Tuesday, March 28, 2017

India's campaign finance reform journey

The recently passed amendments to the Finance Bill 2017 by the Lower House of the Indian Parliament includes a provision to remove the caps on undisclosed donations to political parties. Critics are right in questioning the wisdom of pushing through such an important decision as part of a Money Bill. And it is most likely that this would be litigated and stuck down by the Supreme Court. 

But their critique that this would weaken campaign finance reforms is arguable. In fact, I am inclined to argue that lifting the cap on corporate donations may be a prudent compromise, though the government may have ended up overreaching with its other elements. 

The conventional wisdom on campaign finance reforms advocate a simultaneous pursuit of transparency (limiting cash donations), competition (capping of donations), and deter cronyism (making their disclosure mandatory). 

While logically unexceptionable and intellectually laudable, I am inclined to believe that this is impractical given the political economy and the scale of transformation that it would entail. Given the prevailing nature and scale of campaign financing, the massive gap between the actual and permissible amounts, and the difficulty of cobbling political consensus on such issues, it is surely unrealistic to expect a simultaneous targeting of all dimensions with one comprehensive strategy. 

A more realistic approach to addressing campaign finance may be to take a few steps at a time. Between the three, it may be prudent to address transparency initially by squeezing out channels of cash donations and ensuring that only clean money enters the political arena. While the decision to dispense with the cap on donations may actually be a practical response, the waiver of disclosure requirements is a retrograde step. The latter becomes all the more so since maintaining the current disclosure requirements would have been politically feasible. 

Instead of the current proposal, it would have been more appropriate and practical to have a much higher cap than the (now amended) 7.5 per cent of the average net profit over the past three years and either retain the current disclosure requirement or link disclosure to the revised cap. A progressive reduction of that cap would then have become the natural phasing of campaign finance reforms. Now, anonymous corporate donations have been given a complete free pass. And future reforms have to battle insertion of the caps on both donations and disclosure requirements.  

The credibility of government's commitment to campaign finance reforms will be measured by complementary measures to strengthen the rigour of audits and tax filings of political parties as well as enforceability of their violations. 

In any case, as already mentioned, I feel that the last word on this enactment may yet come from the Supreme Court, and it is here that some of the aforementioned suggestions can be considered.

1 comment:

Kumar Harsh said...

Respected sir,
Already a fan of your blogs. I hope I am permitted to ask naive questions. If not, please inform.
Query: Can transparency be ensured just by "limiting" cash transactions(the companies can still pay in batches of Rs2000), or should it be done by completely doing away with it? Is there any benefit of reducing the batch size?
Thanks.