State Funding Of Elections


Mains   > Polity   >   Election   >   Electoral reforms


  • A report by the Association for Democratic Reforms (ADR) and the National Election Watch claimed that 19 political parties received over Rs 1,100 crore during assembly elections in 2021. Majority of the donations received came from ‘unknown’ sources, which once again sparked debate over the need for state funded elections.


  • In the system of state funded elections, the Government gives funds to political parties or candidates for contesting elections.
  • Its main purpose is to make it unnecessary for contestants to take money from vested interests so that they can remain clean
  • Various government reports have looked at state funding of elections in the past, including Indrajit Gupta Committee on State Funding of Elections (1998), Law Commission Report on Reform of the Electoral Laws (1999), National Commission to Review the Working of the Constitution (2001) and the Second Administrative Reforms Commission (2008).
  • Except for the 2001 report, all other recommended for partial state funding.


  • Fair elections:
    • As funds are equitably distributed among parties, it will bring a level playing field for all types of parties. Also, through state funding the demand for internal democracy in party, women representations, representations of weaker section etc can be encouraged.
  • Reduce crony capitalism and criminalization in politics:
    • Public funding can limit the influence of interested money and thereby help curb corruption.
  • Transparency:
    • Public funding can increase transparency in party and candidate finance and thereby help curb corruption.
  • Limited capacity of common man:
    • In societies where many citizens are under or just above the poverty line, they cannot be expected to donate large amounts of money to political parties or candidates. If parties and candidates receive at least a basic amount of money from the State the country could have a functioning multi-party system without people having to give up their scarce resources.
  • Encourages Participative democracy:
    • With state funds, people who desire to take on political roles can venture with better ease.
  • Already exists:
    • Some form of state funding exists in India, which includes free air time on public broadcasters, subsidies, the exemption of registered parties in India from paying income tax etc.



  • Large fiscal deficit:
    • The country already has a widening fiscal deficit, which could widen once state fundig is introduced. Also, it could reduce the resources available for social expenditures like welfare schemes and subsidies.
  • Inefficient use of Public fund:
    • Through state funding of elections, the tax payers are forced to support even those political parties or candidates, whose view they do not subscribe to.
  • Weakens Party-People relations:
    • State funding increases the distance between political leaders and ordinary citizens as the parties do not depend on the citizens for mobilization of party fund.
  • Control by ruling party:
    • As it controls the public purse, the ruling party could have an undue influence on the process
  • Encourages passivity:
    • Political parties tend to become organs of the state, rather than being parts of the civil society.
  • Creates ‘paper tigers’:
    • It may lead to parties and candidates running for elections just for the sake of availing monetary benefits
  • Diversion of funds:
    • There is a possibility of state funding being used as a supplement and not as a substitute of candidate’s own expenditure
  • Weak institutional setup:
    • The EC at present has limited control over the political funding arena. Also, the internal audit mechanisms within political parties are virtually non-existant.
  • Global experience:
    • Democracies such as France, Germany, Denmark, Israel, Italy, and Australia, among others, has shown that public funding does not necessarily reduce the expenditure of political parties.


  • Balancing between opacity and Privacy:
    • The present structure of electoral bond scheme is not conducive to clean up the funding process.
    • The government’s argument that opacity is necessary to protect privacy of the donor is indefensible. Privacy in political funding can only breed corruption.
    • One immediate measure that can be adopted is switching to digital transactions. This ensures adequate transparency with reasonable privacy to the donor.
  • Retract amendments:
    • The changes that remove the need of disclosure should be done away. Donations above a certain limit needs to be made public to eliminate doubts over corporate-politico nexus.
  • Ban foreign funding:
    • No mature democracies in the world, like the USA and UK, allow foreign funding in their political sphere. Hence, foreign funding for political parties should be banned.
  • Bring political parties under RTI:
    • Bringing parties under the Right to Information act can enhance transparency. But without pressure from the citizenry, it is unlikely to interest a political class hell-bent on insulating itself from public accountability.
  • Prospect alternatives:
    • Former Chief Election Commissioner S.Y. Quraishi has suggested an alternative worth exploring: a National Electoral Fund to which all donors can contribute.
    • The funds would be allocated to political parties in proportion to the votes they get.
    • Not only would this protect the identity of donors, it would also weed out black money from political funding.


Q. State funding of elections is a potential solution to problems associated with elections funding in India. Discus