Financing Indian elections: Black all the way

By all accounts huge expenditures were incurred by candidates of big parties and since it was above the election expenditure limit of ₹70 lakh, most of it has to be black.

July 16, 2019 03:13 pm | Updated 03:15 pm IST

The Bharatiya Janata Party has suggested one nation one election. One of its advantages is that it would save the country much expense. How much is the expense on a general election? The recently concluded general elections can throw some light on it and also on how elections are financed in India.

Some have argued that it was the most expensive election anywhere in the world — even more than the 2016 Presidential election in the USA. Rallies, travel, cut outs, campaigning, social media activity, offices, paid news, etc., all need money. By all accounts huge expenditures were incurred by candidates of big parties and since it is above the election expenditure limit of ₹70 lakh, most of it has to be black.

Electoral bonds were supposed to help end use of black in elections. But analysts believe it has become a device to bribe the ruling party in white.

The Election Commission, at the beginning of April, had caught ₹1,460 crore worth of cash, liquor and drugs. By the end of April, the figure went up to ₹3,205 crore.

The last figure for May 20, at the end of the campaign, is ₹3,456 crore. This would amount to an average of ₹6.5 crore per constituency. According to some observers, what was caught was not even 10% of the actual expenditure by candidates.

There were on an average 15 candidates per constituency. So at ₹70 lakh per candidate for a Lok Sabha seat, the maximum that candidates could spend legally was ₹10.5 crore per constituency. So, what was caught was 63% of the allowed expenditure but what was actually spent was far higher. How much could it be?

One political leader said, upward of ₹10 crore is spent on an average by a candidate of a major party. Gopinath Munde admitted to spending ₹8 crore in the 2009 Lok Sabha election. Today with inflation and much higher stakes, the expenditure could be more than double that amount spent ten years back.

Reports are that a big meeting/rally costs upward of ₹1 crore. Then there are small meetings and road shows. The candidates need a team of volunteers who do the mobilisation and campaigning. Every booth has to be manned by many volunteers and additional volunteers are required to get voters out.

If there are 1,500 booths in a constituency, at least 7,500 workers would be needed. There was a time when people would come out voluntarily to help their candidate to fight the elections. My father told me that in 1951-52 they went campaigning with gram, peanuts and water.

Today, workers are paid on a daily basis and transport, liquor and food provided to them. Assuming only 20 days of campaigning (it is much longer) 1.5 lakh person days of work would be needed. If only ₹200 is spent on an average per worker per day, this would amount to ₹3 crore. This would be an average since the candidates who are locally popular are likely to get volunteers for free. In the last three days liquor, saris, other goodies and money are distributed.

So, an average figure of ₹10 crore per serious candidate is plausible. This would be 14 times the election expenditure limit of ₹70 lakh.

The total legally allowed expenditure of ₹10.5 crore by candidates per constituency would imply that for 543 constituencies, it would be ₹5,700 crore. Out of the 15 candidates per constituency, two or three are usually serious and the rest considered to be minor or dummy candidates. The minor candidates are not able to raise much of funds and spend little. The expenditure of dummy candidates is borne by the main candidates who put them up.

If it is assumed that of the 15 candidates, five spend up to the allowed expenditure limit while the rest spend little and maybe ignored, the figure of allowed expenditure by all the candidates in all the constituencies would be around ₹2,000 crore.

If it is assumed that the actual expenditure per serious candidate was ₹10 crore, including the financing of the dummy candidates, and assuming three serious candidates per constituency, the actual expenditure would turn out to be ₹16,000 crore.

If the assumption is that what is caught is only 10% of the actual expenditure, then one is looking at an expenditure of ₹35,000 crore and an average expenditure of ₹22 crore per serious candidate.

Over and above what the candidates spend, the political parties spend money in publicity, etc. There is no expenditure ceiling for them. But what they can show in their accounts is the amount legally donated to the party’s account. This is now largely coming via electoral bonds. The SBI, the sole agency to sell these bonds, has sold bonds worth ₹1,716 crore in January and March 2019 which has gone to the parties.

So, what could be legally spent on the just concluded national election by the candidates and the parties would be about ₹3,700 crores. Anything spent above this amount would be illegal money. If as per the above lower expenditure calculation, ₹16,000 crore was spent, the gap between the actual and that allowed was ₹12,300 crore.

This had to be funded entirely from illegal funds which have to be black since they cannot be shown in the accounts, either of the candidates or the parties or the donors.

The implication is that the electoral bonds hardly dent the problem of black money and associated undue influence of the wealthy on politics. Rather than solving the problem, they add to the existing problem of crony capitalism.

Some argue that the money spent on the elections boosts the economy by generating additional demand and also redistributes incomes to the poor. Of an officially estimated economy of about ₹180 lakh crore in 2018-19, ₹16,000 crore is negligible.

If to this amount, one adds the expenditure by the election commission, troop movements and so on, say, another ₹10,000 crore, the total becomes ₹26,000 crore; about 0.14% of the GDP or about 0.24 % of the black economy. This is not much of direct expense for maintaining democracy (even if imperfect).

Not much of an economic stimulus either and little redistribution of incomes to the poor. The loss to the poor is magnified a 100 fold when the elected leaders beholden to the corrupt who gave them money to come to power subvert policies to favour their financiers.

It leads to policy failure which is much bigger than the loss due to Model Code of Conduct. Thus, one nation one election hardly scratches the surface of what is wrong with the Indian elections.

The writer is the Malcolm Adiseshiah Chair Professor, Institute of Social Sciences and the author of Ground Scorching Tax .

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