NEED FOR POLITICAL

REFORMS FOR FASTER

ECONOMIC DEVELOPMENT IN
INDIA
WITH SPECIAL REFERENCE TO ELECTORAL SYSTEM
CONTENT
• Impact of Elections on Indian Economy
• Impact of Black Money on Indian Economy
• Demonetisation
• Need for political reforms
• UK’s Policy to increase transparency in Electoral Funding
• State Funding Policy of Japan, Canada and Sweden
• Sweden’s Simultaneous Election Policy
• Other proposed reforms and Conclusion
IMPACT OF ELECTIONS
ON INDIAN ECONOMY
IMPACT OF ELECTIONS ON INDIAN ECONOMY
• Political budget cycles theories indicate that macroeconomic variables
like output, unemployment, inflation show a particular pattern during
the election year

• trend could be attributed to the fact that investors were afraid of the
possibility of coalition government causing the policy paralysis

• CPI data from 1958 does not give any particular pattern in terms of
increase or decrease before and after the elections, but mostly inflation
decreases pre-election year
DEPICTION OF INFLUENCE
• from the given graph, we could clearly see that:
• The budget deficit which grew in the year 2011-12 went
down again near the year of elections i.e. 2014-15
• Exchange rate changes saw its lowest in the year 2014-
15
• Inflation which was highest in 2012-13 also saw a
downfall by 2014-15
• Similarly we see the Sensex changes plummeting in the
year 2014-15 which is a steep fall from the previous
year 2013-14
Thus, we can conclude that election do play a major role
in influencing the economy.
 ELECTIONS IN INDIA

• 1971- When economy governed politics

• 1977- Increased spending in elections increased the deficit

• 1980- Policy changes such as trade liberalization, devaluation and delicensing of investments to improve growth without disruption

• 1984-1st phase of shift in policy toward freer markets as key to poverty eradication and growth

• 1989- Because of BOP crisis, government was not able to import also to inflation

• 1996- Policy measures in areas like industrial delicensing, foreign investment, trade policy, financial and capital markets

• 1998- Asian crisis was the reason for many economic changes in India

• 1999- First non-Congress government

• 2004- political cycle. High expectations from Dr Manmohan Singh

• 2009- Global Financial Crisis

• 2014-
IMPACT OF BLACK MONEY ON INDIAN ECONOMY
• In Ancient times the ways to generate money as well as its usage was
very transparent i.e. everyone knew the sources of money and its
application, which may be referred as WHITE MONEY. So, in the
past, White Money was in use but now the colour of Indian money has
changed to Black.
• Black Money acts as a major hurdle in the growth of Indian Economy.
• One of the major reasons of sluggish growth of Indian Economy is the
rampant prevalence of Black money
• According to National Institute of Public Finance and Policy (NIPFP)
defines- “Black Money is the aggregate of incomes which are taxable
but not reported to authorities.”
IMPACT OF BLACK MONEY ON INDIAN ECONOMY

in addition to wealth earned through illegal means, the term black money would also include legal
income that is concealed from public authorities:

 To evade payment of taxes (income tax, excise duty, sales tax, stamp duty, etc)

 To evade payment of other statutory contributions

 To evade compliance with other laws and administrative procedures. Generation of Black
Money It is generated through main two activities or means – Illegal means and Legal means

 It is earned through Illegal means such as drug trafficking, weapons trading, terrorism, selling
counterfeit or stolen goods etc.
IMPACT OF BLACK MONEY ON INDIAN ECONOMY

 By Corruption which includes bribe given to and by public officers

 Hiding income through Legal activities i.e. not reported to public

authorities or we say to the government for the purpose to evade taxes

 Even commercial classes generate black money through Trade.

 FROM WHERE IS IT USED
• In INDIA it is mainly used by ministers in Elections to promote their own
interests.
• List is never ending but to name few are Ministers, Liquor Traders, Top
Industrialists, Senior Officers, Chief Ministers, etc. Present Status of Black
Money in India as we know, in the recent times the issue of black money and
corruption has come into being with participation of our civil society and
parliament institutions
• Corruption in India is a major issue that adversely affects its economy. In
2014 India ranked 85th out of 175 countries in Transparency International's
Corruption Perceptions Index, compared to its neighbours Bhutan (30th),
Bangladesh (145th), Myanmar (156th), China (100th), Nepal (126th),
Pakistan (126th) and Sri Lanka (85th)
DEMONETISATION: BLOW TO INDIAN
ECONOMY
• The Demonetization was announced as a surprise in the night on
November 8, 2016.
• It was presented as one of the major policies in the battle against Black
money in India
• Because of this major operation, the economy of India slowed down
from 9.1% to 5.7%
NEED FOR POLITICAL
REFORMS IN INDIA
NEED FOR POLITICAL REFORMS IN INDIA
• Political reform means evolving such an electoral system by which
gentility could be empowered in the state machinery.

• Political reform means evolving such a structure of polity by which not

only horizontal sovereignties (of the countries) but vertical sovereignties
(of the world, hemisphere, & quarter world) could also be recognized
and the respective share in the politico-economic power could be
allotted.
INTRODUCTION TO THE PROBLEMS OF
CURRENT INDIAN POLITY
• Our political system is extremely fragmented, with nearly 15 political
parties contesting each seat in 2014. States like Haryana see political
competition rise to as high as 23 parties per seat. This fragmentation
increases the political choices and as a result the amounts of money
needed to be spent in an election cycle.
INTRODUCTION TO THE PROBLEMS OF CURRENT INDIAN
POLITY
• In the 2014 national election, 79% of the Congress Party’s candidates
and 73% of the BJP’s candidates had declared assets greater than Rs
10 million. This not only creates a barrier of entry for talented leaders
without significant financial capabilities but also leads to selection of a
class that is not representative of a country with an annual per capita
income of INR 79,920.
INTRODUCTION TO THE PROBLEMS OF CURRENT INDIAN
POLITY
• The ECI has sought to increase restrictions against the participation of
criminals in elections or limit the use of finance in
elections. However, these low-level changes cannot look to improve
the health of the Indian political system. Any long-lasting reform
must amend the rules of the games, on how political parties and
candidates contest elections, and raise finances.
SUGGESTED REFORMS FOR
INDIA
 UK’S POLICY TO INCREASE TRANSPARENCY IN
THE ELECTORAL FUNDING
• Legislation to prevent excessive spending by electoral candidates in the UK has
been in place since the Corrupt and Illegal Practices Prevention Act 1883.

• The current law regarding campaign financing in the United Kingdom is

contained in the Representation of the People Act 1983 (RPA) and the Political
Parties Elections and Referendums Act 2000 (PPERA).

• The UK’s system of regulating campaign financing focuses on limiting the

expenditure of political parties and individual candidates, rather than limiting the
donations that can be received by these parties and individuals.
• There are three types of distinguishable regulated expenditure during a general
election: “distinction is made between ‘campaign expenditure’ incurred to promote a
party or its policies in general, ‘controlled expenditure’ incurred by registered third
parties to promote parties or candidates, and ‘election expenditure’ incurred on
promoting a specific candidate.”

• The PPERA subjects political parties to campaign spending limits (known as

“campaign expenditure”) a year prior to a general election. As the date of a general
election is typically not known until a few weeks prior, to comply with the law,
political parties must continually maintain records of their expenditure and received
donations. Spending by individual candidates on their election expenses is
generally excluded from this definition of campaign expenditure and is regulated
through the RPA, as amended by the PPERA (see discussion, below).
 SUGGESTION FOR INDIA
• It was only in 1968 that donations by corporate entities to political
parties were banned.

• However, instead of clamping down on corporate donations, the move

only led to funding being driven underground.

• Along with reforming political parties our policy makers need to realise
the true cost of campaigning in India.
• With an average population of 22 lakhs in each parliamentary constituency current
expenditure limits allow a candidate to only spend INR 3 rupees to persuade a
voter. As a result, while candidates on paper seem to conduct campaigns within
prescribed expenditure limits, it is rarely the case in practice.

• The suggestion for India is that it needs to tread the path of UK’s Transparency
Policies and try to reform the legislation with a view to revamp the electoral
policies of India
THE STATE FUNDING POLICY OF JAPAN,
CANADA AND SWEDEN
• Public funding refers to funds or resources provided by the
State/Government to political parties and/or candidates.

• Political parties and candidates should have equitable access to public

funds, and the rules regarding public funding should be clearly stated in
law. It is particularly important that there be no misuse of public resources
by the incumbent party or candidate. The legal framework should
encourage the founding and sustainability of a multi-party system.
• Public funding is divided into direct public funding or indirect public funding,
depending on the form in which public resources are made available.

• Direct public funding is given to political parties in the form of money –

usually as bank transfers.

• Indirect public funding refers to resources with a monetary value that the
Government provides to political parties
• Direct state funding of political parties is practised in 86 per cent of the
European countries, 71 per cent in Africa, 63 per cent in the Americas and 58
per cent in Asia. Its supporters say that public finance can help protect the
political process from direct, quid pro quo kickbacks or corruption and create
a level playing field for parties, candidates with less resources and new
entrants.
SWEDEN’S SIMULTANEOUS ELECTION POLICY
• It is not too well known that elections to Sweden’s county and municipal councils
occur simultaneously with the general elections (elections to Riksdag), every four
years. The next general elections in Sweden is due this September.

• General elections to the Riksdag, regional/county council assemblies and

municipal councils are held every four years, in September. These elections take
place on the same day.

• The electoral system in Sweden is proportional, which means that the parties are
given a number of representatives in the elected assembly that is proportional to
their share of the vote.
 SUGGESTION FOR INDIA
• The need of the hour is to synchronise state and central elections.

Holding elections together to the Lok Sabha and the state legislatures will bring the
following benefits:

• Reducing government expenditure: Holding an election costs crores of rupees to

the government or the public exchequer. And holding elections many times a year
to the state legislatures in addition to holding the Lok Sabha election once every 5
years costs thousands of crores to the public exchequer. If elections are held
simultaneously there will be significant savings of public money that can be
utilized for development works.
• Reducing party election expenses: Fighting elections costs huge amounts of
money to the political parties as well who leave no stone unturned to ensure
victory for their candidates. Political parties have to engage in continuous
resource generation since every year there are elections in at least 2 or 3 states.
If elections are held at once, then expenses of political parties will also be
under control. This will reduce the role of black money in election funding
since political parties will not be tempted to seek illegal sources of funding for
elections.
• More time for development work: Right now ministers and their parties are in constant
election mode since election to some or the other state legislature is just a few months
away. This results in less time to devote to their official duties. If elections are held
simultaneously to the Lok Sabha and the state legislatures the ministers and MPs and
MLAs will be free for at least 4 years to devote to their official duties and constituencies.

• Better utilization of security forces: For holding elections hundreds of central police
forces in addition to state police have to be deployed. Not only this costs huge amount of
money but the security forces also are diverted from their core mandate of ensuring
internal security in the country. If elections are held simultaneously to the Lok Sabha and
the state legislatures it will free up the security forces to devote to their core duties for the
rest of the period.
 OTHER SUGGESTED REFORMS
Auditing
• The ECI needs to be empowered to conduct regular audits to confirm the parties’
compliance with their internal constitutional documents, and the organisation of
internal elections. In fact, in 2011, the Law Ministry had already prepared a
Political Parties (Registration and Regulation of Affairs) Bill. Section 6 of
the Political Parties Bill required all political parties to form an executive
committee to oversee the implementation of democratic norms and intra party
elections at all levels. However, after being drafted, the Political Parties Bill
saw little to no subsequent debate.
Giving teeth to the ECI
• As things currently stand, the election commission has limited powers to take
action against candidates or their political parties.

• For example, in 2009, on a misreporting in electoral expenditure by Maharashtra

based politician, the ECI was unable to take direct action against the candidate.

• The corner stone of electoral governance in India, the Model Code of Conduct is
technically not legally binding and any compliance by parties or candidates is only
voluntary.
• Need of the hour is granting greater regulatory power to the ECI

• Along with granting greater regulatory power, it would be necessary to ensure greater
independence.

• This can be granted by granting the other commissioners the same constitutional
protections granted to the CEC under Article 324.

• As recommended by the 1990 Goswami Committee and the 255th Law Commission
Report, appointments of all the Election Commissioners (including the CEC) should
be made by the President in consultation with a three-member collegium - of the
Prime Minister, the Leader of the Opposition and the Chief Justice of India.
CONCLUSION
Thus, we saw how our elections play a very important role in our economy. We saw how
demonetisation could not help much in the growth of our economy. We the looked into the
frame of other democracies to find the solution to prevailing problems. But I believe that
these reforms are just a few in the line of numerous reforms to make our economy an ideal
economy. We need strong laws and even more powerful amendments in our constitution.
We can’t expect that to happen in a year or so but for whatever it takes, we need to
gradually move towards the change. For this change promises us a better economy, a better
democracy and thus a better tomorrow.
THANK YOU