As reports highlight staggering multi-billion dollar spending in US elections, it raises a natural question for the world's largest democracy: How does India regulate the flow of money into its own politics? The systems are worlds apart.
The Foundation: Candidate Spending Caps
The bedrock of
India's campaign finance regulation is the limit placed on individual candidates' expenditure. Governed by the Representation of the People Act, 1951, and the Conduct of Elections Rules, 1961, these caps are enforced by the Election Commission of India (ECI). As of early 2022, a candidate for a Lok Sabha seat can spend up to ₹95 lakh in larger states, while a candidate for a legislative assembly seat is capped at ₹40 lakh. Every candidate must maintain a detailed account of their spending and submit it to the ECI within 30 days of an election's conclusion. Failure to comply or exceeding the limit can lead to disqualification for up to three years. However, a significant loophole exists: while candidates are limited, there is no cap on how much a political party can spend on a campaign, as long as the funds are not directly attributed to a specific candidate's election.
Corporate and Individual Donations
Political parties in India can accept voluntary contributions from individuals and companies. Individuals can donate any amount without a ceiling. For corporations, the rules have shifted over time. The Companies Act, 2013, initially capped corporate donations at 7.5% of a company's average net profits over the previous three years. However, amendments in 2017 removed this cap entirely, allowing companies to donate unlimited amounts, provided it is authorized by their board. Donations cannot be made in cash and must be disclosed in the company's profit and loss account, though the name of the recipient party is no longer required in that disclosure. Furthermore, all parties are required to report any donation exceeding ₹20,000 to the Election Commission, providing details of the donor. Foreign contributions, however, are strictly prohibited under the Foreign Contribution (Regulation) Act.
The Controversial Electoral Bonds Scheme
Introduced in 2017 to supposedly cleanse political funding by eliminating cash, electoral bonds were financial instruments that individuals and corporations could buy from the State Bank of India (SBI) and donate to a political party anonymously. The government argued this ensured donations were made through official banking channels. However, the scheme was widely criticized for its opacity. While the donor's identity was known to the bank (and by extension, the government), it remained hidden from the public, undermining transparency. Critics argued this created an information imbalance and a risk of quid pro quo arrangements between donors and the ruling party. In a landmark decision in February 2024, the Supreme Court of India struck down the electoral bond scheme as unconstitutional, citing that it violated the voters' right to information. The court ordered SBI to disclose the details of donors and recipients. Following the ban, political funding appears to be reverting to an older mechanism known as Electoral Trusts, which require donor disclosure.
A World Away from US 'Super PACs'
The Indian system stands in stark contrast to that of the United States. While the US has limits on direct contributions to candidates, the defining feature of its system is the existence of 'Super Political Action Committees' or Super PACs. These independent committees can raise and spend unlimited amounts of money to support or oppose candidates, as long as they do not coordinate directly with the campaign. This has led to an explosion in election spending. The sources of funding for many of these groups, often dubbed 'dark money' organizations, can be obscure. India does not have a parallel system of sanctioned, unlimited independent spending on this scale. The primary distinction is that India's regulations, for all their loopholes, focus on limiting candidate expenditure and party reporting, whereas the US system, following court rulings like Citizens United, allows for vast, unlimited spending by outside groups.
The Challenge of Transparency and Unaccounted Money
Despite the legal framework, the biggest challenge in Indian elections remains the vast gap between official spending limits and the actual money spent. Ground reports suggest that the real cost of contesting a seat can be many multiples of the legal limit, with figures sometimes running into crores. The use of 'black money' or unaccounted cash remains a pervasive issue. While the electoral bond scheme was meant to curb this, its anonymity was seen by many as a step backward for transparency. Even with the bonds scheme struck down, the challenge of ensuring all political funding is transparent and accounted for persists. The debate continues over how to create a system that is both transparent to the public and fair to all participants, ensuring that financial power does not translate directly into political influence.
