Elections in India | State funding

Elections in India are due very soon. The recent demonetisation has brought forward many contentious issues at hand which are concerned with the proliferation of black money. Specifically, it has brought focus on the need to reform the electoral system, primarily the funding of elections. PM Modi, at an all-party meeting a week ago ahead of the Parliament session, strongly pitched for state funding of elections to enhance transparency in public life and combat corruption. The suggestion seems significant since the demonetisation has dried up dubious funds to fight elections.

History of State Funding of Elections


  • The Atal Bihari Vajpayee Government had in 1999 constituted a multi-party parliamentary panel under the chairmanship of senior Communist Party of India leader Indrajit Gupta to study the feasibility. Among other members were Dr. Manmohan Singh of the Congress and Somnath Chatterjee of the Communist Party of India (Marxist).
  • The Dinesh Goswami panel in 1999, sought to endorse the state funding of elections to combat illegal and indiscriminate use of money in elections.
  • The Law Commission of India too had in its 1999 report said that ‘total’ state funding was a desirable goal so long as political parties were prohibited from accepting money from other sources.
  • Second Administrative Reforms Commission in 2008 had also endorsed partial state funding in a bid to check “illegitimate and unnecessary funding” of elections.

Report of Indrajit Gupta Panel


  • In the report submitted to the Union Ministry of Law & Justice as well as to the Union Ministry of Home Affairs, the committee strongly recommended state funding of political parties contesting elections.
  • It also added that such funding should be limited to parties recognised as ‘national’ or ‘State’ by the Election Commission of India, and to candidates directly fielded by such recognised parties.
  • The panel also believed that while ideally, there must be total state funding of elections, budgetary constraints could come in the way. Therefore, members of the committee broadly concurred with the view that a good start could be made with partial funding — that is, with the state taking care of certain expenditures of the recognised parties.
  • It added that the aim should be to discourage political parties from seeking external funding (except through a nominal membership fee) to run their affairs, carry out their programmes and contest elections.
  • The panel recommended the creation of a separate Election Fund with an annual contribution of some Rs 600 crore (at the rate of Rs 10 per voter, for the then total of 60 crore voters) by the Centre and a matching amount by all States put together.
  • It also said that only those parties which had submitted their income tax returns up to the previous financial year could avail of state funding.
  • The committee recommended that every candidate of the party eligible for state funding should be given a specified quantity of fuel for vehicles during an election campaign, a specified quantity of paper to prepare electoral literature, and an amplifier system for every Assembly segment of a Lok Sabha constituency, subject to six such sets for each Lok Sabha constituency.

Arguments in favour of State Funding of Elections

  • A legal ban on adding party and third party expenses in the constituency to the candidates’ overall accounts followed by strong public disclosure and penalties may bring the overall cost down at constituency level (for election related expenditures).
  • Chief Election Commissioner of India, Nasim Zaidi said that the existing rules that regulate donations were not enough to check the proliferation of black money in elections.
  • State funding of elections would boost the idea of democracy in the real sense as it would encourage public participation by eliminating the need of huge funds to contest elections.
  • State funding of elections would bring transparency and pave the way for bringing the funding of political parties under the umbrella of ‘Right to Information Act, 2005’.
  • The business houses and other lobby groups that illegally inject huge chunks of money through the channels of funding of political party would end up getting dejected post-elections as there would be no lure of funds for the political party in power.
  • The circulation of black money which promulgates during the election period and continues post-election would come down up to a huge extent.

Arguments against State Funding of Elections


  • How a Government that is grappling with deficit budgets, can provide money to political parties to contest elections? Using the money collected from the de-monetisation drive for this purpose would be a “travesty” because that would mean more money for politicians at public expense.
  • Given that state expenditure on key social sectors such as primary healthcare is “pitifully small”, the very idea of the Government giving away money to political parties to contest polls, is revolting.
  • Public resources have to be channelled towards and not diverted from such essential services, and that, too, to finance something that already gets abundantly financed.
  • State funding will become one more additional tool, one more additional source, of funds without reduction of the use of illegal money in election campaign. This in a way can restrict the participation of right-thinking citizens.

International Experience

state funding

  • Some countries like Finland, Italy, Israel, Norway, Canada, the US, Japan, Australia and South Korea implemented the concept with mixed results. Italy, Israel and Finland, for instance, did not see any significant reduction in state expenditures due to public funding, despite the many checks and balances.
  • In most of these countries, the argument against state intervention has been that political parties, being a free association of citizens, are independent entities, and that they cannot be bound by financial strictures. It’s an argument that can well be applied to India by anti-state interventionists.

The idea of implementing such a well-intentioned electoral reform is welcome, specially followed by the demonetisation drive.  However, such efforts will have greater credibility if we have in place institutional mechanisms such as the Lokpal which, in some ways, is supposed to be the sentinel that state funding of polls is expected to be as well.

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