BLACK MONEY AND THE FUNDING OF ELECTIONS

Abstract The institution of democracy thrives on the conduct of ‘free and fair’ elections. The political parties and the candidates require huge funds to build and sustain themselves, garner support and contest elections. The need to raise funds for election expenses paves the way for collecting and diverting huge amounts of money through illegal route and thereby turning politics into a “dirty business.’’ In spite of the statutory limit on election expenditure, the elected members of the national and state legislatures blatantly violate the same and also undervalue their expenses in audit accounts to be submitted to the Election Commission. Due to absence of adequate and legal source of funding, the politicians tend to rely heavily on black money to fund their campaigns. Sumantra Bose has observed that “the culture of corruption is deeply intertwined with the ways in which power is won, exercised and retained in India’s democracy.” For the 2014 elections, the election expenditure crossed the Rs. 100 billion mark. In this backdrop, this paper discusses the causes for the rising trend in financing of political parties and their elections. This paper is divided into three parts. The first part looks at the evolution of the regulatory regime governing election financing with respect to the amendments made in the Representation of People Act, 1951 and lifting of the ban on corporate donations. The second part traces its impact exposing the irregularities and flaws inherent in the system of electoral finances in light of various scams. The final part analyses the reforms in this area most notably, the proposal of partial state funding in opposition to private funding as incorporated by other democracies and the possibility of enhancing the powers of the institutional structure overseeing electoral reforms, the Election Commission of India.