Political Economy
Electoral Bonds and Political Finance in India
How India's electoral bond scheme allowed anonymous donations to political parties, why the Supreme Court struck it down in 2024, and what it revealed about money in politics.
Elections cost money. How political parties are funded matters for democracy, because donors may seek favours in return. India’s electoral bond scheme became one of the most debated experiments in political finance.
The scheme
Announced in the 2017 budget and introduced in 2018, electoral bonds were:
- Bearer instruments sold by the State Bank of India in fixed denominations.
- Bought by individuals or companies and given to political parties, which cashed them.
- Anonymous to the public: neither the donor’s identity nor the recipient was disclosed.
The government argued the scheme would reduce cash donations and bring political funding into the banking system.
Concerns
Critics argued:
- Anonymity prevented voters from knowing who funded parties.
- The SBI, a government-owned bank, had donor records, creating an information imbalance favouring the ruling party.
- Changes to company law removed limits on corporate donations, allowing even loss-making companies to donate.
- The scheme could enable quid pro quo: donations in exchange for contracts or favourable decisions.
The Supreme Court judgment
On 15 February 2024, a five-judge bench of the Supreme Court unanimously struck down the scheme as unconstitutional, holding that it violated voters’ right to information. The Court ordered SBI to disclose details of bonds purchased and redeemed.
The data, published in March 2024, showed that bonds worth more than 16,000 crore rupees had been redeemed, with the ruling party receiving the largest share. Journalists and researchers analysed links between donations and government actions.
The economics of political finance
- Information: voters need information to hold politicians accountable.
- Rent-seeking: donations can buy influence, distorting policy.
- Competition: funding rules affect how fairly parties compete.
What next?
Debates continue about better systems: public funding of elections, donation limits, full disclosure and stronger enforcement.
Before the judgment, a voter wanted to know which companies funded the parties seeking her vote. With electoral bonds, she could not find out. After the Supreme Court's order, the donor lists were published, allowing public scrutiny.
Political finance affects which policies are adopted and who benefits. Transparency helps voters hold parties accountable.
- Electoral bonds allowed anonymous donations to political parties from 2018.
- Critics warned about secrecy, information imbalance and quid pro quo.
- The Supreme Court struck down the scheme on 15 February 2024.
- Disclosed data showed over 16,000 crore rupees in redeemed bonds.
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