Electoral bonds are like a Pandora’s Box, which could unleash greater problems for the economy and perpetuate the culture of black money, say Megha jain and Aishwarya Nagpal

Much has been said and debated since the 2017-18 Union Budget’s announcement covering various aspects of funding of political parties and the

Electoral Bond Scheme (EBS). It has often been pointed out that the EBS provides an easy pass of power and influence to foreign corporates. This at a heavy price to Indian democracy. By keeping the donor’s identity anonymous, electoral bonds allegedly add to ‘opacity’ rather than ‘transparency’, thus raising doubts about India’s ability to curb black money and the rising number of money laundering cases. Schemes like EBS can best be labelled as ‘white in black’ ie, white to deal black/unaccounted money accounts. In this context, let’s review the underlying concept and misperceived notions about EBS.

Why EBS: EBS was presented by the Government as a welcome step to promote a cashless/digital economy. These bonds are unlike normal ones and have no coupon rate of return/interest attached to them. They are, in fact, a written promise to pay a stated sum (denominations as per GoI regulations) to a specified person (political party) or the bearer at a specified date (within 15 days from the date of purchase at the quarter’s beginning month) or on demand. The holder is the deemed owner, who can transfer the funds to the party of his/her choice, within the indicated time span. There is no upper limit defined in this case unlike cash funding to political parties, which was capped at Rs 2,000 till last year. Anyone, and not necessarily a company, can opt for the scheme, thus benefitting the donors through legitimate tax havens. 

Flawed objective: Electoral bonds were aimed at infusing transparency in the entire electoral funding process but a careful look will reveal that the ideology itself is dubious. These bonds have remained controversial as they are considered to be a “step backward” in the fair play of democracy and accountability. Unbarred contributions by loss-making companies can, perhaps, add on to the existing quest. Also, the process of distribution — only through one Public Sector Bank (PSB) — seems to empower monopolistic concentration. In the long term, in a way, they may create a separate pungent lobby of a few dominating players, thus leading to greater economic inequalities. The powerful few could just be interested in promoting “economic bads” in order to meet their own ends.

Pros and cons: Undoubtedly, EBS is no less than a “black-box” where both the donor and the recipient cannot even make a faint guess as to how it would unfold in the future. A careful evaluation of the perceived benefits and prospective costs will reveal the possibility of higher social costs than private benefits, hence adding to “negative externalities.”

The same may prove to be a threat to automatic dynamic economic adjustments of open market/free forces. In a country like India, where institutions are yet to realise their true potential to impact the financial independence and openness, EBS may not be fundamentally conducive due to clustering of command in the hands of a few. It could ultimately prove to be unhealthy and unequitable, thus defeating the central theme of democracy. Political polarisation, the future inclination to a group/person and dependency on external sourcing of funds are all additional ulterior motives behind schemes like EBS.

Way forward: As has been suggested by many, the creation of a National Election Fund (NEF) to specifically meet the objective of political election funding can prove to be a much better alternative in order to pave the way to capture ‘transparency’ in its true form.

Further, the same could be appended by direct state funding, which would definitely diminish the biases and skewed favoritism to the ruling/powerful parties. In order to stop cash donations entirely, make all contributions transparent and allow independent scrutiny of political parties’ books of accounts. For good, the EBS move has been challenged in the Supreme Court many a time by agencies like the Association for Democratic Reforms (ADR). But is this enough to stop the encroachment in a political democratic environment, especially when the scheme is proposed by the ruling party itself?

To conclude, electoral bonds seem to be a Pandora’s Box,  which would unleash greater problems with fewer benefits. If at all this scheme gains momentum in its endeavour to arrest ever-soaring corruption, India will be the only country in the world to present the notion of EBS with nothing towards empowerment.

(Megha Jain is Assistant Professor, Daulat Ram College and Aishwarya Nagpal is Senior Research Scholar, Faculty of Management Studies, University of Delhi)