While it is expected that electoral bonds will usher a new era of transparency in India’s electoral politics, however many skeptics believe that it would endanger democracy. Discuss (150 W/ 10 M)

Mentor’s Comment:

Introduction should explain about Electoral Bond and its functioning like it cannot be purchased by paying cash.

Further, talk how this will bring transparency. Limit in bond amount by one individual, involvement of banking institutions hence disclosing the details of donor and the donee, will curb black money and ill dumping of money etc…

Next, bring points how it will endanger democracy? Loopholes in electoral bonds, only the ruling party can ascertain the donor and donee and hence black mailing will follow…etc…

Next, mention way forward citing the importance of transparency for a democratic country like India. Also mention the recommendation given by former CEC S Y Quraisi for the creation of National Electoral Fund to which donors can contribute and later on the fund should be distributed to different political parties contesting election. This will bring transparency as well as accountability.


Model Answer:

  • Electoral Bond is a financial instrument for making donations to political parties. These are issued by Scheduled Commercial banks upon authorisation from the Central Government to intending donors, but only against cheque and digital payments (it cannot be purchased by paying cash).
  • These bonds shall be redeemable in the designated account of a registered political party within the prescribed time limit from issuance of bond.

How it will usher a new era of transparency?

  • It is expected that the bond will bring more transparency on who the donor and the donee is, and is in line of cleansing political funding. There are many bogus political parties which have been registered with the Election Commission and accept donations but never contest election.
  • These parties had become avenues of dumping ill-gotten money and a check on their financial transactions will definitely help the government achieve its goal of eliminating corruption and black money from the system.
  • Further, the provision limits the amount of cash donations that political parties can receive is stipulated at Rs. 2000 from one person. However, the political parties are entitled to receive donations by cheques or digital mode from their donors and will have to file prescribed Income-tax.
  • Currently, political parties are required to report any donation of over Rs. 20,000 to the IT department. But there has been a trend of more donations flowing by way of hard cash in smaller amounts. To fix this, the Budget has reduced the disclosure limit to Rs. 2,000 and insists that any amount over this must be paid through cheque or the digital mode. The idea is that electoral bonds will prompt donors to take the banking route to donate, with their identity captured by the issuing authority.

How it will endanger democracy?

  • There are loopholes to electoral bonds too. While the identity of the donor is captured, it is not revealed to the party or public. So transparency is not enhanced for the voter.
  • The most pernicious feature of electoral bonds is their potential to load the dice heavily in favour of the ruling party.
  • Banks receiving donation amounts on behalf of political parties as well as companies report to the RBI which in turn is subject to the central government’s will to know.
  • So, only the ruling party and no one else can ascertain which companies donated to the opposition parties.
  • It is then free to use the organs of the state to gently dissuade (or retaliate against) these misguided donors. Only the government is in a position to harass, or alternately protect donors from harassment by non-state harassers.

Way forward:

  • There is a need to have complete transparency in funding system of political parties as 69% of the income of political parties is from unknown sources which gives opaque picture of political parties’ income.
  • Former Chief-Election Commissioner S Y Quraisi has suggested an alternative worth exploring. He suggested creating a National Electoral Fund to which all donors can contribute. The funds would be allocated to political parties in proportion to the votes they get. Not only would this protect the identity of donors, it would also weed out black money from political funding.


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