Political Financing Crisis in India: Rising Costs and Falling Transparency in 2024 Elections

New Delhi: India’s democracy, often celebrated as one of the most vibrant in the world, faces a growing crisis in political financing. The 2024 Lok Sabha Elections, with an unprecedented expenditure of ₹1.35 lakh crore, have been dubbed the most expensive electoral event globally. However, the escalating costs of elections, coupled with widespread non-compliance in expenditure reporting and a lack of transparency in funding sources, have raised serious concerns about the integrity of India’s electoral process.

The Costliest Election in History: ₹1.35 Lakh Crore and Counting

The 2024 Lok Sabha Elections have set a new benchmark for electoral expenditure, with costs soaring to ₹1.35 lakh crore. This staggering figure underscores the increasing financial demands of modern electioneering in India, where campaigns rely heavily on media, rallies, and digital outreach. The scale of spending has raised eyebrows, especially when contrasted with the Election Commission of India’s (ECI) expenditure limits of ₹95 lakh per candidate for Lok Sabha elections and ₹40 lakh for Assembly elections. Reports indicate that actual spending frequently surpasses these caps, often facilitated by third-party campaigners and loopholes in the Model Code of Conduct.

The financial burden of elections is not limited to candidates but extends to political parties, which are required to submit expenditure statements to the ECI within 90 days for general elections and 75 days for assembly elections. However, according to a recent ADR report, many parties delayed these submissions by 1 to 232 days, while some failed to report altogether. This widespread non-compliance has fueled concerns about accountability and transparency in political financing, threatening the democratic principle of a level playing field.

The Crisis of Transparency: Undisclosed Funding Sources

One of the most alarming trends in Indian political financing is the opacity surrounding funding sources. Between 2004-05 and 2022-23, approximately 60% of contributions to India’s six major political parties came from undisclosed sources, according to ADR data. This lack of transparency obscures the influence of donors, raising questions about potential quid pro quo arrangements and the fairness of electoral competition.

In the 2024 general elections, national parties collected over 93% of total funds, highlighting a significant disparity in financial resources. This concentration of funds among a few dominant parties undermines the democratic ideal of equal opportunity for all contenders. The reliance on undisclosed sources further complicates efforts to monitor and regulate campaign financing, as black money and unreported transactions continue to infiltrate the system.

The Supreme Court’s recent directive to the State Bank of India (SBI) to release data on electoral bonds marked a significant step toward transparency. Electoral bonds, introduced as a mechanism to streamline political donations, have been controversial due to their anonymity. The court’s order aimed to shed light on corporate and individual contributions, but critics argue that this is only a small step in addressing the broader issue of financial opacity in elections.

Corporate Donations and Electoral Bonds: A Closer Look

Corporate funding has emerged as a significant factor in Indian elections, with political parties receiving substantial contributions from businesses. According to an ADR study, corporate donations to political parties during the 2019 Lok Sabha elections amounted to over ₹920 crore. The Bharatiya Janata Party (BJP), Indian National Congress (INC), All India Trinamool Congress (AITC), Nationalist Congress Party (NCP), and Communist Party of India (Marxist) (CPM) were the primary recipients. In the financial year 2020, the BJP led the pack, followed by the INC and NCP, with major donors including ITC Limited, Jankalyan Electoral Trust, and Prudent Electoral Trust.

Electoral bonds have become a significant source of revenue for political parties, particularly for the BJP and INC. While these bonds were intended to formalize political donations, their anonymity has sparked concerns about accountability. The 2024 elections have brought these issues into sharper focus, as the integration of wealth into electoral politics continues to limit opportunities for less affluent candidates.

Wealth and Electoral Success: A Barrier to Entry

The intertwining of wealth and electoral success is a growing concern in Indian politics. Data from the ECI, compiled by Lokniti-CSDS, reveals a stark correlation between candidates’ assets and their electoral outcomes. In Madhya Pradesh, 44% of winning candidates in the 2024 elections declared assets exceeding ₹5 crore, while 31% had assets between ₹2 crore and ₹5 crore. Rajasthan followed a similar trend, with 39% of winners possessing assets of ₹5 crore and above, and 29% in the ₹2 crore to ₹5 crore range. Chhattisgarh, however, presented a slightly different picture, with 66% of winning candidates holding assets between ₹50 lakh and ₹2 crore, and only 30% above ₹5 crore.

This data underscores the increasing role of wealth in electoral politics. In Madhya Pradesh, for instance, 75 BJP MLAs and 25 Congress MLAs possessed assets worth ₹5 crore and above, while in Rajasthan, 39 BJP MLAs and 29 Congress MLAs fell into the same category. Chhattisgarh showed a lower concentration of high-value assets among elected representatives, potentially due to the defeat of many incumbent Congress MLAs with substantial wealth.

The asset distribution among elected representatives highlights a troubling trend: politics is becoming increasingly inaccessible to those without significant financial backing. The average increase in assets among re-elected MLAs further reinforces this point. In Madhya Pradesh, Congress MLAs reported a 51% average increase in assets, while BJP MLAs saw a 33% rise. In Rajasthan, the figures were 37% for Congress and 63% for BJP, and in Chhattisgarh, 49% for Congress and 29% for BJP. Smaller parties in Rajasthan reported a staggering 157% average increase in assets, suggesting significant wealth accumulation among their re-elected MLAs.

The Exclusionary Nature of Indian Politics

The soaring costs of elections raise critical questions about the affordability of political participation in India. A 2014 study by the Centre for Media estimated that the parliamentary elections that year cost $5 billion, a 40% increase from previous elections. In a country where 60% of the population subsists on approximately $3 per day, this translates to roughly $8 spent per voter—an astronomical figure for most citizens.

The financial barriers to entering politics disproportionately affect the youth and less affluent individuals, effectively debarring “outsiders” who lack access to substantial resources. This exclusionary nature of Indian politics undermines the democratic principle of equal representation and limits the diversity of voices in governance.

Proposed Reforms: A Path to Clean and Fair Elections

To address the crisis in political financing, several reforms have been proposed by experts and committees. The Law Commission has recommended capping the total expenditure by political parties during elections to curb excessive spending. The Indrajit Gupta Committee (1998) advocated for state funding to reduce disparities in financial resources among parties, ensuring a more level playing field.

The ADR has proposed limiting campaign expenditures to transactions via cheque, demand draft (DD), or RTGS to curb the use of black money. Additionally, it recommends that all donor details be publicly disclosed to enhance transparency. Independent observers should also be appointed to monitor party expenditures, ensuring compliance with ECI regulations.

These reforms aim to address the core issues of financial opacity and unequal access to resources, fostering a more inclusive and accountable electoral system. However, implementing these measures will require political will and robust enforcement mechanisms.

The Role of the Election Commission

The ECI has made strides in promoting electoral integrity, including reforms to ensure the impartiality of the voting process. However, challenges persist, particularly in monitoring and regulating political financing. The ECI’s expenditure limits are often circumvented, and the lack of stringent enforcement allows candidates and parties to exploit loopholes. The Supreme Court’s intervention in the electoral bonds case has highlighted the need for greater oversight, but systemic reforms are necessary to address the root causes of financial opacity.

The ECI also faces challenges in resolving disputes related to political party splits and mergers, as noted in a 2017 UPSC question. Ensuring the trustworthiness of elections, particularly in light of controversies surrounding Electronic Voting Machines (EVMs), remains a priority for the commission.

Conclusion: Toward a Transparent and Inclusive Democracy

India’s 2024 Lok Sabha Elections have brought the crisis of political financing into sharp focus. The unprecedented cost of elections, coupled with widespread non-compliance in expenditure reporting and a lack of transparency in funding sources, threatens the democratic principles of fairness and accountability. The concentration of wealth among elected representatives and the reliance on undisclosed donations underscore the need for urgent reforms.

By implementing measures such as expenditure caps, state funding, mandatory digital transactions, and public disclosure of donor details, India can move toward a more transparent and inclusive electoral system. The ECI, in collaboration with policymakers and civil society, must prioritize these reforms to ensure that democracy remains accessible to all, regardless of financial status. As India navigates its evolving political and economic landscape, addressing the crisis of political financing is imperative to uphold the nation’s democratic values and foster meaningful public participation.

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