1. Overview of Political Finance in South Asia, with a Focus on India E. Sridharan University of Pennsylvania Institute for the Advanced Study of India 15 December 2015

2. South Asian systems largely similar South Asian political finance regimes, except Bhutan, seem largely similar in the following five respects – No effective limits on corporate, anonymous and trade union donations to either parties or candidates No public funding, except Sri Lanka and Bhutan Limits on expenditure that, we know from experience, are impossible to effectively monitor and check Hence, a free-for-all arms race in spending Hence, ineffective reporting and disclosure systems despite rules

3. Scale of India’s Elections and Expenditure India’s 2014 (16 th ) General Election 850 million voters including 100 million new 8251 candidates from 384 parties for 543 lower house seats Westminster-style single-member, simple plurality rule Estimated $5 billion spent in the campaign

4. India’s Political Finance Regime Representation of the People Act (RPA) 1950, 1951 governs elections. Independent Election Commission of India (ECI), 1950 Parties raised money from membership and contributions in the 1950s, 1960s. Spending ceilings for candidates Corrupt fund-raising and black money nexus in a heavily regulated economy with high corporate taxes 1969 – ban on company donations to parties without introducing state funding, a critical juncture Lack of adequate legal sources of funds reinforces nexus with black money, corruption

5. Developments in the 1970s, 1980s 1970s – intensified state regulation of the economy, inflation, growing competition for dominant Congress party 1975 – party spending exempted from candidate spending ceiling – no limits – by Explanation 1 to Section 77(1) of RPA 1979 – parties exempted from income and wealth taxes, but have to file confidential income tax returns 1985 – corporate donations to parties re-legalised but no tax benefits. Fails to bring transparency Opaque fund-raising institutionalised across parties

6. 1990-2002 1993 – Confederation of Indian Industry supports state funding of elections 1996 – Supreme Court forces parties to file income tax returns that they should have been doing by threatening to include party spending for candidate spending limits 1998 – campaign period shortened to 14 days 1998 – beginning of significant free air time on state-owned electronic media Reform committees’ (Goswami, Gupta) suggestions ignored. Growing NGO and media activism on electoral reform

7. Changes in Disclosure Regime 2003-15 2003 - ECI, backed by Supreme Court, made it mandatory for candidates to declare their and their dependant relatives’ assets, their criminal records and their educational qualifications 2003 – Election and Other Related Laws Amendment Act – introduced tax deductibility of donations to parties, but still left loopholes for unlimited party spending and anonymity of small donors under Rs. 20,000 ($333). 2005 – Right to Information Act 2008 – Political parties income tax returns, and their incomes and expenditures, disclosed under RTI Act, from 2004-05, disseminated by Association for Democratic Reforms Up to 2014-15, the bulk of party incomes are from anonymous donors 2014 – ECI’s transparency guideline removes donor anonymity for small donations under Rs. 20,000; remains a guideline only

8. Summing Up While the changes in the disclosure regime of 2003-08 has greatly increased transparency, Explanation 1 remains in place, and loopholes mean that unlimited party spending continues Major loophole in disclosure regime is that donors and amounts of under Rs. 20,000 ($333) do not have to be identified by name or amount. Vast sums, majority of money of all parties, are raised through this anonymity loophole Accounts are audited by party-appointed auditors, contra to ECI proposal of government auditors; large-scale under-declaration probable Disclosure regime changes came about due to NGO, media and judicial activism, which were resisted by parties; donors passive Possible direction for solutions – public funding of parties in general or for elections STRICTLY conditional upon internal democracy, transparency and accountability of funds, in parallel with freer private funding and spending also STRICTLY conditional upon full transparency and disclosure of party incomes and expenditures

9. http://www.thehindu.com/opinion/blogs/blog-datadelve/article5182451.ece