Electoral Reforms In India

[op-ed snap] The opacity around electoral bonds


From UPSC perspective, the following things are important :

Prelims level : Electoral Bonds

Mains level : Limitations of electoral bonds and electoral funding laws


Election Commission and the Reserve Bank of India had expressed reservations about the Electoral Bonds scheme.


    • In 2017, then RBI Governor wrote to the Finance Minister that “allowing any entity other than the central bank to issue bearer bonds is fraught with considerable risk.”
    • The EC warned that this would allow illegal foreign funds to be routed to political parties.
    • There is no other country in the world where such a scheme exists.

Electoral Bonds

    • The scheme was passed in the Lok Sabha as part of the Finance Bill so that it could bypass Rajya Sabha.

Importance of Electoral Bonds – Money

    • Money plays a larger role in elections. India spends more on elections than the U.S. with a per capita GDP of 3% of the U.S. 
    • Sustaining victory over several elections requires funds. 
    • To reach voters, candidates and parties use hoardings and advertisements on printed, electronic and social media. They hold election rallies. They travel and have to pay party workers. 
    • There is the added expenditure of buying votes through the distribution of gifts, money, liquor and so on.

Funding elections

    • Some countries have public funding of elections. 
    • Campaign funding laws and reforms are a constantly evolving subject internationally. They focus on public funding, limits on expenditure, limits on donations, transparency in funding and penalties for non-compliance.

Electoral bonds

    • The gaps between the stated purpose of the electoral bonds scheme and the law are glaring. 
    • The voter does not know who is funding whom through electoral bonds. 
    •  This is supposed to protect the donors from harassment from the authorities.


    • Harassment by the party in power through law enforcement agencies is well known. The bank knows the purchaser of the bonds as well as the party that cashed it. 
    • The law agencies can obtain this information whenever they want. 
    • Ruling party use this to demand donations for itself, prevent donations to others, and use the law enforcement agencies to harass those who donate to rival parties.
    • A large corporate could buy the government using electoral bonds. 
    • The ruling party gets nearly all the funds. 
    • If big money entirely funds elections in an opaque way, democracy will not exist.

Other electoral funding challenges

    • India continues to have spending limits. Hardly any winning candidate sticks to it.
    • Black money cannot be used to buy electoral bonds. However, black money can be used outside the scheme during elections. 
    • The reduction in cash donations from ₹20,000 to ₹2,000 is not good enough. There are parties with hundreds of crores of declared income who claim that all the funds were received from small cash donations of ₹100 or less. 
    • ₹2,000 notes printed after demonetisation are being hoarded. 
    • Electoral bonds cannot eliminate black money. 

Way ahead

    • Any political party can voluntarily choose to disclose its funds and sources. 
    • There is no law that prevents them from doing so. 
    • They can also state publicly that they will henceforth not use black money. 
    • We need to benchmark ourselves against the best international practices and laws on campaign funding. 
    • Complete transparency in all funding.
    • Political parties need to be under the Right to Information Act. 
    • There must be spending limits as well as donation limits and strict penalties for flouting rules and the law. 
    • Public funding needs to be examined and introduced with proper checks and balances.
    • Voters need to demand changes and we need voter awareness campaigns. 
    • The electoral bonds scheme needs to be scrapped.


Electoral Bonds

[Burning Issue] Electoral Bonds

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