📰 The opacity around electoral bonds
If big money entirely funds elections in a secretive way, democracy as we know it will not exist
•The recent disclosures that the Election Commission (EC) and the Reserve Bank of India (RBI) had expressed reservations about the Electoral Bonds scheme highlight the importance of this issue. In 2017, the then RBI Governor wrote to the then Finance Minister that “allowing any entity other than the central bank to issue bearer bonds, which are currency-like instruments, is fraught with considerable risk and unprecedented even with conditions applicable to electoral bonds.” The EC warned that this would allow illegal foreign funds to be routed to political parties.
•Objections were overruled and the scheme was passed in the Lok Sabha as part of the Finance Bill so that it would not have to go through the Rajya Sabha where the then-government lacked a majority. There is no other country in the world where such a scheme exists.
Need for funds
•But first, why is this important? The main reason is that in the 21st century, money plays an increasingly larger role in elections. This was not so about 50 years ago. Today, India spends more on elections than the U.S. with a per capita GDP that is 3% of the U.S. Today, having more money does not guarantee success, but, at the other extreme, having no money certainly guarantees defeat. Some party may win a one-off election by spending very little, but sustaining victory over several elections requires funds. To reach voters, candidates and parties use hoardings and advertisements on printed, electronic and social media. They hold election rallies. They travel and have to pay party workers. In India, there is the added expenditure of buying votes through distribution of gifts, money, liquor and so on.
•Given that money is required, a central issue is whether a winning candidate or party will work for the public or for those who have funded them. So, some countries have public funding of elections. Campaign funding laws and reforms are a constantly evolving subject internationally. They focus on public funding, limits on expenditure, limits on donations, transparency in funding and penalties for non-compliance.
•We need to look at the issue of electoral bonds in this context — the importance and need for funding, and proper laws. Even a glance at the best international laws and rules shows that we in India are lagging far behind. The gaps between the stated purpose of the electoral bonds scheme and the letter of law are glaring, and several articles in the media have pointed them out. The voter does not know who is funding whom through electoral bonds. This is supposed to protect the donors from harassment from the authorities.
•However, such harassment is always by the party in power through law enforcement agencies — police, the Central Bureau of Investigation, the Intelligence Bureau, the Enforcement Directorate and so on. The simple remedy is to stop such motivated actions. However, the bank knows the purchaser of the bonds as well as the party that cashed it. The law agencies can obtain this information whenever they want. Can the ruling party use this to demand donations for itself, prevent donations to others, and use the law enforcement agencies to harass those who donate to rival parties? There is nothing in the electoral bonds scheme or existing laws to prevent this from happening. Equally troublesome, donation limits have been removed. In theory, a large corporate could buy the government using electoral bonds. This would not be possible in any other country. India continues to have spending limits but, as everyone knows, hardly any winning candidate sticks to it.
•It is true that black money cannot be used to buy electoral bonds. However, black money can be used outside the scheme during elections. The reduction in cash donations from ₹20,000 to ₹2,000 is not good enough. There are parties with hundreds of crores of declared income who claim that all the funds were received from small cash donations of ₹100 or less. This cannot be prevented by merely reducing the cash limits. Meanwhile, we see reports that the ₹2,000 notes printed after demonetisation are being hoarded. Whether this will be used as black money and in elections is unknown. In short, electoral bonds cannot eliminate black money. There are other provisions in the electoral bonds scheme and the amended Finance Act, 2017. All of them were there earlier as well.
•No doubt, there have been protests from the Opposition parties and from civil society. Political parties are sometimes seen as lacking credibility as they protest when they don’t get money but keep quiet when they get funds. Civil society is seen as anti-establishment. In India it is possible for those in power to ignore all this. However, we are missing the elephant in the room. We don’t need an incentive to be transparent and honest. Any political party can voluntarily choose to disclose its funds and sources. There is no law that prevents them from doing so. They can also state publicly that they will henceforth not use black money. No party has done this. Perhaps there are some compulsions under which they function — whether as the ruling party or as the Opposition.
Setback to democracy
•Before we move to possible remedies, let us clearly look at the effect of the electoral bonds scheme and possible long-term implications. The ruling party gets nearly all the funds. It, along with the enforcement agencies, knows who has given how much money to whom. The public does not have this information. How can we have good democracy in secrecy? The real danger, however, is long-term. If big money entirely funds elections in an opaque way, democracy as we know it will not exist. Meanwhile, registrations are cancelled for NGOs but not for political parties. What is democracy without free speech and dissent, especially against the powerful?
•Various commissions, including the Election Commission, have given detailed recommendations on suitable remedies. But, to date, no government has acted on them. We also need to benchmark ourselves against the best international practices and laws on campaign funding. Details are many, but there are a few simple principles for such remedies. First is complete transparency in all funding. Second, political parties need to be under the Right to Information Act. The Central Information Commission ruled that they were, but the parties refuse to follow its directions. There must be spending limits as well as donation limits, especially in a highly unequal society like ours, and strict penalties for flouting rules and the law. Public funding needs to be examined and introduced with proper checks and balances.
•Voters need to demand changes and we need voter awareness campaigns. The simple message from voters to political parties could be “we like you, not your big money. If you want, we will all pitch in and give small individual donations.” If voters reject candidates and parties that overspend or bribe them, we would have moved democracy one level higher. Most important, the electoral bonds scheme needs to be scrapped. The Supreme Court is hearing a petition on this issue. Let us hope Indian democracy survives without going through another crisis.
If big money entirely funds elections in a secretive way, democracy as we know it will not exist
•The recent disclosures that the Election Commission (EC) and the Reserve Bank of India (RBI) had expressed reservations about the Electoral Bonds scheme highlight the importance of this issue. In 2017, the then RBI Governor wrote to the then Finance Minister that “allowing any entity other than the central bank to issue bearer bonds, which are currency-like instruments, is fraught with considerable risk and unprecedented even with conditions applicable to electoral bonds.” The EC warned that this would allow illegal foreign funds to be routed to political parties.
•Objections were overruled and the scheme was passed in the Lok Sabha as part of the Finance Bill so that it would not have to go through the Rajya Sabha where the then-government lacked a majority. There is no other country in the world where such a scheme exists.
Need for funds
•But first, why is this important? The main reason is that in the 21st century, money plays an increasingly larger role in elections. This was not so about 50 years ago. Today, India spends more on elections than the U.S. with a per capita GDP that is 3% of the U.S. Today, having more money does not guarantee success, but, at the other extreme, having no money certainly guarantees defeat. Some party may win a one-off election by spending very little, but sustaining victory over several elections requires funds. To reach voters, candidates and parties use hoardings and advertisements on printed, electronic and social media. They hold election rallies. They travel and have to pay party workers. In India, there is the added expenditure of buying votes through distribution of gifts, money, liquor and so on.
•Given that money is required, a central issue is whether a winning candidate or party will work for the public or for those who have funded them. So, some countries have public funding of elections. Campaign funding laws and reforms are a constantly evolving subject internationally. They focus on public funding, limits on expenditure, limits on donations, transparency in funding and penalties for non-compliance.
•We need to look at the issue of electoral bonds in this context — the importance and need for funding, and proper laws. Even a glance at the best international laws and rules shows that we in India are lagging far behind. The gaps between the stated purpose of the electoral bonds scheme and the letter of law are glaring, and several articles in the media have pointed them out. The voter does not know who is funding whom through electoral bonds. This is supposed to protect the donors from harassment from the authorities.
•However, such harassment is always by the party in power through law enforcement agencies — police, the Central Bureau of Investigation, the Intelligence Bureau, the Enforcement Directorate and so on. The simple remedy is to stop such motivated actions. However, the bank knows the purchaser of the bonds as well as the party that cashed it. The law agencies can obtain this information whenever they want. Can the ruling party use this to demand donations for itself, prevent donations to others, and use the law enforcement agencies to harass those who donate to rival parties? There is nothing in the electoral bonds scheme or existing laws to prevent this from happening. Equally troublesome, donation limits have been removed. In theory, a large corporate could buy the government using electoral bonds. This would not be possible in any other country. India continues to have spending limits but, as everyone knows, hardly any winning candidate sticks to it.
•It is true that black money cannot be used to buy electoral bonds. However, black money can be used outside the scheme during elections. The reduction in cash donations from ₹20,000 to ₹2,000 is not good enough. There are parties with hundreds of crores of declared income who claim that all the funds were received from small cash donations of ₹100 or less. This cannot be prevented by merely reducing the cash limits. Meanwhile, we see reports that the ₹2,000 notes printed after demonetisation are being hoarded. Whether this will be used as black money and in elections is unknown. In short, electoral bonds cannot eliminate black money. There are other provisions in the electoral bonds scheme and the amended Finance Act, 2017. All of them were there earlier as well.
•No doubt, there have been protests from the Opposition parties and from civil society. Political parties are sometimes seen as lacking credibility as they protest when they don’t get money but keep quiet when they get funds. Civil society is seen as anti-establishment. In India it is possible for those in power to ignore all this. However, we are missing the elephant in the room. We don’t need an incentive to be transparent and honest. Any political party can voluntarily choose to disclose its funds and sources. There is no law that prevents them from doing so. They can also state publicly that they will henceforth not use black money. No party has done this. Perhaps there are some compulsions under which they function — whether as the ruling party or as the Opposition.
Setback to democracy
•Before we move to possible remedies, let us clearly look at the effect of the electoral bonds scheme and possible long-term implications. The ruling party gets nearly all the funds. It, along with the enforcement agencies, knows who has given how much money to whom. The public does not have this information. How can we have good democracy in secrecy? The real danger, however, is long-term. If big money entirely funds elections in an opaque way, democracy as we know it will not exist. Meanwhile, registrations are cancelled for NGOs but not for political parties. What is democracy without free speech and dissent, especially against the powerful?
•Various commissions, including the Election Commission, have given detailed recommendations on suitable remedies. But, to date, no government has acted on them. We also need to benchmark ourselves against the best international practices and laws on campaign funding. Details are many, but there are a few simple principles for such remedies. First is complete transparency in all funding. Second, political parties need to be under the Right to Information Act. The Central Information Commission ruled that they were, but the parties refuse to follow its directions. There must be spending limits as well as donation limits, especially in a highly unequal society like ours, and strict penalties for flouting rules and the law. Public funding needs to be examined and introduced with proper checks and balances.
•Voters need to demand changes and we need voter awareness campaigns. The simple message from voters to political parties could be “we like you, not your big money. If you want, we will all pitch in and give small individual donations.” If voters reject candidates and parties that overspend or bribe them, we would have moved democracy one level higher. Most important, the electoral bonds scheme needs to be scrapped. The Supreme Court is hearing a petition on this issue. Let us hope Indian democracy survives without going through another crisis.
Ahead of a second general election since the referendum, the clashing parties are drifting further apart in their positions
•More than three years after the United Kingdom voted, by a narrow margin, to leave the European Union (EU), Brexit has claimed the scalp of two Prime Ministers. Should Boris Johnson’s Conservative Party fare poorly in the upcoming general election scheduled for December 12, he could be the third PM to exit. The biggest casualty, however, has been clarity about the country’s future as Britain continues to rehash the tactical battles of the 2016 referendum on whether or not to remain in the EU, the destination of 45% of the U.K.’s exports and the source of 53% of its imports, including half of its food supplies.
•The U.K. is now a country more divided than ever into tribes of ‘Leavers’ and ‘Remainers’, divisions that cut across traditional political lines. At one extreme are the most ardent Remainers, who would like to cancel Brexit altogether, whether through a second referendum or by voting in a government that will revoke the process of leaving the EU. They refuse in principle to consider a future outside the EU. Gathered at the opposite pole are the hardcore Brexiteers who wish to see Britain cut all its ties with the EU on exit day, in order to start creating new trading relationships with a clean slate. Both sides are, consciously or otherwise, perpetuating a dangerous fallacy that lies at the heart of what ails Brexit: the notion that Brexit is an event, a one-off.
•Brexit, however, is not an event, but a process of dissociation and reassociation. Mr. Johnson is rallying the faithful by urging to country to ‘get Brexit done.’ His slogan plays to the sentiments of the Brexiteers, for whom Brexit has become totemic of sovereignty to be upheld and defended at all costs. For too long, the Brexiteer argument goes, the U.K. has been subservient to ever-expanding EU rules and regulations. Brexiteers believe that a democratic state ought to be able to set its own rules about, among other areas, food standards, pet well-being, road safety, banking regulations, and, most importantly, immigration limits.
A process, not an event
•However, Britain’s exit from the EU, from the ever-closer ties that have bound this island nation to its continent since it joined the European Communities (the EU’s predecessor) in 1973, is not an event but a process. These, and many other regulations, will not just disappear overnight once Britain leaves the EU. They are written into British law, and Parliament will need to decide on whether and how to replace them. Brexit is closer to the amputation of a healthy limb than to tooth extraction. There will be blood vessels to cauterise, a prosthetic limb to be fitted and adjusted, and a phantom limb to be contended with. And yes, movement after the amputation will become a little more challenging.
•Brexit, then, is a great unravelling. The fact that two Prime Ministers have tried and failed to negotiate an acceptable withdrawal agreement — something that will govern U.K.-EU relations until the two entities can agree on a new trading relationship — is a testament to the complexity of this uncoupling. In mountaineering terms, if the summit is a constellation of new trading relationships with different countries, then Theresa May and Boris Johnson have failed to get Britain even to base camp, the point at which there is agreed common ground to begin negotiations with the country’s largest trading partner. Further, through the EU, Britain is currently part of trading arrangements with about 70 other countries. After Brexit, the U.K. will need to replace these with bilateral pacts.
•Getting from the base camp to the summit, then, is going to be exponentially more complex. As British delegations set forth to negotiate new trade deals with other countries, they will confront tough questions about what Britain can offer to say, U.S., India and China. What the U.K. is willing to concede is likely to be equally difficult. Would London really be willing to open up British markets to American meat or allow American pharmaceuticals free access to its National Health Service (NHS)? Having defended its right to control immigration through Brexit, will the U.K. be willing to grant more visas to Indian workers? How much access will Britain be comfortable with for Chinese goods and technology?
•Even if a withdrawal agreement is ratified by Parliament, allowing Britain to exit the EU (this latest extension ends on January 31, 2020), that exit will only serve as the starting point of a new process of creating alternative trading arrangements for Britain. It is believed that Mr. Johnson models himself on Winston Churchill. It might, therefore, be apt to recall Churchill’s words at London’s Mansion House after Britain won its first battle against German forces at El Alamein in 1942, almost three years after the war had begun. After three years of defeats, this victory offered hope. However, Churchill cautioned, “this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”
•Withdrawing from the EU will be the start of a long process of redefining Britain. No other country has yet disentangled itself from a trading relationship with its largest trade partner, even in such times of protectionist tendencies that appear to be affecting the desire for future trading relationships.
Unity of the U.K.
•Further complicating matters is the fact that Brexit is increasingly becoming an English obsession that is threatening the unity of the United Kingdom. Scotland and Northern Ireland (the former by a decisive margin) voted to remain in the EU in 2016. Though Wales voted narrowly to leave, the sentiment appears to be shifting with the main Welsh nationalist party, Plaid Cymru, now putting its weight unambiguously behind Remain. Meanwhile, divisions over Brexit have fuelled Scottish nationalism, with the Scottish Nationalist Party demanding another independence referendum. In a 2014 referendum on independence, Scotland had voted 55% to 45% to remain in the U.K., primarily because remaining in the union gave it access to the EU.
•Against these fissiparous tendencies, the U.K. is gearing up for its second general election since the Brexit referendum. Far from finding any common ground, the tribes of Leavers and Remainers are drawing further apart. Mr. Johnson’s attempts to portray that Parliament is stymieing the ‘will of the people’ by blocking Brexit has vitiated the political atmosphere, with more and more MPs reporting abuse and threats from the public. Neither the Conservatives’ glib ‘get Brexit done’, nor the Labour Party’s apparent decision to shift the focus away from Brexit will serve to bridge the widening differences in this country. Yet, opposing Brexit as a smaller party will be challenging: though the Liberal Democrats, Greens and Plaid Cymru have come together in an anti-Brexit pact, they have nothing else in common. It could be that the malaise of Brexit will infect the results of the general election by denying any party a decisive victory. If so, the deadlock over the battle for Britain’s future will continue. Rather than looking forward with hope, this appears to be an election that will look back with anger.
📰 ‘India’s reluctance to join RCEP understandable’
Pact looks like an extension of China’s Belt and Road initiative: ex-Australian PM
•The Regional Comprehensive Economic Partnership (RCEP) agreement looks like an extension of China’s Belt and Road initiative, former Australian Prime Minister Tony Abbott said, adding that he understood India’s reluctance to join the pact. He also said he was keen to see an India-Australia bilateral deal being signed.
•“I can understand India’s caution about RCEP,” Mr. Abbott said at a media roundtable discussion. “My anxiety with RCEP is that just as the Trans Pacific Partnership was the economic leg of the U.S. pivot to the Asia Pacific, RCEP is like the trade leg of the Belt and Road Initiative.”
•“While I’m all in favour of generous assistance to countries in difficulties, I am very wary of anything that might end up leaving vulnerable countries permanently indebted to another,” he added. One of India’s primary concerns about joining the RCEP pact was that its already-huge trade deficit with China would widen significantly. “I am cautious about RCEP,” Mr. Abbott said. “As PM, I certainly did my best to promote freer trade, but I was very keen on doing bilateral deals with our significant trading partners. Under PM Modi, Australia and India began discussions on a trade deal. It kind of got lost when there was no PM visit to India in 2015 and then I think it got subsumed in the RCEP negotiations.”
•The former Australian PM said he was keen to see the bilateral deal working out and that once that was done, it would rekindle ‘enormous enthusiasm’ on the part of Australian businesses.
•He further said that Australia was keen to see India join existing bodies, such as the Asia-Pacific Economic Cooperation agreement.
•“We think existing entities would be better with India in them rather than without,” Mr. Abbott said. “So, if India was within APEC, I believe it would be a stronger, more effective body.”
Focus now on India
•“I think we were quite right to focus on China for the 30 years or so, from the Deng reforms until quite recently, but I think the neglect of India is a pity,” Mr. Abbot said.
•“One of the things I was able to do as PM was to end the neglect of India. Let’s ensure that in the years to come there is at least as much Australian focus on the relationship with India as there was in that 30-year period on the relationship with China.”
📰 GDP slump will hit $5-trillion economy target, warns NITI Aayog
The Hindu has accessed a presentation made by NITI Aayog CEO Amitabh Kant to the Standing Committee on Finance; 12.4% growth needed to achieve the figure, Mr. Kant said.
•The road to a $5 trillion economy by 2025 is beset with many speed breakers, the NITI Aayog has warned the government.
•To begin with, the think tank has said the nominal GDP growth — a measure of growth without accounting for inflation — has to be at least 12.4% on an average if that target has to be reached. The current rate was a mere 8% in the first quarter of the current financial year.
•The government is expected to release data for the second quarter (July to September) later this month. Experts estimate that growth will dip in Q2 compared to Q1 in both real and nominal terms. For example, while GDP growth in real terms in Q1 stood at 5%, state-run lender State Bank of India recently estimated that this could dip to 4.2% in Q2, with a corresponding dip in nominal growth as well. Real GDP growth accounts for inflation in its calculation.
•The Hindu has accessed a presentation made by the Aayog CEO Amitabh Kant to the Standing Committee on Finance, chaired by former Union Minister and BJP MP Jayant Sinha.
•Finance Minister Nirmala Sitharaman on July 5, presenting her first Budget, had said her government would work to make India a $5 trillion economy by 2025. The claim has often been ridiculed by opposition parties.
•Mr. Kant in his presentation said that “domestic investment and consumption” are the only dependable drivers for sustainable re-acceleration [of the economy]. “However a deceleration in investment is visible, primarily in the household sector, due almost entirely to real estate,” he pointed out.
•According to data he provided, gross fixed capital formation in the sub-sector of ‘dwellings, other buildings and structures’ fell from 12.8% of GDP in 2011-12 to 6.9% in 2017-18.
•The slowdown in the domestic market is also because of limited availability of capital with the banks which are tied down due to high non-performing assets in heavy industry and infrastructure, Mr. Kant said.
•As an indication of the “structural changes” that Ms. Sitharaman had also hinted at in her Budget speech, Mr. Kant argued that in the power sector, there is a high cross-subsidisation in favour of residential tariff leading to very high industrial tariffs. The electric power transmission and distribution (T&D) losses in India stand at 19%, higher than that of Bangladesh and Vietnam.
•The presentation flagged the urgent need to focus on export of high-value technology and manufacturing goods instead of primary goods currently exported. Citing an example, the NITI Aayog chief said 98% of phones exported by India are in the low-value category, to the Middle East and Africa.
•There has been a sharp decline in exports in the textiles from 2017 onwards, according to the presentation. Several financial experts have blamed the decline on the November 2016 decision to demonetise high value currency that drained vital liquidity out of the cash-dependent textile market.
