Election Funding And Black Money

The Prime Minister must go boldly where no Indian politician has gone before, and reform political funding.

- Baijayant ‘Jay’ Panda

The withdrawal of the old Rs 500 and Rs 1,000 currency notes has been the single most disruptive economic move since the reforms of 1991. It has been extremely controversial, but not because of popular outrage. In fact, the public reaction to it has been overwhelmingly the opposite, something that much of the mainstream media acknowledged rather belatedly, not to mention grudgingly.

Opponents of this remonetisation have directed their ire at many aspects of it, with arguments that range from valid questions to hysterical denouncements. A valid and important aspect of the debate is what effect it will have on illicit “black” money, especially considering that the nation’s politics runs largely on such funds.

Even supporters of remonetisation will agree that it could at most facilitate one-time flushing out of unaccounted money. In fact, considering the larger than-expected amount in old notes that has reportedly been deposited in banks, the extent of this initial success will itself depend on follow up action by tax and investigative authorities, to catch and freeze illicit deposits.

Sure, the regeneration of black money will be harder now in comparison to earlier instances of remonetisation. The increasing requirement of PAN cards and Aadhaar, growth of the digital and cashless economy, and the electronic traceability that all these facilitate, will create more hurdles for black money than earlier.

However, checking large-scale regeneration of black money will need more fundamental reform. And nowhere is that more desperately needed than in the manner in which our politics is funded.