NEW DELHI – When Prime Minister Narendra Modi abruptly scrapped large bills of India’s currency two months ago with the goal of curbing illicit wealth, many citizens asked why he spared the country’s political parties and their opaque funding practices.
The number of political parties is growing rapidly in the world’s largest democracy. At the last count, there were 2,045 registered political parties, up from 1,866 just a year ago.
One of the reasons behind the rise, election officials say, could be the generous waivers that political parties receive under the country’s tax laws.
In an unprecedented move last week, the Election Commission informed the tax authorities that it is removing 255 parties from its list because they have not contested a single election in 10 years and exist merely on paper. The Indian Express newspaper said these “could be nothing but money-laundering operations.”
“The rapid growth in the number of political parties was suspicious, and we began a probe some months ago,” said an official with the Election Commission, who spoke on the condition of anonymity. “So many parties had not contested elections; they were not active politically. So we feel that these parties continue to exist only because they may be enjoying the benefits of tax exemption by being on our list.”
India’s tax rules exempt political parties from paying income tax, and they do not have to report details of donors who give less than about $300. The parties have also opposed recent moves to bring them under the nation’s Right to Information law, under which citizens can demand to read internal files.
An election watchdog group, the Association for Democratic Reforms, reported that parties typically escape scrutiny by claiming that a majority of their funds came from such small donations of under $300. These are listed under the category of unknown donors.
Modi’s Bharatiya Janata Party reported that 65 percent of its income came from such anonymous benefactors between 2005 and 2015, the group said. The opposition Congress party reported 83 percent of its income from unknown donors.
In the past week, local reporters have combed through the list of many these 255 little-known political parties and visited them at their nondescript offices. Some of the addresses were in people’s homes or clinics. Some had just one manager who could not show evidence of political activity.
The election commission also renewed its call to lower the permitted cap of “anonymous contributions” to around $30 – a measure that could reduce the presence of dirty money in the country’s political parties and election campaigns, the official said.
“Considering the way this government has declared war on corruption and black money, the timing couldn’t be better for electoral reforms,” The Hindu newspaper said in an editorial Tuesday.
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