Political Financing: Should It Be Proportionate to a Party’s Parliamentary Share?

Six Arguments Against It

Newsreel Asia Insight #166
March 20, 2024

A collaborative media report shows the financial advantages of the ruling Bharatiya Janata Party (BJP), particularly through electoral bonds, just weeks before India’s general election. The BJP justifies its substantial financial intake as being proportionate to its share in Parliament. However, the question arises: does this argument hold up under democratic scrutiny?

The report – part of a collaborative project involving three news organizations: Newslaundry, Scroll, and The News Minute, along with independent journalists – examines the claim of the BJP that the party received 60 billion rupees out of 200 billion rupees from electoral bonds, pointing out that it was incorrect.

The BJP actually received 82 billion rupees out of 164.9 billion rupees redeemed through electoral bonds, accounting for just over half of the total value, says the report, published by The News Minute.

The amount indicates that the BJP received more money from bonds than over 20 other parties combined, it says. 

Beyond electoral bonds, political parties, including the BJP, received funds from electoral trusts and other donations (cash and bank transfers), as declared in their annual audit reports.

Over six years (2018-2023), the BJP’s total funds from all sources amounted to 129.3 billion rupees. The BJP’s share of known political finance in India is roughly 58%, based on the analysis of audit reports from 12 major political parties, which represent over 85% of political representation in Parliament and over 96% of the money received through electoral bonds, the report said.

Here are six arguments challenging the BJP's justification based on its parliamentary share:

(1) The argument that a party’s financial intake should be proportional to its parliamentary share risks creating a self-reinforcing cycle where the ruling party, due to its financial advantage, can maintain or even increase its political dominance. This undermines the principle of a level playing field, which is essential for fair competition and democratic integrity. It can lead to a disproportionate influence where the ruling party has more resources to campaign, influence voters and shape policy debates, potentially sidelining opposition parties and reducing the diversity of political discourse.

(2) If financial resources are heavily skewed towards the ruling party, it raises the barrier to entry for new parties and candidates, limiting political competition. In a healthy democracy, there should be opportunities for new entrants to challenge incumbents, ensuring that the political system remains dynamic and responsive to changing public needs and opinions. A financial system that favours the ruling party can stifle these opportunities, leading to political stagnation and entrenchment of power.

(3) A significant financial advantage for the ruling party can increase the risk of policy capture, where the interests of large donors overshadow the public interest. This situation can lead to policies that favour a few at the expense of the many, undermining the principles of equity and justice in policy-making. Moreover, when a party relies heavily on financial contributions from a few sources, there is a heightened risk of corruption and quid pro quo arrangements, eroding public trust in the political system.

(4) The financial dominance of a ruling party – due to its undue advantage in campaigning, advertising and outreach – can influence voter perceptions and choices, not necessarily based on policy preferences or ideological alignment, but on the visibility and presence of the party. Such a scenario undermines the autonomy of voters to make informed decisions based on a fair and balanced presentation of options.

(5) In a federal system like India’s, equating financial intake with parliamentary share overlooks the importance of state and local governance. States with different political affiliations may find themselves at a financial disadvantage, affecting their ability to implement policies and programs effectively. This can lead to centralisation of power and weaken the federal structure, which is designed to accommodate regional diversity and local governance needs.

(6) More critical than parliamentary share is a party’s vote share. Due to India’s first-past-the-post electoral system – a method of electoral representation in which a candidate or party wins an election by securing more votes than any other candidate or party, without needing a majority of the votes – parliamentary share can misrepresent a party’s popular support. For example, in the 2019 general election, the BJP secured 37.76% of the votes, while the combined vote share of the National Democratic Alliance (NDA), which includes the BJP, amounted to 45% of the 603.7 million votes cast. This indicates that over 62% of voters did not choose the BJP, and 55% did not vote for the NDA.

Determining a party’s financial intake should ideally be based on principles that promote fairness, transparency and democratic equality.