After a spate of scandals last year—including an alleged telecom scam that cost the exchequer $40 billion—the Congress Party-led government is under fire for nurturing a cozy nexus between politicians and businesses. So what does Congress suggest to solve the problem of scandals inspiring voters to throw incumbents out of office? State funding of elections.
That's one of five anticorruption ideas that Congress President Sonia Gandhi proposed at a party conference last month. It should come as no surprise that India's most powerful politician wants to further insulate the country's leaders from electoral discipline.
India may be a robust democracy by many standards, but it restricts political speech by setting limits on campaign expenditure. For instance, a candidate running for the lower house of India's parliament can spend only 2.5 million rupees ($56,000) of his own money, about the price of one full-page advertisement in a national newspaper. Those who actually comply with this limit find themselves running a weak campaign.
It's an open secret that politicians break the rules. Campaigning is expensive, so money is going to flow in somehow, if not legally then illegally. The election commission found ambulances ferrying cash—possibly by politicians for last-minute vote buying—in the 2008 state polls in the southern state of Karnataka. Unrealistic regulations mean that politicians call for ever stricter controls. The commission is now deploying tax officials on "poll duty" to check expenses. Perhaps it will one day enlist the army for election monitoring.
Instead of driving themselves into criminality, Indian politicians could clean up their act by legalizing this "black" money. Part of the trade-off for doing away with spending limits could be the requirement to report all campaign donations on the Internet. Unrestricted and private financing is a problem only if voters don't know who's paying for whom.
New Delhi had been moving toward greater transparency in recent years. In 2003, political donations became deductible against income taxes, encouraging individuals and corporations to declare them. And in 2009, right after regaining power, the Congress government proposed that donations to "electoral trusts," vehicles for routing donations to parties, also become tax exempt.
Congress now seems to be making a U-turn. Mrs. Gandhi is taking her cue here from various NGOs and government committees pushing public financing as a way to dissolve the nexus between money and politics. The problem is that state-funding makes every allocation to any candidate a political decision. This stacks the decks in favor of incumbents, since these legislators can always ensure they get more funds than their competitors. Mrs. Gandhi's party, having dominated the landscape since independence, stands to benefit the most.
Indians are beginning to understand that economic competition is making them free and prosperous. They are also gaining the resources to take part in politics in a way that threatens the old elites. While corruption is indeed a big problem, the issue could now be hijacked for the politicians' own ends.
India's biggest problem is not the influence that businessmen wield in politics, but rather the influence that politicians wield in business. Everyone from industrialists to farmers are pouring money into the political process because politicians rather than the market are deciding their fate. The surest way to limit corruption in Indian politics is to limit the reach of its government and make sure that electoral competition is not stifled.
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