Political funding: How BJP and Congress compete for every piece of the pie

It was widely reported last year that the Indian National Congress (INC), the main political opposition and a contender for power in the 2019 polls, has ran out of money. Divya Spandana,  who leads the party’s social media wing, openly confessed that the INC has no money to run its mundane political activities. It appears that the oldest national party does not have the funds to run its offices in several States and senior functionaries were asked to cut down their travel expenses.  While this may be a shocker for the fans of the party, which was in power not very long ago, key statistics of its finance clearly indicate the party is in a tight spot as far as donation aggregation goes. While the Congress raised Rs. 225 crore for the year in question, it spent about Rs. 321 crore – more than Rs. 96 crore from the earned donations.  This prompted party president Rahul Gandhi to make an urgent appeal for donations last year.

While 2018 was an extraordinarily tight year for the Congress party considering that the party fought a spate of State assembly elections including the electorally significant Rajasthan, Chhattisgarh and Madhya Pradesh requiring considerable expenditures, the fact is the party’s coffer has been experiencing a sharp decline ever since it lost power in 2014. The declared income of the party for FY 2017-18 was its lowest in 11 years, and 12% lower than the previous financial year.

Figure 1: Comparative flow of BJP and Congress Income

Source: Computed from ADR data

Figure 2: BJP income as percentage of the INC Income

Source: Computed from ADR Data

Figure 3: Cumulative donation to the BJP and the INC (2005-18)

Ever-widening funding gap

Where does the Congress party stand when compared to the ruling Bharatiya Janata Party (BJP)? While the Congress party is ahead of other national parties in terms of total donations (raised by various means such as membership fees, sale of coupons, individual denotations, electoral trusts, electoral bonds, rents from properties, etc), the oldest party, however, earned less than 1/5^th of what the ruling party received in 2017-18.  As per the income tax returns and annual audit reports of both national parties, the Congress party could raise about Rs 199 crore as donations for the year, compared to an impressive Rs 1027 crore by the ruling party. To put it in another way, from the combined income of the two biggest national parties, the Congress party’s share was a meagre 16 per cent (Figure 2).

In terms of donations above Rs. 20,000, the BJP raked up Rs. 437 crore in FY 2017-18 compared to Rs. 26 crore by the Congress party for the same year. Overall, the ruling party earned 13 times more than the combined similar donations received by other national parties, including the Congress party.

In terms of donations above Rs. 20,000, the BJP raked up Rs. 437 crore in FY 2017-18 compared to Rs. 26 crore by the Congress party for the same year.

Not a very long ago, the Congress party was at the pole position in political donations.  For instance, in 2012, it raised about Rs 356 crore against Rs 309 crore by the main opposition BJP then. If one goes back a little further, the in-power Congress party in 2006 raked up as many as 3.25 time more donations than the BJP. However, the Congress party’s fortune started sliding after it faced a flood of allegations of corruption and big ticket scandals around 2012-13, which coincided with the rising stock of the once dormant BJP. Even before it assumed the power in 2014, the opposition BJP surpassed the ruling Congress in political donations. For instance, while the Congress raised Rs. 598 crore for the FY 2013-14, the BJP collected as much as Rs 673 crore for the same year (Figure 3).

Figure 4: Comparative statistics of corporate donation to the BJP and the Congress

Source: Computed from the ADR Data

Blame corporate donors for the growing divide

The BJP’s phenomenal rise in capturing more than 80% of the total donations and the Congress’s sharp deceleration are closely linked to how they tapped the corporate donations. For example, the BJP in FY 2017-18 tapped a staggering 92% of the total corporate donations (Figure 4). This disparity gets even starker when compared with the Congress party. While the BJP received as much as Rs 400 crore of the corporate donations, the Congress party received as little as Rs. 19 crore in FY 2017-18 (Figure 4). To put in another way, the BJP tapped 21 times more of corporate donations than the Congress could get in FY 2017-18.

The BJP’s phenomenal rise in capturing more than 80% of the total donations and the Congress’s sharp deceleration are closely linked to how they tapped the corporate donations.

Of course, the BJP for long has been occupying a pole position in tapping corporate donations. Even when the Congress party was in power, the BJP collected more money from businesses and corporates. While the ruling Congress party could raise about Rs 172 crore in the years 2005-12, the BJP tapped Rs 192 crore in the same period (Figure 4). Still, the gap in corporate donations then was modest, compared to what it is now.  Since 2013, the business/corporate donors have contributed a whooping Rs 1621 crore for the BJP, while the Congress received only Rs 235 crore.

Electoral Trusts fuelling funding disparities

What is contributing to this growing gap in corporate donations between the two major national parties? While the usual explanations that the BJP has a close proximity with small businesses and trading communities and also are aggressive in tapping donations still hold good, a key contributor to such growing disparities in corporate funding are the electoral trusts. In its less than a decade long existence, electoral trusts have emerged as the biggest channel for corporate donations in India. Since 2013, more than two-third of corporate donations are being routed through this route. Some of the richest electoral trusts have been donating generously to the BJP, than to other national parties, including the Congress party. Of the 22 registered electoral trusts and their donations for FY 2017-18, the BJP received 85% of the total contributions. For example, the richest Prudent Electoral Trust contributed a staggering Rs 144 crore  (around 85%) to the BJP alone.  The Congress party received only a paltry Rs 10 crore from the same trust for the said period. Further, since its formation in 2014, the Prudent Electoral Trust has donated Rs 594.37 crore (82 per cent) to the BJP, out of its total Rs 726.13 contributions.

In its less than a decade long existence, electoral trusts have emerged as the biggest channel for corporate donations in India. Since 2013, more than two-third of corporate donations are being routed through this route.

The story does not end with the electoral trusts alone. Now with the electoral bonds (where more than 99.9% donations are of high value indicating their business links) also in the game, the gap in corporate donations is going to widen even further. In 2018, the ruling party collected as much as 95% of the donations routed through the electoral bonds. The audit and income tax reports of the BJP suggest that the ruling party received Rs. 210 crore of the total Rs. 222 crore donated through the electoral bonds in March 2018. The Congress received a meagre Rs. 5 crore for the same period. 

Too much gap not good for democracy

Of course, one cannot blame the ruling BJP for collecting more money than the other national parties. With close proximity to business and trading communities, it always finds its easy to raise more funds than the Congress. Yet, the gap was never so wide as it is today. While the BJP’s spectacular victory in the 2014 general elections and then its phenomenal spread over many new States allows it to win over the corporates and big donors, the Congress’s drastic slide in the donation basket has no easy answers. Has the opposition Congress lost the confidence of business community or this has something to do with the party’s uncertain political prospects? Whatever be the reason, too much gap in the political donations between the ruling party and the principal opposition does not augur well for the health of the democracy.  While income or donations by no means is a clear indicator of winning in elections, yet the campaign finance literature offers enough insights into how political parties with well-oiled campaign machines often have disproportionate advantage over their cash-starved rivals in mounting effective campaign communication and narrative buildings. This is clearly visible in the 2019 general elections.

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Niranjan Sahoo is a Senior Fellow and Niraj Tiwari a Research Intern at Observer Research Foundation, Delhi

• Domestic Politics and Governance
• National Politics
• India
• Elections 2019
• Political funding

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