The Indian Supreme Court deemed the Electoral Bond Scheme unconstitutional, highlighting transparency issues. Micro-donations are proposed as a democratic alternative promoting political engagement.
On 15 February 2024, the Supreme Court of India declared the ‘Electoral Bond Scheme unconstitutional on the grounds that the non-disclosure of information regarding the funding of political parties was violative of the ‘Fundamental Right to Information’ of citizens under Article 19(1)(a) of the Indian Constitution. The Supreme Court’s judgement reinstated the legal framework existing before the Finance Act, 2017, thereby balancing the Right to Information with the Right to Privacy after applying the ‘Double Proportionality’ test, which the court has been consistently directing since the K.S Puttuswamy Vs Union of India, 2017 case. This blog examines how electoral bonds can be replaced by an alternative in micro-donations offering a more participatory and democratic approach to political funding campaigns.
Electoral Bonds – The Issues?
Through the Finance Act of 2017, electoral bonds were introduced by the Indian government to improve transparency in election donations by allowing anonymous donations and removing cap & disclosure obligations for corporations. In this regard, the scheme faced intense scrutiny & criticism due to the following issues:
Reduced Transparency: Donations through electoral bonds were made anonymous, which made it highly difficult to track the primary source of funds & led to concerns about the increased potential for black money entering the political system.
Corporate Lobbying: One of the negative effects of Corporate Political Activity (CPA) is increased corporate-political nexus due to the high concentration of corporate funding, which increased manifold after the electoral bonds scheme, as evident through the details disclosed by SBI to the Election Commission of India. In March 2024, the Election Commission of India published all the names of corporate donors. Ironically, some of those companies have had negative or zero profits after tax over the last many years, but still, they found ways to donate heavily to national and state parties, which highlighted the existing menace of corporate lobbying.
Political Economy of Reforms: This concept examines the influence of the economic interests of political institutions on their strategic behaviour in formulating policy changes. It also underscores that reforms are more sustainable when they are perceived as fair & inclusive by the general public. On the contrary, electoral funds have concentrated corporate funding, further alienating the average voter from the democratic process.
Micro-Donations – A healthy alternative
Micro-donations refer to raising smaller contributions from many citizens, which has great potential in democratising and decentralising political funding.
Micro-donations are inherently more transparent than large & anonymous corporate donations as they are contributed by general voters. More citizens engage actively and feel invested in politics and elections if they contribute to the campaigns of political parties or politicians of their interest, even through smaller contributions rather than remaining passive voters. To win an election, politicians need funding, which they are deriving majorly from a few big corporate donors. In return, they tend to skew policies in their favour, gradually driving the country towards “Oligarchic” democracy. Hence, if politicians are confident, they shall raise funds sustainably and rely on smaller donations from many individuals, and they will feel more accountable to the public instead of serving narrow corporate interests.
Micro-Donations: The Story So Far
Although the concept of ‘micro-donations for election funding’ is not so popular in India, the philosophy was implemented a century ago. During the 1921 Non-Cooperation movement, Mahatma Gandhi established the ‘Tilak Swaraj Fund’ introducing the innovative “Muthiya system”. In Ballia district (Uttar Pradesh), the common public used to set aside a handful of grains before preparing each meal and that particular portion would go to the Tilak fund. This Muthiya system built a sense of unity and brotherhood among the public, which could not have been achieved if our freedom movement had been funded only by a few corporations.
Post-Independence, the share of micro-donations declined, and corporate funding increased significantly. However, during the last few years, the big national parties of India, including BJP and INC, have launched micro-donation campaigns in different forms through social media. For example, PM Narendra Modi tweeted about donating INR 1000 or smaller denominations towards party funds before the 2024 general elections and appealed to millions of party workers and supporters to ‘Make a donation towards New India’s Creation’. Similarly, the INC started its campaign & appealed to its party supporters under the ‘Donate for Desh’ initiative.
Over the last decade, micro-donation platforms have been successful in the USA, wherein ‘Act Blue’ & ‘Win Red’ online platforms have revolutionised political fundraising by enabling small-dollar donations for Democrats & Republicans, respectively, by raising billions of dollars for political campaigns. Thanks to the Act Blue online platform, the growth in micro donations from individuals contributing to Democratic congressional candidates has far outpaced the increase in corporate donations.
The Way Forward
It seems that the political parties of India have started realising the potential of micro-donations but still the idea is yet to gain mainstream popularity and awareness among the general voters across the country. Institutionalising micro-donations by all political parties, leveraging successful models from other democracies coupled with the necessary regulatory framework & government incentives like tax benefits for small donors or public recognition for contributions shall help in establishing a micro-donations culture in the country. In conclusion, the flaws in electoral bonds necessitate exploring healthier alternatives like micro-donations, which shift the election donation process to a more transparent & democratic model, thereby strengthening the overall integrity of the electoral process. This shall ensure that our Indian democracy shall truly remain – “of the people, by the people and for the people”.
Author’s Bio: Sri Harshith Rajam is pursuing the Post Graduate Programme in Management at the Indian School of Business. Before joining ISB, he served as a Block Development Officer (Group-A Cadre) under the Ministry of Panchayat Raj & Rural Development, Govt of Andhra Pradesh. He has also served as a Central Intelligence Bureau Officer at the Ministry of Home Affairs, Govt. of India. His areas of interest include writing about the socio-economic issues of India, playing cricket, and traveling to historical places.
DISCLAIMER : The views expressed in this blog/article are author’s personal.