Who Funds Indian Politics?
Political parties in India collectively spend thousands of crores of rupees in each election cycle. Understanding where that money comes from — and what the recent legal and regulatory changes mean — is essential for any informed Indian citizen. This guide explains India’s political funding system in plain language.
The Electoral Bond Saga
The electoral bond scheme, introduced in 2018, was designed as a way to funnel corporate money into political parties through a nominally transparent mechanism: companies bought bonds from the State Bank of India and donated them to the political party of their choice, which could then encash them. The scheme promised anonymity for donors while theoretically creating a paper trail.
In February 2024, the Supreme Court unanimously struck down the scheme as unconstitutional, ruling that anonymous political donations violated voters’ right to information under Article 19(1)(a). The subsequent disclosure of electoral bond data revealed a pattern that sparked considerable public debate: several companies had donated to ruling parties at the state and national level around the same time as receiving government contracts or regulatory approvals.
The court’s ruling has forced a rethink of political funding transparency in India.
How Parties Currently Raise Money
Indian political parties fund themselves through several channels, each with different disclosure requirements:
Corporate donations: Companies can donate up to 7.5% of their average net profits over the previous three years to political parties. Donations above ₹20,000 must be disclosed in party accounts.
Individual donations: Individuals can donate to political parties and claim a 100% deduction under Section 80GGC of the Income Tax Act. Donations above ₹20,000 must be made by cheque or digital transfer.
Membership fees: Most parties have nominal membership fees, though income from this source is relatively modest.
Coupon sales and events: Parties sell coupons, books, and event tickets — often to businesses seeking access or goodwill — as a way of raising funds that are harder to trace.
State funding: India provides limited state funding through free airtime on Doordarshan and All India Radio during elections, but does not provide direct cash to parties as several European democracies do.
The Opacity Problem
Despite existing disclosure requirements, significant opacity remains in Indian political finance. Parties are required to submit audited accounts to the Election Commission annually, but the quality and completeness of disclosures vary significantly. The Association for Democratic Reforms (ADR) consistently documents gaps between reported income and expenditure and what is known from other sources.
What Reform Would Look Like
Civil society organisations and electoral reformers argue for: mandatory disclosure of all donations above ₹2,000 (reduced from ₹20,000); state funding of political parties through a formula based on vote share; independent audit of party accounts by the Comptroller and Auditor General; and limits on election expenditure at the party (not just candidate) level.
The Voter’s Role
Understanding political funding helps voters make more informed choices. The ADR (adrindia.org) publishes comprehensive analysis of party accounts, candidate asset declarations, and election expenditure data. Informed citizens who use these resources are better equipped to evaluate the relationship between political donations and policy decisions that affect them.
