Follow the money: Supreme Court’s electoral bond ruling marks a significant step in India’s anti-corruption journey

While the verdict is a win for transparency, deep-rooted industry-politician ties highlight the need for broader reforms and sustained action.

Youth Congress activists raise slogans during a protest against BJP over an alleged electoral bond scam in Patna on February 16, 2024. | Photo Credit: PTI

In 2017, then Finance Minister, the late Arun Jaitley, rose to announce a new method of electoral funding. Individuals, associations, and corporations wishing to make donations to political parties could approach India’s largest public sector bank, State Bank of India (SBI) and purchase tax-free, time-limited bearer bonds during certain windows of time throughout the year. These bonds could then be deposited into the registered bank accounts of political parties. With that, paving the way for electoral bonds, legally sanctioned yet fully anonymous routing of money into the accounts of political parties.

The decision met with scepticism and, in many cases, a clear thumbs down. The RBI—the natural authoritative voice on a subject like this—raised grave opposition to the idea. In response to the suggested amendment, the Central bank wrote saying the move would set a “bad precedent” by encouraging money laundering and undermining faith in Indian banknotes, and would erode a core principle of central banking legislation. Pointing to the dubious and anonymous nature of these bearer bonds, the bank pointed out that “the bonds are bearer bonds and are transferable by delivery. Hence, who finally and actually contributes the bond to the political party will not be known.”

However, the decision was cleared through all the relevant finance ministry doors at lightning speed and even though the scheme itself took a year to be notified, electoral bonds became a permanent part of the political funding pipeline.

Many years—and elections—later, the Supreme Court has struck down the electoral bond scheme, ruling that it is unconstitutional. The court ruled that the scheme violated the right to information, and freedom of speech, and could result in quid pro quo arrangements between donors and political parties. The court also asked the State Bank of India to provide details of the political parties that received these monetary instruments to the Election Commission of India by early March. The poll body has been directed to then publish the details on its website by March 13.

Association for Democratic Reforms, a nonprofit organisation working on electoral and political reforms for over 25 years, has detailed numbers as far as is available, on the who and the how much, of these donations. Till April 2023, when parties last submitted audited statements, electoral bonds worth Rs. 12,979 crore had been sold in 26 tranches. The Bharatiya Janata Party (BJP) leads by a leg and a mile in these collections, garnering more than 50 per cent of all electoral bond donations. It has also been rising; donations to the BJP increased from Rs. 614.63 crore during FY 2021-22 to Rs. 719.86 crore during FY 2022-23 (17.12 per cent increase) while donations to the Indian National Congress decreased from Rs. 95.46 crore during FY 2021-22 to Rs. 79.92 crore during FY 2022-23 (16.27 per cent decrease). Amongst other political parties, CPI(M)* declared the highest decrease of 39.56 per cent, from Rs. 10.06 crore in FY 2021-22 to Rs. 6.08 crore in FY 2022-23 while AAP declared a decrease of 2.99 per cent, from Rs. 38.24 crore in FY 2021-22 to Rs. 37.10 crore in FY 2022-23.

Notes from the Union Minister Of State for Finance, Pankaj Chaudhari state that by April 2023, electoral bonds worth Rs. 3,539 crore had been sold so far in the financial year 2023-24. The break-up of data is not available yet.

In terms of States, Delhi ( Rs. 276.202 crore) and Gujarat (Rs. 160.509 crore) have made the largest contributions and when pieced up for sectors, corporates or business houses are by far the largest sector-wise contributors to national parties, standing at more than Rs. 680 crore for FY 2022-23.

Quid pro quo?

The Supreme Court’s decision and ruling are hugely important in light of its own less-than-flattering approach towards the issue over the last few years. Over the course of the past few years, a decision around the electoral bonds case has been bouncing in the air with a string of interim orders almost always ending in a tangle of tenuous arguments that leaned heavily in favour of the Union Government.

While answering the question of why this was a bad—and unconstitutional—idea in the first place, the best place to start is the Union Government’s own argument in this case. Citizens do not have a general right to know regarding the funding of political parties, it stated. Second, the influence of contributions by companies to political parties ought not to be examined by the Supreme Court. It is an issue of democratic significance and should be best left to the legislature. In response, the Supreme Court observed that the current scheme left enough space open for political parties to coerce persons to contribute and the argument of the Union of India that the Electoral Bond Scheme protects the confidentiality of the contributor akin to the system of secret ballot is erroneous.

What do we know of the nature of donor funding so far? According to data from the Association for Democratic Reforms, 3,318 donations from corporates or the business sectors amounting to Rs. 680.50 crore were made to national parties during FY 2022-23. With the maximum number of donations during FY 2022-23, the BJP declared 3,067 of those corporate donations amounting to Rs. 610.49 crore. In percentage terms, a whopping 92 per cent of all corporate donations via electoral bonds went to the BJP. These donations, in turn, formed close to 85 per cent of the party’s total donations via bonds.

In the world of business, favours are for returning. Large dole-outs of money towards a political party can quite naturally raise the potential of beneficial decisions for a corporate entity, as well as a sympathetic ear in times of financial, legal, or policy trouble. It is no secret that some of the largest campaign contributions in the US come from gargantuan lobbying blocs like the pharma industry, insurance companies, and the oil and gas sector. It is also a fairly simple exercise to carve up several key industries into the duopolies that exist in India today, both tightly regulated by the government and the more competitive ones. Telecom, aviation, retail, natural resources, and infrastructure. The story is there to see.

Who does this hurt?

There is a more simplistic equation at play in the electoral bonds theory. The fact that the ruling party garners more funds, at a State or Central level, seems quite clear. For instance, K. Chandrashekar Rao’s Bharat Rashtra Samithi received over 50 per cent of the donations via electoral bonds in FY 2022-2023, months before the Assembly election that saw his over 9-year stint as Chief Minister of Telangana come to a close. Amongst regional parties, the Trinamool Congress got Rs. 528 crore through electoral bonds in 2021-22; State election was held in West Bengal between March and April 2021. It seems like a foregone conclusion then that business interest tends to dip into its coffers more generously for political parties that are perceived to be the ‘winning horse’ ahead of an election.

But the important rider to the striking down of electoral bonds is that only a fraction of political spending was funded through electoral bonds. CMS India, a think tank that has been analysing elections for many decades, had some stunning numbers to share for the 2019 election. In 20 years, involving six elections to Lok Sabha between 1998 and 2019, election expenditure went up by around six times from Rs. 9,000 crore to around Rs. 55,000 crore. The 2019 Lok Sabha election was the most expensive election the world had ever seen until that point, seeing a spend which was double that of the 2014 election.

As far as spending capacity goes, the BJP spent about 20 per cent in 1998 against about 45 per cent in 2019 out of a total poll expenditure estimate of Rs. 9,000 crore in 1998 which shot up to Rs. 55,000 crore in 2019. By contrast, in 2009 the Congress party’s share was 40 per cent of total expenditure, sliding to between 15 to 20 per cent in 2019. The 45 per cent share of spend by the BJP would imply a spend of close to Rs. 25,000 crore by the country’s ruling party. Compare that to even its most recent electoral bond earnings of Rs 719.86 crore during FY 2022-23. Clearly, a fraction of political funds are coming in via bonds.

Some challenges may now arise. One is that powerful corporations may go back to exploring opaque and nebulous ways of donating to political parties. And two, the perception of a strong BJP and its leadership at the Centre has meant businesses have had no hesitation in donating to them via electoral bonds. It is parties other than the BJP that have, and will, continue to struggle to raise funds. In an atmosphere of fear and ‘big brother’ oversight, most business industry members have hesitated to contribute even a small amount to opposition parties. Under the mask of anonymity, some money may have been donated in the form of bonds. That will now change.

The step ahead

There are no two points of view on the unconstitutional nature of the electoral bonds. They were wrong, and the Supreme Court’s decision, albeit seven years delayed, is welcome and correct.

Such is the degree of scepticism and ruptured trust that the Supreme Court’s decision quite immediately set the question rolling; what does this really mean for the country’s ruling party, arguably one of the richest political outfits across the world? Does it mean there are already enough and more provisions in place for the upcoming election? In its ruling, the Apex Court said that the amendments to the Companies Act allowing unchecked and unlimited corporate funding were arbitrary. Will the Companies Act be corrected and will the Court’s observations be enough for disclosures to come tumbling out of the electoral bond closet?

The Election Commission, which took a few days to respond to the ruling on electoral bonds and said it has always been in favour of transparency and will comply with the top court’s order, must now walk the talk. Details of donors, amounts, and dates must be made public. Being the guardian of elections implies the Election Commission’s remit is to ensure checks and balances on the growing influence of money during elections, to build voter awareness and ensure ethical voting.

While welcoming the judgement as a positive step towards strengthening Indian democracy and curbing collusion between industry and political parties, it’s crucial to recognise that it’s just the first step. Transparency International’s Corruption Perceptions Index ranks countries by their perceived levels of public sector corruption—with the first rank going to the least corrupt nation. For 2023, India’s rank fell to 93, from a ranking of 80 in 2019 and 76 in 2015. Rapidly sliding rankings seem to suggest the ruling party’s anti-corruption slogan of ‘na khaunga na khane dunga’ (neither will I indulge in corruption, nor allow anyone else to indulge in it) was more idealistic than intentional. India has a corruption malaise, fed by a politician-industrialist nexus that runs deep and wide. Striking down electoral bonds is one step towards tackling it. We need to walk a mile.

*CPI(M) has issued a statement in which it denies acceptance of any amount as contributions through electoral bonds.

Mitali Mukherjee is Director of the Journalist Programmes at the Reuters Institute for the Study of Journalism, University of Oxford. She is a political economy journalist with more than two decades of experience in TV, print and digital journalism. Mitali has co-founded two start-ups that focussed on civil society and financial literacy and her key areas of interest are gender and climate change.