INDIA BEGAN VOTING…

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When notes chase votes: Why campaign spending has started posing a serious question for India’s democracy

India began voting yesterday. TV psephologists have more or less predicted the return of a BJP-led government with BJP short of majority but not-so-short that Narendra Modi will face a leadership challenge. Only the partisan and the foolish will agree/ disagree with TV pundits right now. The minimally wise will leave predictions aside. Except one prediction – cash has won India’s elections.

Much media focus has centred recently on the Election Commission’s entirely correct upbraiding of tax authorities who seem to find, by strange coincidence, dirty cash mostly when it is being handled by opposition politicians. On the face of it, this seems to be a case of pre-poll institution bending.

In terms of realpolitik, BJP may have set a precedent that may come to haunt them at some point of time. In terms of principle, there’s now a strong argument for putting tax authorities and, perhaps, enforcement authorities, too, in EC’s ambit from the time the code of conduct is announced. In terms of reality, chances of this happening are remote. No party will let go of such ‘useful’ tools.

But the cash/ polls story is much bigger than EC-tax department exchange of missives or occasional cash seizures by the commission. The real story is that notes for votes have started posing a serious, almost existential question for India’s democracy.

As the analysis and data in an ET story clearly showed, 2019 general election have put paid to all fanciful talk that India’s polls will be fought with clean money. What happens usually is that currency with public – a measure of how much cash is floating around in the economy – grows sharply in the months, or the financial year, before national elections.

Year-on-year growth of currency in public for 2018-19, the financial year just before 2019 polls, is 17.3%, a sharp jump from previous years in the five-year period (excluding the remonetisation/ demonetisation period). Such pre-poll bumps in cash use have happened for all recent elections. And the pre-poll bump for 2019 is among the highest in the last seven national elections.

BJP government’s electoral bond scheme was flawed from the point of view of transparency (it hid the donor’s identity in SBI records that could be accessed only by the government, which owns the bank). And for the same reason, the idea was flawed even in terms of incentivising non-cash donations – big donors fear their identity as electoral bond-buyers will be known to those in power or to others who may come to power.

Political analyst Milan Vaishnav, who co-authored with Devesh Kapur an excellent book on political funding (Cost of Democracy), has said India’s elections this time can cost up to $10 billion, much more than the 2016 US general election, which saw spending of around $6.5 billion. Another figure, from the Delhi think tank, Centre for Media Studies, puts the estimated campaign expenditure at $8.5 billion, lower than Vaishnav’s outer limit but still considerably higher than the US election campaign spend.

So, here’s some data that will wake you up: the $19 trillion-plus American economy hosts poll spending of around $6.5 billion, and the $2.7 trillion Indian economy may host poll spending of around $10 billion. Even if you measure everything in purchasing power parity and not exchange rate terms – by PPP, India’s economy is roughly half the size of America’s – the comparison still holds as much force.

There’s more shocking data. Vaishnav and Kapur’s analysis shows more than 80% of this Lok Sabha’s members declared assets worth Rs 1 crore and above. That figure is not expected to significantly change in the coming Lok Sabha.

So, 80% of 543 members of the Lok Sabha have assets above Rs 1 crore, while, as per government tax data, a mere 81,000 of 1.2 billion Indians declare incomes over Rs 1 crore. Double or treble or even quadruple the crorepati taxpayer figure, accounting for underreporting and adding asset value to income. Still, a vanishingly small proportion of Indians are worth over Rs 1 crore, while 80% of India’s MPs are in that club.

Since a majority of voters are poor and the poor are far more likely to vote than the better off classes, our elections are about the poor voting for the rich who talk about the poor while spending the most money anywhere in the world for election campaigning.

Vaishnav’s $10 billion figure in rupee terms – reasonably assuming $1=Rs 70 exchange rate figure – is Rs 70,000 crore. Since 543 MPs will be elected, average campaign expenditure per Lok Sabha constituency will be a staggering Rs 129 crore.

To put Rs 70,000 crore in perspective: It is almost equal to the annual expenditure of Rs 75,000 crore under BJP’s PM-Kisan income transfer scheme for small farmers, it is nearly 20% of the annual outlay of Rs 3.6 lakh crore of Congress’s hugely expansive NYAY income transfer scheme, it is more than the current Rs 60,000 crore annual expenditure on MGNREGA, it is more than the current annual oil subsidy of around Rs 38,000 crore … we can go on, but the point is clear.

What India’s politicians spend on national elections courting votes of the poor can easily fund a good welfare scheme for the poor.

Now, some may argue that since all political parties try to raise and spend as much unaccounted cash as possible, and since elections are free and fair, and since incumbents lose elections pretty frequently, the fact of extravagant amounts of dirty campaign money doesn’t by itself distort India’s electoral democracy.

This is plain wrong. Distortions happen through the relationship between politicians and big donors and through gaming the financial system. These, in turn, distort policy making, mostly by complicated tweaks that few voters understand or even know about. And the media, which enthusiastically reports on any ‘big’ corruption story, pretty much ignores the corrupting element built into our election system.

Votes will be counted on May 23. Notes that chased those votes will be forgotten – again.

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