Reforming India’s Party Financing and Election Expenditure Laws

Competitive political parties and election campaigns are central to the health of democracies. Parties and campaigns require significant resources to be effective. India has developed complex election expenditure, political party funding, and reporting and disclosure laws. We suggest that these laws may have perverse impacts on the electoral system: they tend to drive campaign expenditure underground and foster a reliance on unaccounted funds or ‘‘black money.’’ This tends to lead to an adverse selection system, in which those willing and able to work with black money dominate politics. We conclude with some possible remedies, including partial state financing of political parties, that might restore the health of India’s electoral system.