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In 2017, the Indian government introduced a new financial instrument called electoral bonds to bring greater transparency and accountability to political funding. The stated aim was to eliminate unaccounted money from influencing elections and policymaking. However, electoral bonds have proven to be deeply controversial and have sparked intense debate about their efficacy and potential for misuse.

What are Electoral Bonds? Electoral bonds are interest-free bearer instruments that can be purchased from specified branches of the State Bank of India by Indian citizens or companies incorporated in India. These bonds, which are similar to promissory notes, can then be donated to registered political parties. The unique aspect of these bonds is that they preserve the anonymity of the donor – the identities of those purchasing the bonds are not made public by the government or banks.

The Rationale Behind Electoral Bonds The government argued that electoral bonds would be an effective tool to root out black money and disincentivize under-the-table cash donations to political parties. By allowing anonymous donations through a regulated banking channel, it was believed that more people would make their political contributions transparently and legally. Additionally, capping the maximum donation amount at Rs. 20 crore was meant to prevent extremely wealthy donors from exerting disproportionate influence.

Criticisms of Electoral Bonds While the intentions behind electoral bonds may have been well-meaning, the scheme has attracted scathing criticism from opposition parties, election watchdogs, and constitutional experts. Here are some of the major criticisms:

1. Lack of Transparency Despite claims of enhancing transparency, electoral bonds maintain a thick veil of secrecy by not revealing the names of donors to political parties and the public. This anonymity undermines a fundamental tenet of democracy – the public’s right to know about the financial interests and allegiances involved in political funding.
2. Potential for Legitimizing Illicit Money There are concerns that electoral bonds provide a avenue to ‘whiten’ ill-gotten money, as no questions are asked about the source of funds used to purchase the bonds. This could potentially allow corrupt entities and vested interests to bankroll political parties using unaccounted wealth or proceeds of financial crimes.
3. Strengthening Corporate Plutocracy Critics argue that by allowing anonymous corporate donations of unlimited amounts, the electoral bond scheme amplifies corporate influence in politics and policymaking. This could lead to the subversion of democracy as wealthy companies could effectively ‘purchase’ policy favors without public scrutiny.
4. Asymmetric Transparency Opposition parties have pointed out that while donation details of political parties are made public, the government is not obligated to reveal details of electoral bond purchases from the SBI. This one-sided transparency raises questions about the fairness of the scheme.
5. Potential for Institutionalized Corruption Some legal experts believe that maintaining secrecy over political funding sources is unconstitutional and violates citizens’ right to information. They argue that electoral bonds institutionalize a culture of secrecy and corruption in political financing.

The Way Forward Despite the controversies, several amendments have been made to the electoral bond scheme over the years, including removing the cap on donations and extending availability windows. The government maintains that electoral bonds are the best available mechanism for cleansing political funding in India.

However, calls for substantive reforms like mandating disclosure of donor identities above a certain threshold and stronger safeguards against money laundering have only grown louder. Ultimately, striking the right balance between ensuring transparency and protecting donor privacy will be key to making the system fair, just and truly democratic.