War against black money should have started with political parties, not demonetisation

A few days ago, at an all-party meeting ahead of the first day of the Winter Session in Parliament, Prime Minister Narendra Modi brought up the issue of what he referred to as the state funding of elections.

At the meeting he said:

“…it was time the issues of state funding of elections and holding simultaneous elections in the country were discussed. Since all parties are concerned about the consequences of unaccounted money on the economy, let this issue be discussed in detail along with other issues of concern in the Winter Session of Parliament”.
 

A matter of terminology

But what exactly is state funding of elections?
It is a complete misnomer that is designed to hide the truth. It is generally understood to mean that the government will fund the election expenses of those who want to contest the polls.

The misnomer has to do with this being called “state” funding. The impression conveyed here is that this is money that the government owns. Since people at large seem to think that government money is available for free, and one should try and take as much of it as possible by way of free electricity, free water, and other such freebies, we are somewhat passive about the possibility of the government footing the bill for candidates contesting elections.

But the question is, from where does government money come?
It does not come from currency notes issued by the Reserve Bank of India but from direct and indirect taxes paid by the people. Thus, government money is actually people’s money. Therefore, the first correction is to refer to it as the public funding, and not state funding, of elections.

Black money and elections

This method of financing elections has been discussed for decades, directly or indirectly, since the socialist Jayaprakash Narayan constituted what came to be known as the Tarkunde Committee in 1975.

The most frequently cited, of course, is the Indrajit Gupta Committee, which was set up in 1998 specifically to study state (public) funding of elections. This report is invariably invoked in all discussions on the issue, and it is claimed that the committee recommended state (public) funding of elections.

However, the fact is that the Indrajit Gupta Committee suggested only partial financial support by the state, and that too, only in kind by way of bearing the cost of printing material, time on electronic media, vehicles and fuel.
Most importantly, in my 16 years of working in this field, I have never heard anyone mentioning the first paragraph of the conclusions of this report. It reads as follows:

“Before concluding, the committee cannot help expressing its considered view that its recommendations being limited in nature and confined to only one of the aspects of the electoral reforms may bring about only some cosmetic changes in the electoral sphere. What is needed, however, is an immediate overhauling of the electoral process whereby elections are freed from evil influence of all vitiating factors, particularly, criminalisation of politics. It goes without saying that money power and muscle power go together to vitiate the electoral process and it is their combined effect which is sullying the purity of electoral contests and effecting free and fair elections. Meaningful electoral reforms in other spheres of electoral activity are also urgently needed [emphasis added].”

Demonetisation and elections

Now we come to the question: what does the public funding of elections have to do with demonetisation?
Bharatiya Janata Party leader and former Prime Minister Atal Bihari Vajpayee is widely reported to have once said, “Every legislator starts his career with the lie of the false election return he files.”
This is the crux of the supposed relationship between public funding of elections and demonetisation, which is that a large chunk of money used in elections is unaccounted money. There are two thesis here:

1. If public money is provided to candidates and political parties to contest elections, they will not use other, unaccounted money, and,
2. If there is no unaccounted money in the country and economy, the question of it being used in elections will not arise.

Let us take the first thesis. There are two issues with this. The first is that it seems we, as a country and society, have accepted, or are willing to accept, that we cannot get our candidates for elections and political parties to refrain from using unaccounted money. And in order to force them to do so, we are willing to risk serious damage to the entire economy by way of demonetisation.

What we seem to be missing is that the entire cash economy is not black money. A roadside vendor buys vegetables in cash and sells them in cash. The vastness of the country and lack of infrastructure such as availability of uninterrupted electricity, make it extremely difficult to work without cash.

The second issue with the first thesis is that if we cannot make our electoral candidates and political parties mend their ways as mentioned above, how will we ensure that those candidates and political parties who get public money do not also use unaccounted money in their campaigns? And if we cannot ensure that, then giving candidates public money to contest elections will be nothing but throwing good money after bad.

The moral of the above analysis of the first thesis is that until political parties follow the law of the land, neither public funding of elections nor demonetisation is going to impact generation of unaccounted money in the country.

Show some transparency

The second thesis has the cause and effect reversed. It is not the existence of unaccounted money that allows or encourages its use in elections, it is the use of unaccounted money in elections that is the real cause, or at least the abettor, of the generation of unaccounted money in the country.

And if political parties were to follow the law of the land, they would need to function as public authorities under the Right to Information Act as declared by a full bench of the Central Information Commission in a decision on June 3, 2013, rather than blatantly disregard the decision of the highest statutory authority in the land for implementation of the Right to Information Act. In addition, they must become demonstrably democratic in their internal functioning and transparent about their financial affairs.

But the current straws in the wind do not show any movement in these directions.

Jagdeep S. Chhokar is a former professor, dean, and director in-charge of the Indian Institute of Management, Ahmedabad.

This article was first published on Scroll.in