GD Topic - Funding Democracy: Are Electoral Bonds a Boon or Bane?

Candidates taking the MBA entrance exam must prepare for the Group Discussion Round as it is an important part of the MBA admission process. "Electoral Bonds" is one of the most debatable GD topics. Learn about Electoral Bonds and their positive and negative impact on the Indian Economy in this article.

Group Discussion (GD) is a critical component of the MBA admission process, designed to assess a candidate’s interpersonal and communication skills, critical thinking, and ability to work in a team. During a GD, a group of aspirants is given a topic, which could be current affairs, abstract ideas, or business-related issues. Candidates are expected to express their opinions, engage in constructive dialogue, and demonstrate leadership qualities. The ability to present well-structured arguments, listen actively to others, and build on the discussion while respecting diverse viewpoints is essential. GDs are not just about knowledge but also about how effectively a candidate can articulate their thoughts under pressure and contribute meaningfully to a group. Excelling in a GD requires preparation on a wide range of topics, staying updated with current events, and practicing group dynamics to ensure confident and impactful participation.

Students preparing for MBA admission must know that once they have cleared the entrance exam, they have to appear for the Group Discussion and Personal Interview Round. Various MBA exams such as CAT, XAT, SNAP, NMAT, MAH MBA CET, etc., conduct Group Discussion Rounds as a part of the admission process. Candidates must ensure thorough GD preparation to increase their chances of getting admission in MBA at B-schools and institutions. 

Funding Democracy: Are Electoral Bonds a Boon or Bane?

In India, political funding has long been a heated debate topic, especially concerning transparency, influence, and accountability in election campaigns. To curb the influence of black money in political donations and ensure transparency, Late Arun Jaitley, the former Finance Minister announced Electoral Bonds during the 2017 Budget Session & introduced the electoral bonds scheme in January 2018. This scheme allows individuals, companies, and institutions to donate funds to political parties anonymously through the banking system. While the government advocates for this system as a step towards transparency, critics argue that it opens the door to non-transparent funding and corporate influence in politics.

For a Group Discussion (GD) on this topic, students can examine both perspectives and explore whether electoral bonds make political funding fair or unfair in India.

What are Electoral Bonds?

Electoral bonds are a unique approach to political funding. Any Indian citizen or corporate entity can purchase these bonds from the authorized branches of the State Bank of India (SBI) during specified periods throughout the. Once purchased, these bonds can be anonymously transferred to any political party’s account registered under Section 29A of the Representation of the People Act, 1951. The bonds are valid for 15 days after the date of issuance, and only political parties that secured at least 1% of the votes in the last general election are eligible to receive funds through this scheme. After 15 days, the donated money will go to the PM Relief Fund & can be used by the political party (to whom the money was donated) for its campaign.

A key point of contention in this scheme is that, while donations are made through banking channels, the public cannot access details about the donors or recipients. Thus, while the government and banks have access to donor information, the system remains anonymous to the public, which critics claim undermines transparency.

Key Facts about Electoral Bonds

• Electoral Bonds can be purchased by any individual or company.
• Electoral Bonds are issued in the multiples of ₹1,000; ₹10,000; ₹1,00,000; ₹10 Lakh; and ₹1 Crore.
• There is no restriction on the electoral bond purchase quantity, removing previous restrictions that limited corporate donations to 7.5% of their net profits.
• Only those political parties who are registered under Section 29A of the Representation of the People Act, 1951, with at least 1% previous votes can redeem the electoral bonds.
• Electoral Bonds can be bought only at the authorized State Bank of India (SBI) branches via non-cash methods only.

Electoral Bonds in India: Arguments in Favor and Against

Electoral bonds were introduced in India to formalize political funding and curb the influence of black money in elections. However, the anonymity they provide has sparked debates on whether they ensure fair competition in democracy or disproportionately empower the wealthy and corporate donors. 

To understand this GD Topic, let us review some major arguments in favor and against Electoral Bonds as a Political Funding System.

Arguments in Favor of Electoral Bonds

Supporters of electoral bonds argue that these instruments have several benefits for the Indian electoral system:

1. Reduction in Black Money: Before the introduction of electoral bonds, a significant portion of political donations in India were made in cash, often unaccounted for and derived from untraceable sources. Electoral bonds enable donations through banking channels, potentially curtailing the flow of black money into election campaigns.
2. Encouraging Corporate Donations: By providing anonymity, electoral bonds make it easier for corporations to contribute to political parties without fear of political retaliation. The anonymity helps companies avoid backlash from stakeholders or rival parties, which could encourage more corporate participation in political donations, creating a formal funding source for political parties.
3. Protecting Donor Privacy: In a politically polarized environment, many individuals and companies may hesitate to donate to parties publicly due to fear of repercussions. Electoral bonds allow donors to support political causes without compromising their privacy or safety.
4. Banking Verification: The purchase of bonds through the SBI ensures that all transactions are documented, allowing the government to track the source of funds without making this information public. This formalization helps reduce reliance on cash donations, increasing accountability in the system.
5. Focus on Issue-Based Politics: By formalizing donations, electoral bonds can encourage political parties to engage in issue-based campaigns. Politicians may be motivated to align their agendas with the interests of their corporate supporters, who often prefer policies that emphasize economic growth and governance.

Arguments Against Electoral Bonds

Critics, however, argue that the electoral bonds scheme has serious drawbacks, particularly regarding transparency and potential corporate influence:

1. Lack of Public Transparency: Electoral bonds allow donors to remain anonymous to the public, preventing citizens from knowing who funds which political party; thus, compromising their Right to Know (RTI). This lack of transparency can erode public trust and lead to concerns about conflicts of interest, as voters are left unaware of the corporate or individual interests backing each party.
2. Potential for Crony Capitalism: With anonymity provisions, large corporations may donate substantial sums to parties in exchange for favorable policies. This could create an imbalance in democratic processes, where wealthier entities hold sway over political agendas, sidelining the interests of the general public.
3. Note: Crony Capitalism is an economic term used to describe a capitalist economic system where individuals and businesses have a Quid Pro Quo with political parties. This means individuals or corporations with close ties to the political parties and/or government officials use their connections to gain unfair advantage in the marketplace.
4. Foreign Influence: The allowance of up to 50% foreign shareholding in companies that can donate through electoral bonds raises concerns about indirect foreign influence in Indian politics. This provision could allow foreign entities to indirectly support political parties, potentially impacting national sovereignty and the democratic process.
5. Disproportionate Influence of Wealthy Donors: The removal of the 7.5% cap on corporate donations enables companies to contribute unlimited amounts, potentially resulting in a scenario where only the wealthiest donors can exert substantial influence over political parties, thereby distorting representation.
6. Accountability Concerns: Since political parties and donors remain undisclosed to the public, holding parties accountable for possible conflicts of interest with their donors is difficult. This lack of accountability could lead to policy decisions that prioritize donor interests over public welfare, undermining democratic principles.
7. Concentration of Funds in Ruling Party: Data indicates that a significant percentage of funds through electoral bonds have gone to the ruling party, leading to concerns that the system might favor the incumbent government and compromise fair competition among political parties.

In a Group Discussion, participants can analyze both the advantages and disadvantages of the electoral bonds scheme to assess its impact on Indian democracy. While electoral bonds offer potential advantages by reducing cash donations and formalizing political funding, they raise valid concerns about transparency and accountability. The system’s anonymity provision, critics argue, risks creating an uneven playing field that could allow corporations and wealthy individuals to hold disproportionate influence over political decisions. A balanced approach might suggest that while electoral bonds could improve funding formalization, they require additional reforms to increase public transparency and accountability in political donations, ensuring fairness in the democratic process.

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