Modinomics has produced high growth but everything isn't as it seems in India's economy. Photo: AFP

Elections in one of the world’s largest democracies are a money pit with Indian political parties and candidates having spent over $8 billion in this year’s general elections.

The Narendra Modi-led Bharatiya Janata Party, which won with a landslide majority in April this year, was the biggest spender – accounting for nearly 50% of the total expenditure. The principal opposition party, the Indian National Congress, spent about 20%, according to a Centre for Media Studies report.

Such big spending had been enabled by crucial political funding policies introduced by the BJP government in its previous tenure between 2014 and 2019. In January 2018, the BJP introduced an “electoral bearer bonds” scheme, which it promoted as a move to increase transparency in political funding and curb the use of black money.

Currently, however, the BJP is under fire for allegedly misrepresenting scheme. Contrary to the boast of transparency, corporations and individuals can use it to make anonymous donations.

The electoral bond is similar to a promissory note, payable to the bearer on demand, and is interest-free. Anyone who wishes to donate to a political party can buy a bond from the State Bank of India. The donor then transfers the bond into the account of his or her preferred party.

‘Breach of privilege’

On December 18 last year, in reply to an upper house question on concerns about electoral bonds raised by the Election Commission of India, the BJP-led government said it had not received any formal communication from the commission. However, documents obtained through a filing under the Right to Information Act by retired naval commodore Lokesh Batra reveal that the commission had indeed written to the union Ministry of Law and Justice.

Member of Parliament Mohammed Nadimul Haque posed the question to the then minister of state for finance P. Radhakrishnan, asking “ whether it is a fact that the ECI had raised concerns on the issue of electoral bonds.” If so, he demanded to know “the details thereof, as well as reasons thereof and the steps taken by the government to address the concerns.”

Government’s reply to the question raised on electoral bonds in the Upper House, India.

Under a clause in the electoral bond scheme, donors do not need to reveal themselves. This clause undermines the Representation of People’s Act ,under which earlier the political parties had to disclose from whom they got funding. The act was amended to accommodate the anonymity clause of the electoral bond scheme.

In the letter dated May 26, 2017, the Election Commission expressed concerns regarding the amendments to the Finance Act, 2017. Issues included the possibility of shell companies being set up to launder black money, taking advantage of the anonymity clause. The letter notes that it is also impossible to know if the funding came from government companies or foreign sources.

On February 13 this year, Haque complained to the upper house chairman of a breach of privilege by the minister of state for finance. (Parliamentary privilege is defined as a legal immunity in which legislators are granted protection against civil or criminal liability for actions done or statements made in the course of their legislative duties.) Haque stated that the government’s reply contradicted the various letters exchanged among the Election Commission, the Ministry of Law and Justice and the Ministry of Finance.

“These letters establish the fact that the ministry had indeed received concerns of the Election Commission as covered by various news reports. This amounts to misleading the house and qualifies as a breach of privilege. The said incident raises further concerns about the transparency of the scheme,” Haque’s letter said.

Supreme Court order

Meanwhile, the Election Commission approached the Supreme Court citing the same concerns. After multiple hearing, the court ordered in April that each political party disclose the consolidated amount of funding received through electoral bonds in a sealed envelop to the commission.

That was described as an interim order. The not-for-profit Association for Democratic Reforms had sought a stay on the controversial bonds scheme, but the court cited a shortage of time in declining to rule thusly.d

Jagdeep Chhokar, co-founder of ADR, said that the government’s claim not to have received any letter from ECI was deliberately misleading. “If the government says anything in the Parliament, it can’t be taken lightly. The ministry prepares the answer, which then goes through multiple checks. Hence, it cannot be a ‘mistake’. One can use vague language but cannot lie.”

On the electoral bonds he said, “It is a blatant assault on legitimate money in the election and political arena and removes even a shred of honesty and transparency.”

It has been revealed that 32.4 million rupees in  taxpayers’ money was paid by the government to the State Bank of India as commissions for sale and redemption of the bonds that were purchased by ‘anonymous donors for political parties’. The government notification dated January 02, 2018, when the electoral bond scheme came into effect, does not seem to include a clause setting forth this specific payment by the government.

The ruling BJP got more than 90% of the controversial donations of the total 30 billion rupees worth of bonds. It was the last party to submit the details of the donated electoral bonds, 40 days after the Supreme Court deadline of May 31

Election Commission officials say it is quite possible that the parties have simply submitted that they are not in possession of the donor details themselves. According to the finance ministry notification, the lone bank authorized to sell these bonds, the State Bank of India, is the only legal entity to have details of the donors, The Print reported.

The SBI insisted that the information relating to electoral bonds is confidential, held by the bank in “fiduciary capacity.”

Finally, on August 5 during the budget session in the upper house, the current minister of state for finance, Anurag Thakur, corrected the response to the question on electoral bonds. He provided a detailed list of the concerns raised by the Election Commission.

But doubts over the transparency of the electoral bonds scheme remain.

Asia Times reached out for more information to the Budget Division of the Department of Economic Affairs, which handles the electoral bond scheme, but did not receive a reply.

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