Electoral reforms need to follow currency swap

The currency swap cannot permanently alter the dynamics of the shadow economy and electoral finance


Illustration:Jayachandran/Mint
Illustration:Jayachandran/Mint

In 2014, the Centre for Media Studies estimated the aggregate cost of the central and state elections to be a shade under $5 billion. That would have made it, at the time, the second most expensive election season ever after the 2012 US presidential campaign. The vast majority of that sum was, as usual, off the books and above the legal spending caps. Small wonder that with a clutch of state elections coming up—particularly the crucial Uttar Pradesh poll—there is speculation about the effects of the ongoing currency swap on the campaigns.

Election finance—the “money power” euphemism is a more honest take on it—has undergirded the Indian political system for decades. The currency swap can potentially disrupt its functioning. But there are two caveats to this. The first is that the extent of the disruption is likely to be debateable. In An Undocumented Wonder: The Great Indian Election, former chief election commissioner S.Y. Quraishi, with as good a seat in the house as any, details many of the innovative ways in which political parties funnel undocumented cash into elections. It would be naïve to imagine that they will be entirely unable to adapt to the current situation.

The second is a larger problem. Election finance is twinned with India’s shadow economy; it interlocks with various industries and sectors such as real estate, as Milan Vaishnav and Devesh Kapur showed in a 2011 study. Thus, to the extent that the currency swap may bring about a temporary purge in some industries but cannot hope to permanently alter the dynamics of the shadow economy, the same holds true for election finance.

There have been various previous attempts to address these problems—from the Goswami Committee on Electoral Reforms (1990) to the Election Commission of India’s (ECI) seminal 2004 report, Proposed Electoral Reforms, and the Second Administrative Reforms Commission in 2008. None of their recommendations have resulted in legislative action. A lack of political incentive and will is, of course, part of the problem. But part of the problem is also that a dubious premise underpins the entire effort.

The Supreme Court judgement in Kanwar Lal Gupta vs Amar Nath Chawla, 1974, best sums it up: “The other objective of limiting expenditure is to eliminate, as far as possible, the influence of big money in electoral process. If there were no limit on expenditure… the largest contributions would be from the rich and the affluent...”. This premise is responsible for the absurd per-candidate spending caps—Rs54-70 lakh for Parliamentary constituencies and Rs20-28 lakh for assembly constituencies—that all but invite subterfuge.

The reality of the Indian electorate—its size and diversity—make substantial cash outlays an inevitability. To let ideology obscure reality is to create fault lines in the political economy. As another section of the Kanwar Lal Gupta judgement contradictorily says, “Election laws are not designed to produce economic equality amongst citizens.” And the Law Commission of India’s insightful 255th report on electoral reforms released last year points out—although it unfortunately doesn’t follow the thought to its logical conclusion—that placing legislative limits on expenditure will not solve the problem, especially without an alternative such as complete state funding, which is impossible. Until the issue of these spending caps is revisited—a steep upward revision, or better yet, abolition, should be the way forward—bringing sanity to election finance is going to remain exceedingly difficult.

The flip side of this is greater transparency on the part of political parties. The Representation of the People Act mandating that only contributions above Rs20,000 need to be disclosed to the ECI has left a loophole large enough for a truck filled with cash to drive through. Thus, the Bahujan Samaj Party, to take an example, can declare that it hasn’t received any donations above Rs20,000 for the past 11 financial years. This is in keeping with general trends; the Association of Democratic Reforms has found that only 9% of parties’ funding comes from donations over Rs20,000.

Closing this loophole—the Law Commission report has a partial suggestion for how this can be done—must be accompanied by broadening and enforcing disclosure norms. As matters stand, the ECI’s disclosure guidelines have no statutory authority; nor are there legal consequences for non-compliance. And when parties and candidates do file returns with the ECI, they are not posted online for public access—inexcusable in this day and age.

Former prime minister Atal Bihari Vajpayee once said, “Every legislator starts his career with the lie of the false election return he files.” Unless wide-ranging electoral reforms are introduced—and political parties show the will to police themselves—the shake-up caused by the currency swap will remain a blip on the radar.

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