To say that veteran political observers were shocked by the Supreme Court (SC)’s decision to strike down the government’s Electoral Bonds Scheme (EBS) qualifies as the understatement of the year — and it is only February. On Thursday, in a unanimous verdict, a five-judge bench of the Court ruled that the controversial plan, one of the Bharatiya Janata Party (BJP) government’s signature political reforms, violated the Constitution and would immediately cease operating. Good governance watchdogs, government critics, and progressive commentators hailed the ruling as a boon for democracy and a fillip for transparency. This celebratory spirit, however, will likely be short-lived. The fact is that, for the foreseeable future, opacity in political funding is here to stay and the dominant ruling party will be the beneficiary.
For those who hailed the order, there was ample reason for good cheer. In recent years, referee institutions in India have not distinguished themselves with their penchant for speaking truth to power. For a SC that had developed a global reputation for judicial activism, its proclivity to speak in hushed tones — or simply not at all — on a range of hot-button issues after 2014 signalled a broader degeneration of checks and balances on executive power. The fact that the Court ruled so decisively against the government on an issue of vital importance just months before a general election is noteworthy — even if it followed six years of obfuscation.
But a second reason for optimism was the blow struck against an Orwellian form of transparency associated with electoral bonds. In 2017, then finance minister Arun Jaitley announced in his annual Budget speech that the government would legislate a new mode of political giving. Under this new scheme, individuals, firms, and associations would be authorised to purchase bearer bonds from the State Bank of India (SBI) and later deposit those instruments into the bank account of their favoured political party without either the donor or the recipient needing to disclose the transaction. To incentivise this new method of giving, the government eliminated the cap on corporate donations (pegged at 7.5% of a company’s average net profits over the prior three years) and dropped the requirement that firms publish details of their political giving on their annual profit-and-loss statements.
To give the government credit, by steering political funding away from cash and toward the banking system, electoral bonds addressed one lacuna of the corrupt status quo. Yet, at the same time, it gutted any possibility that even one rupee of giving could be traced to its original source. More fiendishly, the scheme was premised on the principle of asymmetric transparency: Because bonds are routed through the SBI (a public sector concern), the regulator (i.e., the government) would know exactly who had given to whom. The public, media, civil society, and the Opposition, on the other hand, would be kept in the dark. Billed as ushering in a new era of transparency, the scheme merely legitimised opacity.
Under the Court’s ruling, the SBI will immediately stop issuing bonds; the Election Commission of India (ECI), is supposed to disclose details of all transactions since April 2019; and any bonds which have not yet been encashed are to be refunded.
What are the implications of this stunning development for the coming general elections and beyond?
First, the hard truth is that the political finance regime that existed before the advent of electoral bonds is now back in action and make no mistake, it is no paradise. 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. Parties, eager to conceal their largesse, publish doctored accounts that bear scant resemblance to reality. Electoral bonds had to be shown the door, but one should not romanticise what is left behind.
Second, the BJP has profited mightily off the electoral bond scheme, accumulating 55% (in value terms) of all bonds issued between 2017-18 and 2022-23. The…