Campaign financing in India: Black Money and the Sale of Offices

by Subrata Mitra und Laura Sophia Hauck

The general election has just started in India on April 11 and are scheduled to run until May 19. In terms of the sheer volume of the election – 900 million voters, spread across the continental expanse of the country – India is the world’s largest electoral democracy. It is also perhaps the most expensive insofar as the cost of electoral competition to political parties is concerned. Except for the Bharatiya Janata Party and the Communist Parties, political parties in India do not have strong organizations like European political parties. Come election: parties scramble for workers and organizers to run the campaign and gifts to motivate voters. With a huge number of parties – with thirty-one national and regional parties, 2044 registered unrecognized parties and a total of 8,251 candidates who contested for the 543 Lok Sabha (lower house) seats, the 2014 parliamentary elections involved a huge number of people. That gives an idea of why the total funds that elections cost are so enormous. It has been estimated that the funds that the parties and candidates spent in the 2009 general election were around $2 billion and the sums involved in 2014 were to the tune of $5 billion. The current parliamentary elections are likely to be the most expensive general elections in Indian history, and perhaps one of the most expensive ever held in any democratic state.

source: Pixabay

Since there is no government funding of election campaigns like for example in Germany, where election campaigns are partly state funded, parties have to raise these funds from private sources. As one can see, elections in India are not exactly ‘a walk in the park’! Fierce competition, not just in terms of candidates but also in terms of how one is able to raise the most funds, is one of the main criteria of success. This creates the scope for political transactions where the contributors seek to strike deals with parties. We learn from a number of studies that in India, there is little transparency about where vast sums of money for elections come from, or how this money is spent. A candidate can spend upto roughly one million Euro (Rs.70 lakh, 900.055,65 Euro) depending on the state they are contesting the Lower House election. Expenditure limit in the Assembly Elections is 360.010,00 Euro (Rs. 28 lakh) in bigger states. But this is only half of the story. The sums spent are usually in excess of the legal limits.

A great scope of the money comes directly from the candidates themselves. They are usually political entrepreneurs, wealthy in their own right, or sponsored by those who command large resources. The average Indian candidate for public office reports around 27 times the nominal per capita income of the country. And money has become even more important over time, so the median wealth at the command of candidates has increased by over 100% between 2004 and 2014. This is remarkable insofar as this is not comparable to the situation in Europe, and, in particular Germany. In Germany (like in the rest of Europe), political entrepreneurs are a rare sight in the parliaments: In a study done by Heinrich Best in 2007 business representatives do not even make up 15% of the seats. Blue-collar workers, contrary to what one might expect, make up not even 5%. So who then sits in the parliaments? Public sector employees, teachers and professors, who predominantly have a background in local politics, take more than half the seats – all across Europe! Unlike India, a huge bank balance neither precedes their career as politicians, nor determines the outcome of the election. Studies show that in India, in contrast, the wealthier the candidate, the more likely he or she is to win an election.

source: Jaffar Theekkathir via Wikipedia Commons

India is also different from Germany in terms of accountability, and expected function of legislators. Once they claimed their seat not much is expected from Indian legislators in terms of policymaking. Therefore, what is the main motive that gets people to enter the political ‘business’? Because it is profitable! By winning an office, they are able to get great returns on their assets: As a study by Fishman, Schulz and Wig (2014) shows that their “winner’s premium” is around 4 to 10% depending on the prevalence of corruption in the respective Indians states. A different study shows that on average their wealth increases by 222% during one term in office alone. Due to their exposed position and their rapidly growing network as politicians, they are getting new contracts. An investment into a costly election campaign soon unravels as an investment into the contestant’s own career.

However, that is not all. Many of these candidates (24% in 2014) have a criminal record or face charges not just for politically motivated but also for serious crimes like attempted murder, assault or theft. In addition, they are even more likely to win than candidates with a clean record or no pending cases. While this might be attributed to a form of Robin Hood self-presentation of the candidate, according to political scientist Milan Vaishnav, who steps up when the government fails to do its job. It becomes clear that there is no monocausal sociological explanation for this phenomenon of institutional corruption in India. Instead, an interplay of the institutional and party field plays a major role in explaining the dominance of rich criminal politicians in Indian politics. However, there are three different, interconnected aspects to consider as well:

(1) The lack of democracy and transparency within the parties.

(2) The lack of transparency of the election financing system.

(3) The government’s failure to regulate illegal financing of parties and elections.

This institutional weakness in confronting political corruption has led to a pattern, where dirty money for campaign financing is as natural as legal donations are. Although we are now moving to the dark side of the elections, where only speculative estimations are available, there’s no doubt that black money plays a major role in Indian elections. In a study of Jennifer Bussell, that collected data between 2011 and 2014 from surveys of more than 2,500 incumbent politicians, most politicians understand black money to be the most important source of funds. “When asked what they think was the most important source of funds for their peers in the most recent election, the most common response by state and national legislators was funds gained through corrupt means (black money). Although this was a less common response from panchayat politicians, 15-20% of block and district officials still reported that this was the most frequent source of funding”.

Perceived Most Common Source of Funding for Peer Politicians. MP = Member of Parliament, MLA = Member of the Legislative Assembly, DPP = District Panchayat President; BPP =
Block Panchayat President. source: Jennifer Bussel (2018).

The Election Commission of India and the Supreme Court, both of which are politically independent have stepped in to monitor the electoral process. Their effective intervention contributes to the running of elections on the lines of a free and fair competition. However, in the long run, reform needs to be institutionalized through effective, binding and transparent legislation. Only then can electoral democracy deliver on the promise of transparency, fairness, social justice and a clean, public life. However, no regulation can be effective without self-regulation. That itself is part of a bigger dilemma. Election Commissions and Judiciary can arbitrate and adjudicate but Legislation can only be done by legislators. With the amount of criminality and involvement in illegal deals that underpin electoral success, are we really expect poachers to become game-keepers?




Bussell, Jennifer (2018), Whose Money, Whose Influence? Multi-level Politics and Campaign Finance in India, in Devesh Kapur and Milan Vaishnav (eds.), Costs of Democracy: Political Finance in India, New Delhi: Oxford University Press.

Fisman, Raymond; Schulz, Florian; Wig, Vikrant (2014), The Private Returns to Public Office, Journal of Political Economy , Vol. 122, No. 4.

Mitra, Anirban; Mitra, Shabana ; Mukherji, Arnab (2017), Cash for votes: Evidence from India, School of Economics Discussion Papers 1711.

Mitra, Subrata (2017), Politics in India: Structure, Process and Policy, London: Routledge.

Vaishnav, Milan (2017), When Crime Pays, New Haven ; London: Yale University Press.


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