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It’s a little too cosy now

comment Updated: Aug 17, 2014 22:52 IST
Hindustan Times
Raghuram Rajan

Can commerce and unflinching public interest rest well in the same bosom? Some think it can be a carefully managed ropewalk, while critics see significant room for conflict of interest. India’s electoral funding remains notoriously opaque, for instance. According to some estimates, parties receive up to 75% of their funds from unknown sources, especially big corporations. No party, it seems, is immune to the charms of obscure corporate funding. The relationship is a double-edged one, because there is a revolving door between the world of companies and the policies they want the political parties to implement.

Some recent tax-relief measures for political donations do seem to have increased the incentive for transparency. The bulk of corporate contributions has come through legal electoral trusts. A big loophole, however, still is that parties are required to disclose only donations above Rs 20,000. To hide sources, parties tend to claim they mostly receive multiple donations of less than Rs 20,000. Companies and governments are, therefore, increasingly under public gaze in a vibrant democracy that is frequently throwing up allegations of crony capitalism.

Crony capitalism can exist anywhere where there is an opportunity for making money without doing the actual work that a healthy capitalist industry requires. It is all about getting privileges and cashing in on them, rather than being productive. The more pernicious danger is that the entire political system runs on murky funding sources, which tend to serve as future kickbacks for political parties. Critics of corporate funding of political parties argue that big financiers expect discretionary favours, such as speedier clearance for business proposals, in return. Few can deny that Indian businesses remain highly vulnerable to discretionary government actions, despite economic liberalisation. As Reserve Bank of India governor Raghuram Rajan pointed out in a recent speech, the effort and focus should shift from getting more and more politicians from “fixing” the system to “reforming” the system. Making the system of corporate-political funding fully transparent can be the all-important first step.