/AA/M. Aktas

A new electoral bond scheme in India is the country's latest attempt to remove illegally obtained income, or "black money," from the country's electoral system.

Introduced in January, the bonds are a financial instrument that will conceal the identity of the donor from the intended recipient political party. 

Hailing the move as historic, India's Finance Minister Arun Jaitley vigorously defended electoral bonds, and said they will introduce an element of transparency into the currently difficult system of cash donations.

This step follows India's ban on high currency notes in November 2016, which the government argued was a bid to flush the system of black money.

Under the latest scheme, bonds can be purchased in multiples of any value ranging between 1,000 rupees and 10,000,000 rupees (€12.60 to €126,000) from specified branches of the government-run State Bank of India. The bonds will have a 15-day validity that will ensure that they don't become a safe haven or a parallel currency.

What's more, these bonds can only be converted to cash in a pre-declared account of a political party, which will have to disclose the amount to the Election Commission.

To bond or not to bond?

In a Facebook post published early January, titled "Why Electoral Bonds are Necessary," Jaitley defended the bond scheme. 

"The conventional practice of funding the political system was to take donations in cash and undertake these expenditures in cash. The sources are anonymous or pseudonymous. The present system ensures unclean money coming from unidentifiable sources. It is a wholly non-transparent system," Jaitley wrote.

"I do believe that donations made online or through checks remain the ideal method of donating to political parties. However, these have not become very popular in India since they involve disclosure of the donor's identity."

Indian voters show their voter ID cards while waiting to vote at Samastipur, Bihar, in 2015Image: picture-alliance/dpa

But not everyone is enthusiastic about the plan. Opposition political parties have expressed skepticism, while analysts and watchdog bodies are wondering if the scheme will be the right panacea for electoral ills.

Many feel the bonds could end up making political funding less transparent and could be misused, given the lack of disclosure requirements for individuals purchasing electoral bonds.

The Communist Party of India (Marxist) described the scheme as flawed and said it would not serve its desired objective.

"The electoral bond route is nothing short of legalizing money laundering. The move would add to opacity in electoral funding rather than increasing transparency. It is regressive," the party's leader Sitaram Yechury told DW.

Yechury added that the donor, recipient and the amount - three vital aspects - were each to remain unknown, or known only to the government.

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This was a sentiment echoed by the principal opposition Congress party, with Congress spokesperson Manish Tewari also pointing out that it would be easy for the government to find out which corporate group has paid to whom.

"Given the track record of the government unleashing state agencies on political rivals and their supporters, no corporate house will make donations to opposition parties. They all will be fearful that their businesses would be targeted," said Tewari at a press conference last week.

This view is shared by Anand Sharma, another senior leader of the opposition Congress, who said that the bonds would discourage open criticism of the government. "The bonds will be a deterrent for donors to fund critics of government, as the bank needs to share details, and the government could easily find out who is funding whom," he said.

The biggest problem, many foresee, is that the voting public will not know which individual, company, or organization has funded which party, and to what extent.

A woman shows her ink-marked finger after voting in the village of Shilatne, in MaharashtraImage: Reuters

Will bonds work?

Simultaneously, the government will know who is getting what from whom and this will open up a Pandora's box, say critics. 

Jagdeep Chhokar, founding member of the New Delhi-based Association for Democratic Reforms (ADR), an election watchdog body, said the move could open up the possibility of harassment toward those seen to be supporting certain ideologies.

"Electoral bonds continue to be designed to make political and electoral funding even more opaque. It will bring more and more black money into the political system," he told DW.

A report by the ADR indicates that funding to national and regional political parties from 2004-05 to 2014-15 largely remained intransparent.

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Of this, about 69 percent of the donations received by these parties amounted to billions of dollars from unknown sources. Another ADR report reveals that nearly 31 percent of the income of national parties in 2015-16 came from unknown sources. These data suggest that black money is channeled to parties in return for political patronage.

India's former chief election commissioner, Achal Kumar Jyoti, said that the electoral bonds would not solve all problems pertaining to transparency in political funding. "That is one step in the right direction. I have not said it will solve all the problems. Let it [bonds] be rolled out," Jyoti said last month.

India's political parties have tried hard to strengthen and cleanse political funding in India for years. But until now, nothing feasible has been put in place. It is still a million-dollar question if this new bond scheme will work.

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