Why in the news?

Observer Research Foundation (ORF) supported by the Westminster Foundation for Democracy (WFD) conducted a case study on India's "Cost of Politics" focusing on spending by candidates contesting political office.

Major Findings of the Study

• Escalating Campaign Costs: Major party Lok Sabha candidates spend ₹5–10 crore, higher in competitive or wealthy states (TN, Telangana, AP, Maharashtra).
• Rising Routine Political Expenditure: It includes attending community events, supporting constituents, sustaining party activities etc.
• Social Media Spending: Requires funds for tech experts, influencers, profile upkeep, and ads but is still cheaper than rallies, transport, food, and worker payments.
• Increasing Vote Buying: Cash handouts before polls have surged, even unwilling candidates feel pressured to join in. 
• Drivers of cost of politics: Pre-election outreach, campaign logistics, media expenses, election patronage (rewards for supporters, network upkeep).
• Source of Funds:
  • Primary sources: Personal wealth; contributions from family, friends, peers, supporters.
  • Other sources: Borrowing from friends/business groups, crowdfunding, selling assets, loans.
  • Most parties expect candidates to self-fund, barring a few major ones.
    • It favours wealthy/dynastic candidates, and disadvantages marginalised groups.

Implications of high costs of elections

• Implications for Governance
  • Growing Business-Politics Nexus: High corporate funding can skew policies toward financiers' interests (e.g., tax cuts, deregulation) that widen social inequality.
    • Wealthy mining, coal, and real estate barons now contest directly, using money to secure party nominations or run as independents
  • Fundraising focus: Elected leaders prioritise raising funds, recovering campaign costs, and repaying financiers over legislative duties.
  • Corruption Risks: Black money in campaigns fosters electoral corruption.
    • India ranked 96 in Transparency International's 2024 Corruption Perceptions Index.
• Impact on Democratic Integrity
  • Erosion of Public Trust: Lack of transparency reduces voter faith, discouraging participation in democracy.
  • Power capture: Big parties dominate funding, enabling large-scale vote buying and cross-media campaigns.
    • Smaller/regional parties lack resources, limiting voter choice and political competition.
  • Barrier for underprivileged: High costs deter women, youth, and non-elite candidates from contesting.

Way Forward

• Enforce spending limits: Strengthen ECI oversight, resources, and judicial support to act against violators.
  • For instance, UK enforces strict expenditure caps and audits at all political levels.
• Constitutional status for parties: Bring political parties under formal regulatory and institutional scrutiny.
• State funding based on vote share to reduce corporate influence, empower smaller parties (Canada & Germany models).  State funding was also supported by:
  • Indrajit Gupta Committee on State Funding of Elections (1998)
  • Law Commission Report on Reform of the Electoral Laws (1999)
  • National Commission to Review the Working of the Constitution (2001)
  • Second Administrative Reforms Commission (2008)
• Voter sensitisation: Prioritise awareness campaigns via civil society, media, and ECI to curb money power in elections.
• Real-time donation disclosure to boost transparency (U.S. model).

Conclusion

Thus election campaign financing in India is marked by high costs, resource concentration, and use of black money, threatening democracy, governance, and equality. Urgent reforms in election financing are needed to protect democracy, including stricter corporate donation laws.