Electoral bond and its Current scenario in India

Author – Kalash Jaiswal, College – Brainware University

Introduction

Electoral bonds, introduced in India in 2018, aim to reform political funding by promoting transparency and curbing black money in campaigns. Issued by the State Bank of India (SBI), these bonds can be purchased by citizens and entities during designated periods and donated to registered political parties that secured 1% or more of the votes cast in the previous election.
However, critics argue that this anonymity undermines public transparency and could lead to large, untraceable donations influencing political decisions. The ruling party receives a disproportionate share of these donations, raising concerns about an uneven playing field in elections. The government and SBI have access to donor information, leading to fears of potential misuse. Balancing these goals with public disclosure and fair competition remains a critical challenge.

Current Scenario of India

Electoral bonds, introduced in India in 2018, aim to reform political funding by promoting transparency and reducing black money in elections. Issued by the State Bank of India (SBI), these bonds can be purchased by Indian citizens and entities in denominations ranging from ₹1,000 to ₹1 crore. Donors must comply with Know Your Customer (KYC) norms, ensuring only verified individuals and entities can buy them. Political parties that secured at least 1% of the votes in the last election are eligible to receive and redeem these bonds within 15 days.

Electoral bonds have significantly impacted the Indian economy, particularly in political funding and the formal banking sector. They have reduced cash-based, unaccounted contributions, promoting cleaner electoral practices. However, the extent of black money’s eradication remains debated, as the anonymity feature of electoral bonds may still allow undisclosed large donations.

Donations made through electoral bonds are eligible for tax deductions, providing a legal and tax-efficient way for individuals and corporations to support political parties. However, concerns about potential revenue loss for the government arise.

Political Impact of Electoral Bonds

The introduction of electoral bonds in India has raised concerns about an uneven playing field in elections, where well-funded parties can outspend competitors, potentially skewing electoral outcomes. The concentration of financial power in a few hands raises questions about the influence of wealthy donors on political decisions and policies. One of the primary criticisms of electoral bonds is the lack of transparency and accountability, as the anonymity feature prevents the public from knowing who is funding political parties. Critics argue that this undermines the democratic process, leaving citizens in the dark about the sources of political funding. Several petitions challenging the constitutionality and transparency of the electoral bond scheme are pending in the Supreme Court of India, which has expressed concerns over potential misuse and lack of transparency. The outcome of these legal challenges will be crucial in determining the future of electoral bonds in India.

Economic Implications

The introduction of electoral bonds has had mixed economic and political reactions. While the scheme has helped channel political donations through formal banking channels, it has raised concerns about money laundering and potential misuse. The anonymity feature and the potential for misuse raise concerns about money laundering. The tax benefits associated with donations via electoral bonds could lead to reduced tax revenue for the government, impacting public finances. The dominance of major political parties in receiving donations through electoral bonds has significant implications for smaller parties, as they struggle to compete on equal terms with well-funded rivals.

This financial disparity affects the overall competitiveness of elections and undermines the principles of a level playing field and fair competition. The government defends the scheme as a necessary measure to reduce black money and formalize political donations, while opposition parties and civil society organizations criticize the lack of transparency and potential misuse. Media coverage has reflected these divergent views, with some supporting the scheme’s intent and others wary of its implications for democratic transparency.

Criticism and Controversies

The electoral bonds scheme in India has faced criticism and controversy due to its lack of transparency and potential misuse of donor information. The anonymity feature shields donors’ identities, raising concerns about unchecked power and influence by wealthy individuals and corporations. Critics argue this undermines democratic principles and allows for quid pro quo arrangements. The ruling party has disproportionately benefited from the scheme, skewing the level playing field for fair elections. Concerns also arise about the potential misuse of donor information by the government for political gain. Legal challenges have emerged, with petitions in the Supreme Court questioning the scheme’s constitutionality and calling for greater transparency. A final verdict is still pending, leaving the future of electoral bonds uncertain.

Recommendation for Reformation of Electoral Bonds

To improve the transparency, accountability, and fairness of electoral bonds in India, several key reforms are needed. These include mandating public disclosure of donor identities and donation amounts, establishing independent monitoring bodies, balancing donor anonymity with public transparency, integrating strong anti-money laundering measures, and encouraging political parties to adopt best practices.

Real-time disclosure systems, managed by independent electoral authorities, would help the public understand who is funding political campaigns and reduce the risk of undue influence by wealthy individuals or corporations. Establishing independent monitoring bodies, including representatives from the Election Commission of India, the Reserve Bank of India, and civil society organizations, would ensure compliance with legal and ethical boundaries. Balancing donor anonymity with public transparency, implementing strong anti-money laundering measures, and encouraging political parties to adopt best practices are also crucial.

Implementing these recommendations can significantly improve the transparency, accountability, and fairness of electoral bonds in India. By enhancing public disclosure, establishing independent oversight, balancing anonymity with transparency, strengthening legal safeguards, encouraging best practices among political parties, and promoting public awareness, electoral bonds can better serve their intended purpose.

Conclusion

The introduction of electoral bonds in India aimed to increase transparency and reduce black money’s influence in political funding. However, the anonymity feature has raised concerns about transparency and potential undue influence by wealthy individuals and corporations. This opacity undermines democratic accountability and leads to allegations of financial favoritism towards the ruling party. Smaller parties and independents face increased challenges in competing fairly, potentially impacting the democratic process. Legal challenges in the Supreme Court highlight the ongoing debate about the scheme’s constitutionality and effectiveness. Implementing reforms to enhance transparency, establish independent oversight, and balance donor privacy with public accountability is crucial for a fair, transparent, and competitive electoral process.