Consider some of the following numbers.

  • Number of voters in country for 2014 Lok Sabha elections: 814.5 million (approx.)
  • Number of Lok Sabha constituencies: 543
  • Approximate number of voters in each constituency: 1.5 million (approx.)
  • Maximum allowed expenditure by each candidate: Rupees 7 million
  • Maximum allowed expenditure by each candidate on each voter in his/her constituency: Rupees 4.5

Thus, a candidate can legally spend only four rupees and fifty paise to get his/her message across to a typical voter in his/her constituency. A couple of SMSs and you are out of money. It should be obvious that this sum is far too inadequate. Then the question arises, what is an adequate number?

Framed differently, “what should be the cap on campaign expenditure incurred by candidates?” Three options comes immediately to mind:

  1. We continue with the Election Commission’s way of prescribing the ceilings that sees occasional revisions.
  2. We instead have some sort of an inflation-indexed formula that takes care of increase in campaign costs at regular intervals.
  3. Have no ceiling on campaign expenditure whatsoever.

I recommend the third option, that is, removal of caps on campaign expenditure incurred by the candidate.

Currently different states have different limits on what a candidate can spend. The upper limit was recently raised from Rs 4 million to Rs 7 million.

It is almost impossible to believe that any serious candidate manages within the prescribed limit. It was recently reported that an analysis by Association of Democratic Reforms (ADR) and National Election Watch (NEW) shows that out of 437 MPs who submitted their election expenditure statements, on an average, MPs spent Rs 1.5 million or about 59 percent of the average expense limit in 2009. Does that mean the prescribed limit was too high and didn’t required an upward revision?

I would contend that the reality is much closer to what Maharashtra BJP leader Gopinath Munde publically admitted last year. A lot was made of the issue when Mr Munde admitted that he had spent Rs 80 million in his 2009 election campaign for Lok Sabha, 32 times the then-official limit of Rs 2.5 million. Mr Munde was only stating the obvious – that it costs several fold the official limit to run a credible election campaign. Since the rewards on winning an election are perceived to be very high, the ‘investments’ (campaign expenditure) which candidates are willing to make, increase accordingly. Given that the prescribed limit is very low, the rest of the expenditure has to be incurred in black money and therefore collected in black money.

Why put a cap on campaign expenditure at all?

I believe the idea behind putting a cap on campaign expenditure is to create a level playing field so that every candidate has an equal opportunity of success, or, in other words, money-power is discounted.

The Economic Times cover story reported last week that Nandan Nilekani, ex-Infosys and ex-UIDAI Chairman, who is set to contest Lok Sabha elections on Congress ticket from South Bangalore constituency, and his wife, have declared assets worth Rs 77 billion. However, the maximum he can spend on his campaign is Rs 7 million. One could argue that with resources like this, Mr Nilekani is better placed than most other candidates in his constituency. Some would say that with a cap on expenditure, as mentioned above, a level playing field is created. But is it really?

Is money the deciding factor in a candidate winning or losing an election? I would disagree. It is an important factor, but not the deciding factor. What better evidence than the recent performance of Aam Aadmi Party in the Delhi Assembly Elections, where some of the most innovative methods of campaigning in recent times were tested and a party with modest resources was able to successfully challenge the established national parties.

Removal of cap on campaign expenditure to tackle black money

Any ban/cap imposed by the government hardly ever leads to desired outcomes. Similarly, statutory limits on expenditure has only lead to black money having a significant role in elections.

Given that expenses by political parties do not have any specific ceiling, any ceiling on candidate’s expenditure is rendered non-consequential. ADR in its rather impressive list of recommendations for electoral reforms suggests, “to make the current laws on electoral expenses more effective, ceiling should be imposed on expenses during elections made by political parties as well”. We contend that fiddling with caps on expenditure is not the answer.

Read more: Election Funding: Who pays for our political parties?

Instead, a more transparent system where people are free to donate to any political party/candidate of their choice (already encouraged by political parties themselves) should be preferred. Full disclosure (without limit) of donations received and expenditure incurred by political parties/candidates and donations made by citizens looks like a better alternative to me.

What do you think?


Note: The number for Lok Sabha constituencies where election takes place was updated from 545 to 543 (since two members representing the Anglo-Indian community are nominated by the President of India). Hat Tip: Chandrasekaran Balakrishnan

Post Disclaimer

The opinions expressed in this essay are those of the authors. They do not purport to reflect the opinions or views of CCS.

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Kumar Anand

Kumar Anand is an economist with over ten years of experience working with for-profit companies, government ministries and not-for-profit think tanks. Kumar has previously worked with National Institute of Public Finance and Policy (NIPFP) where he was part of the research team that assisted the Financial Sector Legislative Reforms Commission (FSLRC). Before joining NIPFP, he worked with Hong Kong-based Asianomics Limited, where he kept a watch on the developments in the Indian sub-continent markets. Before his present role, Kumar worked with Centre for Civil Society in New Delhi, where he created an online library of Indian liberal works to preserve and revive the rich Indian liberal and free market tradition.

Currently, Kumar leads the research team at Nayi Disha in Mumbai, where he is exploring the right set of principles-based rules that should govern a city and a nation and the ways to create a popular demand for such a change. Kumar's research interests are in Indian economic history, urban economics and public choice economics. He is a graduate of Gokhale Institute of Politics and Economics, Pune.