Assessing the Impact of Electoral Bonds on Indian Democracy: A Contested Narrative

Introduction: In 2017, India introduced a novel mechanism for political funding called “Electoral Bonds” with the promise of enhancing transparency and curbing corruption in political finance. However, since its inception, the Electoral Bond scheme has been a subject of intense debate, with proponents lauding its potential to bring clean money into politics, while critics argue that it undermines transparency and accountability in the democratic process. Assessing the true impact of Electoral Bonds on Indian democracy requires a nuanced understanding of both its advantages and drawbacks.

Advantages of Electoral Bonds:

1. Anonymity and Privacy: Electoral Bonds offer anonymity to donors, shielding them from potential backlash or repercussions for supporting a particular political party. This anonymity encourages individuals and corporations to contribute to the political process without fear of reprisal, thereby broadening the base of political funding.
2. Curbing Black Money: Proponents argue that Electoral Bonds help curb the flow of black money into politics by mandating transactions through banking channels. This reduces the reliance on cash donations, which are often untraceable and can facilitate corruption and illegal activities.
3. Encouraging Corporate Participation: Electoral Bonds provide a legitimate avenue for corporations to contribute to political parties transparently. By doing so, it incentivizes corporate entities to engage in the democratic process responsibly, fostering a more symbiotic relationship between businesses and the government.
4. Streamlining Political Funding: The introduction of Electoral Bonds aims to streamline the process of political funding by centralizing donations through designated banking channels. This centralized mechanism facilitates easier tracking and auditing of contributions, potentially enhancing transparency in political finance.

Drawbacks of Electoral Bonds:

1. Lack of Transparency: One of the primary criticisms of Electoral Bonds is their lack of transparency. Since the identity of donors remains undisclosed, there is limited visibility into the sources of political funding, undermining the principles of accountability and openness in a democratic system.
2. Potential for Quid Pro Quo: The anonymity afforded by Electoral Bonds raises concerns about potential quid pro quo arrangements between political parties and donors. Without transparency, there is a risk that political decisions and policies could be influenced by undisclosed vested interests, eroding the integrity of the democratic process.
3. Exclusion of Small Donors: Electoral Bonds primarily cater to large donors and corporate entities, potentially marginalizing smaller donors who lack the financial means to participate in the political funding process. This exclusionary aspect undermines the democratic ideal of equal participation and representation.
4. Bypassing Election Commission Scrutiny: Unlike traditional forms of political funding, Electoral Bonds do not require disclosure to the Election Commission of India. This bypassing of regulatory oversight limits the ability of electoral authorities to monitor and regulate political finance effectively, raising concerns about potential misuse and abuse.

Supreme Court ordered Judgement on Electoral Bonds in 2024

On 15th February 2024, the Supreme Court of India ordered to stop the issuance of Electoral Bonds to the issuing banks namely State Bank of India. The order says:

a) The Electoral Bond Scheme, the proviso to Section 29C(1) of the Representation of the People Act 1951 (as amended by Section 137 of Finance Act 2017), Section 182(3) of the Companies Act (as amended by Section 154 of the Finance Act 2017), and Section 13A(b) (as amended by Section 11 of Finance Act 2017) are violative of Article 19(1) (a) and unconstitutional; and

b. The deletion of the proviso to Section 182(1) of the Companies Act permitting unlimited corporate contributions to political parties is arbitrary and violative of Article 14. Read the complete order..

Conclusion: The debate surrounding Electoral Bonds underscores the complex interplay between transparency, accountability, and political financing in Indian democracy. While proponents argue that Electoral Bonds offer a pragmatic solution to curb black money and encourage corporate participation, critics contend that they compromise transparency and facilitate opacity in political funding. Ultimately, the true impact of Electoral Bonds on Indian democracy remains a subject of contention, highlighting the ongoing need for comprehensive reforms to ensure the integrity and fairness of the electoral process.

Authors View:

In my opinion, the Scheme helped keep track of incoming money to political parties. It’s very much true that before the electoral bond scheme, there was no accountability of how much funds and who was making such funding to the political parties. So, it is clear that before the electoral bond scheme, it was black money.

Therefore, the ruling Government should try to bring such a scheme again similar to the Electoral Bond by keeping in view the recent order of the Supreme Court, so that it does not violate any Constitution rights. I must say that necessary changes could have been made in the existing scheme to make it transparent, but unfortunately, it may not have had enough time to review it.