Hindu
Business Line: New Delhi: Tuesday, 10 February 2015.
The Delhi
Assembly elections were marked by a lot of mud-slinging. One of the issues that
figured prominently was campaign finance. The manner in which funds are raised
by political parties, and the amount of undeclared expenditure during
elections, have been in focus for the last one-and-a-half years. Only a few
days ago, the BJP and the Congress declared expenditures of ₹714 crore and ₹516
crore, respectively, for last May’s general elections. It is hard to take these
numbers at face value when independent assessments run into several thousand
crore rupees. What this points to is that our existing laws and rules encourage
under-reporting of income and expenditure. India’s laws, unlike in the US, are
biased towards expenditure control which explains these unconvincing
declarations rather than transparency in contributions. Hence, the debate is
often skewed in the direction of whether a candidate pierced the ₹28-lakh
expenditure ceiling in an Assembly constituency or the ₹70-lakh ceiling in a
parliamentary constituency, whereas the material question is whether the
candidate can account for every rupee spent. While the ceiling has seen some
revisions in the recent past, it has generally lagged behind spending
compulsions in an increasingly competitive polity. The gap is filled by
unaccounted money, leading to the rise of a criminalised political class.
Expenditure limits have encouraged under-reporting of income and candidate
spending. It is time to shift to an incomes-based approach to regulation.
While India’s
laws pertaining to the income side have become more pragmatic since the Indira
Gandhi years when access to corporate finance was forbidden, the incentives, if
not compulsions, to tap into black money sources remain strong. For instance,
while corporate contributions are fully tax deducible, they cannot exceed 5 per
cent of the net profit of the firm over the previous three years. A
liberalisation of these limits and incentives can help parties and candidates
raise their component of legitimate finance. Corporates should set up trusts to
fund elections, as some major groups have indeed done. But for these efforts to
take root, businessmen, big and small, should feel assured that they will not
be harassed for their political leanings. That said, rules on the contributions
side can be tightened. The requirement that only donations above ₹20,000 need
to be reported allows parties to tap into black money sources without fear of
coming under the scanner.
Over the last
two decades, we have moved towards improved disclosures on candidates’ incomes,
assets and criminal records, enabling voters to make informed choices. For this
process of transparency to extend to party finances, the existing system of
perverse incentives needs to go. Political parties have resisted transparency almost
all parties have opposed being brought under the RTI Act, for instance. They
need to or should be compelled to disclose audited accounts, as well as all
sources of funding. But in the end, elections can be rid of money power only
when the voter is visibly unimpressed by the big bucks being thrown his way.
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