How political funding influences electoral outcomes: what studies say

What is obvious from available data is that the BJP from 2017 to 2022 bagged a staggering 57% of all electoral bonds. While the ruling party earned over Rs 5,200 crore, Congress earned just 10% of the total funds (Rs 950 crore).

Relationship between political funding and electoral outcomes

A study by the Centre for Media Studies (CMS), which called the 2019 Lok Sabha elections the “most expensive election ever, anywhere”, pegged the money spent for the election at around Rs 55-60,000 crore, out of which around 45% were spent by the BJP. In the 2014 national elections too, money played a key role. Candidates who ran for elections reported a median wealth of Rs 23.8 lakh —approximately 27 times the nominal per capita income of India in that year.

Many modern research papers suggest a linear relationship between political funding and electoral outcomes.

In his work titled Money Matters in Indian Elections: Why Parties Depend on Wealthy Candidates, Neelanjan Sircar, Senior Fellow, Centre for Policy Research, points out that candidates from competitive parties (defined in the study as a party that was one of the top two finishers in a constituency) were approximately 20 times richer than candidates from non-competitive parties.

Sircar restricted the analysis to candidates from competitive parties to determine a relationship between wealth and winning elections, and found that among the top two candidates, the richer reported wealth four times greater on average than the other candidate. He found that in the median case, the wealthier candidate was about 10 percentage points more likely to win.

“Taken together, these analyses provide statistical evidence that competitive parties are more likely to field wealthier candidates, and, even when focusing only on those candidates that have some chance of winning, wealth is strongly correlated to electoral success,” concluded Sircar.

Studies conducted outside of India too show a correlation between electoral funding and election outcomes.

Political scientist Thomas Ferguson, in his work titled How money drives US congressional elections: Linear models of money and outcomes, showed that the relationship “between money and votes cast for major parties in elections for the US Senate and House of Representatives from 1980 to 2018 are well approximated by straight lines.”

A recent study done by CH Wang, which studied the relationship between political donations and election outcomes in various legislative elections in Taiwan from 2008 to 2016, provided evidence that political donation was significantly positively associated with election outcomes.

What the Supreme Court, ECI and RBI said on electoral bonds

The Supreme Court, while hearing the electoral bonds case, had raised the point of selective anonymity — where the ruling party could identify donors, but the Opposition could not.

In the past, both the Reserve Bank of India and the Election Commission of India (ECI) voiced objections to the scheme. The ECI, in a letter to the Ministry of Law and Justice, warned that electoral bonds, coupled with preceding legislative changes, could lead to the proliferation of shell companies to channel black money into the political system via these bearer bonds. Later, in 2021, the ECI supported electoral bonds.

Amendments that could increase the role of political funding in electoral outcomes

Along with the electoral bonds scheme, various other laws were also amended, such as the Reserve Bank of India Act, Companies Act, Income Tax Act 1961, Representation of the People Act, and Foreign Contribution Regulations Act.

As former chief election commissioner SY Qureshi wrote in The Indian Express, the limit of 7.5 per cent of profits that a company could donate was done away with, implying that a company could now donate 100 per cent of its profits to a political party. Second, the condition that three years of profits of a company will be looked at was also eliminated, enabling even loss-making companies to make political donations.