Election expenditure in India has been a significant focus due to its implications on campaign finance, transparency, and electoral fairness. Read here to learn more.
In India, the Election Commission of India (ECI) regulates the amount candidates and parties can spend to prevent excessive spending that could lead to undue influence.
However, spending remains high due to multiple factors, including the size of constituencies, the duration of campaigns, and the resources required to reach large and diverse populations.
What is the difference between the election expenditure limits for candidates and political parties in India? How does the U.S. handle election financing, and what role do Super PACs play? Why is curbing the illegal distribution of cash to voters crucial?
Election Expenditure in India: Legal Framework and Limits
- Spending Limits: The ECI sets expenditure limits for each candidate, which vary by state and type of election (parliamentary or state assembly). For instance, in the 2019 Lok Sabha elections, the limit was ₹70 lakh (around $84,000) for most large states, while some smaller states had limits of ₹54 lakh.
- Political Party Expenditure: There is no cap on the expenditure by political parties, which often spend significantly on advertising, rallies, and logistics. Parties fund campaigns largely through donations, often from corporate entities, which has led to calls for transparency in the donation process.
- Election Bonds: Introduced in 2018, electoral bonds allow individuals, companies, and organizations to contribute anonymously to political parties, raising questions about transparency and potential influence from large donors.
Components of Election Expenditure
- Campaigning Costs: These include public rallies, media ads, travel, and distribution of promotional materials. Advertising through TV, social media, and newspapers has become one of the largest expenses.
- Personnel and Logistics: Political parties and candidates incur substantial expenses on hiring personnel, renting spaces, and ensuring logistics for transportation, accommodation, and food for campaign staff and supporters.
- Vote-Buying and Freebies: Though illegal, vote-buying and distribution of “gifts” and “freebies” remain common practices in some areas. In high-stakes elections, both major and minor parties have been found to distribute cash, alcohol, or consumer goods, particularly in rural or economically disadvantaged regions.
India: Election Expenditure Limits for Candidates vs. Political Parties
- Candidates:
- Expenditure limits for individual candidates are governed under the Representation of the People Act (RPA), 1951. Limits vary by constituency size and type (state or national elections) and are set by the Election Commission of India (ECI). For instance, the maximum expenditure for a candidate in Lok Sabha elections can range from ₹50 lakh to ₹95 lakh, while state assembly elections range from ₹20 lakh to ₹40 lakh.
- Candidates must keep detailed records of campaign expenditures from nomination day until the election and submit them within 30 days post-election. Breaching this cap may lead to disqualification.
- Political Parties:
- Unlike individual candidates, political parties in India do not have a set spending limit. However, they must submit annual reports of donations exceeding ₹20,000 to the ECI. Donations via electoral bonds are common, although controversial for allowing anonymous contributions.
- Although there’s no ceiling, excessive or opaque spending can trigger scrutiny under the Income Tax Act and FCRA regulations.
Challenges in Regulating Election Expenditure
- Unaccounted and Off-the-Book Expenses
- Despite Section 77 of the Representation of the People Act (RPA), 1951 requiring candidates to keep records of their campaign spending, a large portion of actual expenditure often remains unaccounted. Candidates and parties may underreport spending or avoid official channels, which distorts the transparency the regulation aims to achieve.
- Cash-Based Transactions and Lack of Transparency
- India’s election financing system has traditionally been cash-dependent, allowing for easier manipulation of accounts and off-the-books transactions. Political parties often rely on cash donations, making it challenging to track sources and amounts, which ultimately undermines transparency.
- Corporate Donations and Electoral Bonds
- While the Companies Act, 2013 permits companies to contribute up to 7.5% of their net profits over three years, the introduction of electoral bonds has complicated transparency. Although intended to limit cash flow and increase accountability, electoral bonds allow anonymous donations, which some argue enables wealthy donors to influence politics without disclosure requirements.
- Limitations in Monitoring by the Election Commission of India (ECI)
- Although the ECI has made significant strides in monitoring expenditures, limited resources and personnel hinder its ability to comprehensively oversee every campaign, especially when candidates resort to hidden funding and expenditures. This limitation makes it difficult to ensure compliance with set spending caps.
- Influence of Money on Voter Behavior
- Excessive spending on campaigns can unduly influence voters, especially in areas with economic challenges. The use of money to sway votes, provide incentives, or fund illegal campaign practices remains a significant issue in many regions, affecting the fairness of elections.
- Legal Loopholes and Inadequate Deterrents
- Current penalties for overspending or misreporting expenses are often insufficient to deter violations. Political parties and candidates might see the fines as minor compared to the benefits gained from non-compliance. This issue is exacerbated by legal loopholes and limited enforcement power granted to the ECI to address violations.
- Foreign Funding and Influence
- The Foreign Contribution (Regulation) Act (FCRA), 2010 prohibits foreign donations to political parties to prevent external influence on elections. However, indirect foreign funding through NGOs and corporate entities sometimes circumvents these regulations, allowing international interests to potentially impact the democratic process.
Monitoring and Compliance
The ECI deploys monitoring teams and observers to track campaign expenditures, although enforcement is challenging due to the informal nature of many transactions and indirect forms of spending.
Violations, when detected, can result in fines, disqualification of candidates, or even criminal prosecution.
However, the enforcement and monitoring process has limitations, particularly given the scope of nationwide elections and the number of candidates involved.
The way forward: potential reforms
- Enhanced Transparency in Electoral Bonds: Increasing transparency in electoral bonds by removing anonymity could make tracking funding sources easier and reduce hidden influences on politics.
- Stricter Enforcement and Penalties: Strengthening ECI’s powers to investigate, monitor, and impose meaningful penalties for expenditure violations could serve as a deterrent and improve compliance.
- Digital Campaign Finance Tracking: Implementing digital platforms for tracking campaign donations and spending in real time could promote better transparency and reduce underreporting.
- Capping Corporate Contributions: Reducing corporate contribution limits, or creating a more balanced cap system, could reduce the influence of large donors and promote fairness in electoral spending.
U.S. Election Financing and the Role of Super PACs
In the United States, election financing is regulated by the Federal Election Campaign Act (FECA) and related legislation, which restricts how much individuals and political action committees (PACs) can donate directly to candidates.
- Direct Contributions to Candidates:
- Individual contributions to candidates are capped (e.g., $3,300 per election per candidate in 2024), and PACs can contribute up to $5,000 per candidate per election.
- Super PACs:
- Super PACs (Super Political Action Committees), created after the 2010 Citizens United v. FEC Supreme Court decision, can raise unlimited funds from individuals, corporations, and unions. However, they cannot directly coordinate with candidates or campaigns.
- Super PACs focus on independent expenditures, such as advertising or media, to support or oppose candidates. Their influence has grown significantly, leading to concerns about wealthy donors shaping policies in their favor due to the substantial financial backing they can provide
Conclusion
Election expenditure in India is a complex issue with deep implications for democracy, transparency, and fair competition.
Efforts are ongoing to reform and strengthen the regulatory framework, though enforcement remains challenging given the scale and resourcefulness of campaign financing strategies.
India’s election financing structure tries to maintain fairness through expenditure limits for candidates, even though there are no explicit caps for parties.
In contrast, the U.S. system includes structured limits for candidates and PACs but allows Super PACs to raise unlimited funds independently, thus amplifying the role of wealth in campaigns. For India, enforcing restrictions on cash distribution is crucial to upholding electoral integrity and ensuring free and fair voting practices across the country.
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-Article by Swathi Satish
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