Why India’s Supreme Court Eliminated Anonymous Political Donations

Political observers in India have long warned against political finance as a vehicle driving corruption in the world’s biggest democracy. 

Nowhere is this more apparent than in the general elections, where opacity in political funding and the murky flow of funds have often benefited the party in power. It has also contributed to the soaring cost of elections. In 2019, India’s election was the most expensive in the world, costing a whopping $8.6 billion—almost twice as much as the cost of their 2014 election, according to a study by the Delhi-based Centre for Media Studies.

But now, a surprise historic verdict from the Indian Supreme Court could finally change things. On Thursday, Feb. 15, India’s top court scrapped a seven-year-old election funding system known as “electoral bonds” in a bid to introduce a base level of transparency to campaign financing.

Electoral bonds were introduced in 2017 by the ruling Bharatiya Janata Party (BJP) and enabled individuals and companies to make unlimited and anonymous donations to political parties. Under the system, donors could purchase interest-free, tax-exempt bonds from the state-owned State Bank of India (SBI) to donate to a political party of their choice which could then exchange the bonds for cash. The BJP’s then-Finance Minister, Arun Jaitley, argued that it would make political funding more transparent through the flow of clean cash while also protecting the donor’s identity. 

Seven years later, however, critics say the system has largely hindered the public’s right to know who has donated money to political parties. And it has massively boosted the BJP—as of last November, the ruling party received nearly 90% of the corporate donations from bonds worth nearly $2 billion, according to a report by the Association for Democratic Reforms, or ADR, a nonprofit advocating for electoral reforms and one of the petitioners in the case.

In the latest ruling, the court called electoral bonds unconstitutional and ordered the SBI to immediately stop issuing any more. It also told the bank to share the details of all bond purchases since April 2019 with the Election Commission—including the value, the date of purchase, and the name of the buyer—within a week.

“The court decision means that going into the next election, voters can find out who has funded political parties,” Trilochan Sastry, the chairman of ADR, tells TIME. “And civil society organizations can observe if there’s any quid pro quo for companies that creates the danger of crony capitalism,” he adds.

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Electoral bonds are a 'distortion of democracy,' critics say

Those bringing the case to court argued that electoral bonds have enabled a system of secrecy and a “distortion of democracy,” according to the petition.

“We filed the petition because electoral bonds violate a fundamental right of voters to know about the funding that political parties are getting,” says Sastry. 

The government responded by saying that it was necessary to keep the identity of donors private so that they would not face “any retribution from political parties." But critics like Sastry point out that because the state-owned bank is required to keep a record of both donors and recipients, the scheme has allowed the ruling government to use this information to its advantage. “It is not a level playing field, because the State Bank of India, if asked to, can reveal information on who bought those electoral bonds and who cashed them,” he says. 

ADR data revealed that so far, electoral bonds worth 160 billion rupees, or $1.9 billion, have been sold, with the BJP receiving a majority 57% of these bonds, compared to just 10% for the main opposition Congress party. “You can't have someone with extra privileges and somebody without—it's a violation of a fundamental principle of the Indian constitution,” says Sastry.

Maintaining accountability and electoral integrity

On Thursday, the five-judge constitutional bench agreed with the petitioners. DY Chandrachud, the Indian Supreme Court Chief Justice, said that India’s freedom of information law was "not confined to state affairs, but also includes information necessary for participatory democracy." 

As such, any information about the funding of political parties was “essential for electoral choices,” he added, imploring the government to be “open and not clothed in secrecy." 

In a 232-page ruling, the judges also noted that corporate donors rarely contribute to political parties out of a pure sense of civic duty. They added that elected representatives could not be held accountable to voters “if companies, which bring with them huge finances and engage in quid-pro-quo arrangements with parties, are permitted to contribute unlimited amounts.”

The BJP’s spokesperson, Gopal Krishna Agarwal, told reporters that the party was "committed to continuous reforms on electoral funding" and would abide by the ruling. The Congress Party, India’s main opposition, welcomed it: “We hope that [the] Modi Govt will stop resorting to such ideas in future and listens to the Supreme Court, so that Democracy, Transparency and level playing field exists,” Congress president Mallikarjun Kharge wrote on X.

Election watchdogs like ADR say the court’s decision will also allow “strict limits on corporate funding.” Sastry points out that in many countries around the world, including the U.S. and the UK, “there are strict norms on transparency and on the limits of corporate funding, because of this very problem of undue influence on elections and on government policies and laws.”

Still, skeptics warn that the political finance system that existed before electoral bonds, and that which will now be reinstated, is no less shadowy. In the Hindustan Times, Milan Vaishnav, director of the South Asia program at the Carnegie Endowment for International Peace, writes: “The hard truth is that it is a system in which corporations, shy of contributing funds openly for fear of political retribution if they back the wrong horse, funnel donations to parties under the cover of darkness. Cash reigns supreme as would-be donors steer clear of a digital paper trail.”