Thoughts on economics and liberty

Tag: Electoral system reform

Let’s make sure we don’t subvert India’s democracy

While noting that the middle classes of India are entitled to some jubilation at the outcome achieved from Anna Hazare's fast (this also being one of the first times since independence when our dormant middle class has actually done something collectively),  two fundamental issues need to be kept in mind:

1) Legal status of fast unto death

In my draft manuscript, The Discovery of Freedom I've been grappling with the issue of fast to death. What is the legitimacy of such a thing in a free society. Is self-harm permitted? Up to what stage? And why?

I can well understand Gandhi's fast unto death in order to calm down tempers and bring an end to communal violence. But I'm not able to understand the legitimacy of a fast unto death to bring about a Bill. Despite my sympathies with Anna, I'm unable to endorse his approach, else he or others could hold the entire country's policies to ransom and totally subvert the democratic process.  

In particular, why is Anna not force-fed when he fasts, but others are ( The law on this matter should be clear and apply uniformly to everyone. No one should be permitted to fast unto death. Period. Indeed, all hunger strikes must be prohibited, being a kind of self-harm – particularly as they seek to change others' behaviour.

The Gandhian times are over. Let us follow some discipline and use the electoral process which is available to EVERYONE. Why create extra-constitutional mechanisms and dilute the discipline of the rule of law?

2) Role of un-elected citizens vs role of elected representatives 

It is crucial that no unelected citizen be permitted to subvert the democracy that we have established – at great cost and effort – in India. I therefore encourage Anna and his supporters to form a political party and contest elections and then, once they have a formal mandate for change, bring about the reforms they have obtained people's authorisation for (subject to preserving the freedoms guaranteed in the Constitution).

I would much rather have the most corrupt elected Parliament make laws for India than unelected people who threaten suicide and bring the entire Parliament to its knees. As I have often said, I believe that even our most corrupt elected representative (e.g. Sonia/Rahu Gandhi) do greater service to India than those who berate them from outside but refuse to challenge them at the hustings. Use the hustings, please, not the streets.

To everyone who wishes to see change in India , let me make this appeal: If you have true COURAGE and INTEGRITY, please fight elections. Don't just start mass movements to destroy democracy and create a rule by mobs.


"Hazare said once Lokpal Bill becomes a reality, he would take up inclusion of "none of the above" choice in voting." (TOI, Apr 11, 2011)

I'm afraid I don't agree to this proposal, being anti-democratic. Let no one sit in judgement as GOD over those who contest elections. If you find no one who good from those who are contesting an election, then contest elections YOURSELF. Please don't damage democracy by refusing to send a representative to Parliament.

Further it would be obnoxious in the extreme for Hazare to impose his personal views on the country through another round of fasting. This destruction of democracy must come to an end. 

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Please be clear: Jan Lokpal won’t catch the most corrupt: Sonia and Rahul Gandhi

I'm pleased at the positive outcome re: LokPal Bill. However, it is very important to keep things in perspective and to note three VERY IMPORTANT things:

A) As Shantanu Bhagwat of FTI has noted, the battle has been won but the WAR is not over. However, I suggest that Shantanu, in his eternal politeness and consideration for the venerable Anna Hazare, has grossly exaggerated the nature of gains made by the LP Bill. In my view, the war has not even begun. This is a cosmetic and essentially irrelevant “reform” at this primitive stage of governance systems in India. The war would need to reform a host of areas:

  • electoral
  • economic and social policy
  • among many, many others.

If the package of reforms is 100, then LP bill is not even 0.5 out of 100.

B) Second, we know that the biggest "fish" in terms of corruption in India is the Congress party, and the heads of the party, the Sonia and Rahul Gandhi combine, are the MOST corrupt people of India. Most corruption in India is at least indirectly controlled by them. True, most of this money is not used by them for personal "aiyashi" but for contesting elections, but such is the nature of corruption that no good cause can justify it.  

Let this be VERY CLEAR, and written in stone. The Jan Lokpal will NEVER be able to catch the biggest fish. That is because they will always transfer funds outside India and use underhand means at every stage. There will be an even greater outflow of corrupt money outside India – beginning NOW!

True, Baba Ramdev and his maniacal followers plan to shed the blood of thousands, but even that won't stop corruption. No, my dear Baba, your intentions are good, but you simply don't understand.

C) Finally, let this be very clear as well: Neither Sonia nor Rahul nor anyone else among the politicians in India is BORN corrupt, or otherwise criminally minded. It is the system that FORCES them to do such things. That is why I'm AGAINST witch-hunts and chasing after individuals, because when 99% of the politicians and 90% of the bureaucrats (and police, media, judiciary, etc.) are corrupt, what's the point in catching one or two people? What difference can it possibly make to the life of the common man?

Yes, LP can have an effect if the system reduces corruption to the minimal, say, to 5% of the total politicians and bureaucrats. Then, LP will have an effect. At the moment, it will merely kill a lot of small fish, and the big fish will escape [and I mean KILL, given the language being used by Ramdev's supporters].

Let us become mature enough (and capable enough) of understanding the true drivers of our system. That is not a trivial task. Let us be clear that our SYSTEM makes Indians corrupt. Indians don't have corrupt DNA. 

I regret that none of the leaders of the current mass movement display ANY understanding of the causes of corruption and misgovernance in India. That task of leading India to its great future that lies ahead will have to be shouldered by FTI. Of that there is no doubt.

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Reforms of Political Representation in India

While Equality (socialism) and corruption are lifelong buddies and room-mates, Freedom (capitalism) and corruption are arch enemies. A free India can’t condone even the tiniest bit of corruption. We must become the least corrupt country in the world if we want to be called free. The following four actions will help to eliminate political corruption and also dramatically improve India’s governance:

  • Raise the wages of MPs and MLAs at least by a factor of ten while simultaneously getting rid of all of their ‘perks’. Let us pay the Prime Minister of this great nation at least what a middle level business executive of a very large multi-national firm gets, say Rs. 1 crore per year, and MPs Rs.20-30 lakhs each. As it is unpopular for politicians to raise their own salaries, we can help them by setting up an independent commission that would determine their wages. There is also atendency among politicians to add to their perks if their wages are kept low by public pressure – this is a significant problem for India. In India some MPs also allegedly sell some of their perks, such as their free air tickets. That is surely criminal. Perks are also expensive to administer. Let us therefore get rid of all perks once salaries are raised, and only reimburse actual expenses incurred on the job, for instance, eligible travel expenses. Let openness and transparency on such basic matters prevail in India; a free society can’t expect anything less than that.
  • We must fund our elections differently – through state funding. The purpose of the wages of MPs or MLAs is not to cover the expenses incurred during elections, but to pay them competitively for their responsibilities. Even if wages are hiked, we will still need to find a way to make the electoral expenses manageable. We can do so by state funding of elections. A simple and effective method that will pay Rs 25 or thereabouts, at current values, for each valid vote cast in favour of a candidate is outlined in Box 3. A system similar to this operates successfully in Australia, where about $2.10 (about Rs 66) is paid at present by the government for each valid vote polled by a candidate.[i]
Box 3 
State Funding of Elections
Let us revert to Mr Harishchandra’s original calculations. A small payment made for each vote polled by a candidate radically alters the expected financial burdens on candidates. It makes it viable for a much larger number of people to participate. The field of candidates changes from less than 1 per cent of the eligible population at present to potentially the entire adult population. Here’s how:
Let a payment of Rs X be made per vote polled, with n = 6 and θ = 0.02, as before.[ii] Mr Harishchandra expects 10 lakh voters to cast their vote at the election. His expected PVreturn now becomes:
With a government payment (X) of only Rs.8.39 per vote cast in his favour, Mr Harishchandra can expect to break even after spending Rs 20 lakhs of his own money on the election. This still leaves him with no income after repaying his loan. A payment of around Rs 25 per vote will make it practicable for Mr Harishchandra to contest the election, even with six serious candidates flanked against him. He is empowered by this method to take a calculated risk. The electoral fray now becomes a genuinecontest, not suicide.
Mr Harishchandra may, of course, still hesitate, since corrupt candidates will continue to spend huge amounts of black money without any accountability and threaten honest people should they attempt to contest. With strong auditing systems, anyone found using black money will be thrown behind bars. Further, over time, the new incentives created by state funding will allow many more honest and competent candidates to contest. There will finally come a turning point when morally challenged candidates will be shut out completely by the public which will only choose to vote for good candidates.
  • Third, we need to abolish election expense limits while simultaneously building extremely strong audit systems for monitoring the contributions received and expenditures made during elections.
  • Finally, a wider set of reforms of the electoral system will be needed, such as making public the property returns of our candidatesin the interest of greater transparency. These and other such reforms are touched upon in Chapter 6.

A One Rupee Freedom Movement 

The level of corruption in a society essentially depends on two factors: the opportunity available for corruption and incentive for corruption.
  • While I haven’t discussed the issue of opportunity in this chapter, our socialist regime – which empowers our governments to interfere virtually in each activity of ours – has clearly provided a wide range of opportunities for corruption in India to a wide range of political representatives and bureaucrats.
  • On the second of these factors, this chapter confirms that Indian politicians have a great incentive to be corrupt.
This is also an apt place to inform the world that not all Indians are moral pygmies. We do continue to have a large number of honest people that the world never gets to see or hear of, because the combination of our socialism and shoddy electoral system prevents anyone but the corrupt from rising to the top. Our system also breaks the back of the honest; completely demoralizes them. The world will, of course, ask us: ‘You’ve had 60 years of independence, so why can’t you get your own house in order?’ To which we must ask the world to be patient, for we have only recently started recognizing the causes of our problems. And we have hardly started our journey on the path to freedom. Our citizens are very sleepy headed and not yet awake either.
We, the sleeping citizens of India, must wake up and take responsibility for allowing these major flaws to develop in our democratic system of governance. We are also responsible for letting the weeds of socialist corruption overwhelm the fledgling tree of democracy and freedom in India. To scare the wits out of our corrupt representatives and to make them start paying attention, let us begin by going to our district officers today, and, for only one rupee each, get our own copy of a recent set of electoral accounts. Then, let us study these accounts and raise the issues we discover in our local press, and write to the Election Commission. That will be a very effective way to start a real freedom moment for India. We can call it the one rupee freedom movement.
This is an extract from my book, Breaking Free of Nehru.

[ii] It is assumed as before that Mr Harishchandra expects to poll one vote more than 1/6th of the votes polled, and therefore will not forfeit the security deposit.

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Accounting of Political Party Funds and Election Expenditure

One could well ask: how am I so confident about my claim that election expenditure accounts of virtually all the serious candidates are either an incomplete or untrue record of reality? Where is my evidence to show that legal limits are flouted, given that declared accounts don’t show that? I agree that I only have circumstantial evidence; but given similar evidence from a number of sources, I suggest that we can reasonably deduce that this claim is true.

Secondary reports from knowledgeable people provide compelling circumstantial evidence. The following are two important secondary sources:
  • Mr Seshan, the former Chief Election Commissioner, spoke in 1994 of cases where the actual campaign expenses, based on information informally gathered by him, exceeded the official limit by orders of magnitude. ‘Seshan revealed that he had been personally told by a woman candidate for the Delhi assembly elections that she had spent Rs 55 lakhs on election expenses even while stating in the mandatory government form that she spent a mere Rs 483. Another candidate for a parliamentary seat had told Seshan that he had spent Rs 50 lakhs and one Telugu candidate reportedly confided to him that he had spent 8.5 crore rupees on his elections’ (Mr M V Kamath reporting in News India Times on 4 February 1994).
  • Arun Kumar’s 1999 book, The Black Economy of India,[i] provides a detailed analysis of actual electoral costs based on interviews with 14 politicians. Many of these politicians ‘commented that their first act after winning elections was to tell a lie’.[ii] The average expenditure per constituency came to Rs. 1.29 crores, hence exceeding the then prescribed limit of Rs 15 lakhs by over 8 times. This expenditure included voluntary contributions and expenses borne by the state and local committees, noting that no unauthorized expenditure is allowed to be made by anyone. If a candidate knew about these expenses, then these should be deemed to be authorized; hence these candidates flouted the law quite badly.
My conclusion is also informed by first hand circumstantial evidence; information I have personally come across between 1983 and 2000 in various roles. My evidence includes the following:
(a)   As a junior officer (Assistant Commissioner), I observed significant misuse of the government machinery by ruling parties in Haryana and Assam. This misuse included taking thousands of people to political rallies in buses commandeered, and in one case, paid for, by the district administration. This is an illegal subsidy for political purposes.
(b) Among my other duties as Sub-Divisional Magistrate (Sadr) of Guwahati, it was my job to supervise the Guwahati Circuit House in 1984–5. In August 1985, Rajiv Gandhi announced the Assam Accord and the subsequent elections in Assam. With the election fever came a huge inflow of money to local units from the Congress (I) ‘high command’. A room bearer who serviced the room of a nationally renowned young central Minister told me that he had seen a briefcase full of hard cash in the Minister’s room. As this was a common occurrence for the room bearer, that observation was mentioned merely in passing. I haven’t seen the ‘smoking gun’ myself, but I have no reason to disbelieve the room bearer since I have directly witnessed, elsewhere during the same period, the handing out of Rs 100 notes in a major political leader’s office in Assam to villagers who had brought in various petitioners from villages. In 1985, a Rs 100 note was a very big thing. Such liberal use of cash (most likely black money) by very senior politicians indicates that their expenditure statements of elections are likely to be fraudulent. Cash flows like water around big politicians.
(c)   As a Commissioner in Shillong, during a conversation with one of my more friendly Ministers in 2000 on a long trip by road and air from Shillong to Delhi, the Minister told me how he had spent well beyond the limit in his election. This person was a fine gentleman. His source of funds seemed to be genuine. I believe he falsified his accounts only because the law forced him to do so. Without such limits, he would have disclosed the full amount.
(d) In observing the behaviour of most of the Ministers with whom I have worked, I found them ceaselessly engaged in making money through corruption of all sorts. In one case I was summarily dumped from my role as Director of Rural Development in Assam when I did not follow a particular (very senior – hint!) Minister’s directive to award a cement contract to a particular private sector company. I was asked to ‘cook up’ reasons to reject the lowest bidder and to give the contract to the private company even though its cement would cost more. While this does not tell us about election expenditures, it tells us about the incessant generation of black money by politicians. And where else do they really like using it except in elections?
(e)  In 2007, a worker of a major political party met me to discuss this book. He agreed with many of the things I have written. He told me in passing about how he had distributed Rs 35 lakhs in cash during a single night among voters in Mumbai a few years ago, along with his fellow party workers. Apparently that was to no avail as his party lost that election. (This point additionally supports the argument that voters are not stupid; they do not vote only on the basis of the money a party throws at them.)
With all this evidence coming from different directions, I am sure you’ll agree with my conclusion that electoral expenditure accounts are almost invariably falsified.
* * *
But leaving aside the issue of actual expenses, which I really wouldn’t care about if these were not based on black money or corruption, let me talk of the much more important issue of account keeping. Election expense accounts are required to be declared under Section 77 of the Representation of the People Act, 1951. An inspection or a full copy of these accounts costs only one rupee.[iii] But since all of us ‘know’ that electoral accounting laws are violated, not many of us seem to bother to actually get a copy of these accounts.
I spent one rupee on 1 December 1999 to obtain a copy of the election expenditures declared by candidates to the 1999 Shillong Parliamentary Constituency elections. A brief letter to the Returning Officer of Shillong along with a formal receipt for one rupee lodged with the appropriate account in the district Treasury did the job. I received a complete photocopied set of the accounts on 3 December 1999. The data were illuminating, indicative of potentially serious issues both with account keeping and with the overall system of monitoring of accounts. I have summarized these accounts in Appendix 2. As this information is (was) readily available to any member of the public at extremely low cost (well below cost, in fact), I am deeming this information to have been published, and have not hidden the candidates’ names from my analysis. I am discussing systematic issueshereand so the names are entirely incidental. To be perfectly clear I would like to state that I am not in any way pointing fingers at the named individuals; on the contrary, I applaudthem for having the gumption to contest elections despite the barriers imposed by our laws. They deserve to be thanked for keeping our infant democracy alive and ticking.
Anyway, back to the issue of accounts. These accounts actually raise more questions than they answer. My discussions with the then Chief Electoral Officer of Meghalaya and with a Deputy Chief Election Commissioner in Delhi did not answer my questions either. While I note that some improvements have subsequently been made to the system of accountability, most of my initial comments are still valid.
  • One of the candidates spent Rs 4.5 lakhs from his or her own personal account, while that candidate’s political party reportedly spent nothing. That is not believable. Why would a candidate agree to represent a party that does not offer even the minimal financial support for the campaign?
  • There was one candidate whose party spent Rs 6.05 lakhs while the candidate spent nothing on his own. I don’t believe this either, as political parties tend to demand at least some co-contribution; there is an element of risk-sharing involved.
  • Five of the nine candidates provided incomplete accounts, or accounts that were improperly filed. Three of the nine did not submit accounts at all till the date I received a copy of these accounts – these were definitely delayed beyond the mandatory 30 days.[iv]
  • The information provided did not permit me to cross-check whether expenses declared to have been incurred by political parties had been recorded in the expenditure statements of those parties. The reason this can’t be done is because no political party in India discloses its accounts publicly (Loksatta party has disclosed an outline of its accounts on the internet recently: well done!). Of course, such disclosure is a given in most Western societies. Further, political party income tax returns (which can’t be a substitute for such detailed accounts) are deemed confidential in India and therefore even the Election Commission does not have access to them.
  • In order to determine whether the payments mentioned had actually been made by cheque or were otherwise traceable one needs a level of detail that is not available. The Election Commission also does not audit these accounts, nor asks them to be audited before submission.
  • The Deputy Commissioner of Shillong informed me verbally on 24 April 2000 that no action was contemplated against any of these prima facie violations which I had noted and circulated in the form of a discussion paper[v] among all senior officers in the Meghalaya Government including the Chief Secretary and Chief Electoral Officer.
The violations I found were of two types: (a) failure to submit accounts, and (b) improper accounts. That no one audits these accounts at all is another issue.
Failure to Submit Accounts
If the Election Commission had agreed to launch an inquiry into the cases of candidates who did not lodge accounts, it could have, under section 10A of the Representation of People Act,1951, disqualified those candidates for a period of three years. As on 1 March 2004, 114 persons were barred across India from contesting Lok Sabha elections, although, in my opinion, many more should have been disqualified if diligent compliance were to occur in India. The problem is that this penalty is too low and therefore meaningless. One can spend crores of rupees, not lodge accounts, and still get to contest in the following elections which usually take place after five years. In my view the failure to submit accounts – and accounts will be needed even when election expenditure limits are scrapped – should be treated as a serious criminal offence leading to imprisonment for at least six months. Our trust should not be trifled with by candidates so lightly.
Improper Accounts
On thisissuethe position is murky. There are penalties including imprisonment of up to three months for some types of electoral offences, but it is not clear upon a casual perusal of the law whether improper accounts will attract a penalty. Under the current law it would appear that if, after due processing, accounts are found not to have been kept, the Election Commission could prosecute the errant candidate under s.171 I of the Indian Penal Code. A successful prosecution would then lead to a fine of at most Rs.500! Expenditure limits: Rs. 25 lakhs. Penalty for failure to keep accounts: Rs. 500! (The law says: ‘Failure to keep election accounts: Whoever being required by any law for the time being in force or any rule having the force of law to keep accounts of expenses incurred at or in connection with an election fails to keep such accounts shall be punished with fine which may extend to five hundred rupees’.)
Note that this law doesn’t talk of improper accounts, or of exceeding election limits. I suspect the Commission has probably not tried to prosecute anyone under this section, since it appears to be too hard and not worth the effort. If our honest Mr. Harishchandra had been prosecuted for disclosing an expenditure of Rs.25,00,001, the court would probably have dismissed the case since complying with the limit appears to be irrelevant under this particular law. All that is relevant is whether Mr Harishchandra kept accounts; which he did.
For the philosophy of freedom, deeply grounded in the principle of accountability, the current situation involving weak monitoring and toothless enforcement is unacceptable. The current accounting system is a total farce. While I strongly disagree with putting limits on political or election expenditures, we should expect complete disclosure and independent audit of all political receipts and expenditures. Accountability in a free society cannot be made into a plaything; our most basic freedoms are at stake here.
In brief, our rotten system requires candidates to falsely swear allegiance to socialism, to lose money in the process of serving the country, to tell lies in their electoral accounts statements and to compromise their personal integrity in innumerable ways throughout their political career. Each of these is a legal requirement! Why would any good person want to join Indian politics?

[This is an extract from my book, Breaking Free of Nehru]

[i] Kumar, Arun, The Black Economy in India, Penguin India, 1999, pp.272–82, 296–8.

[ii] Ibid., p.272.

[iii] Rule 88 of the Conduct of Election Rules, 1961, states: ‘Inspection of account and the obtaining of copies thereof – Any person shall on payment of a fee of one rupee be entitled to inspect any such account and on payment of such fee as may be fixed by the Election Commission in his behalf be entitled to obtain attested copies of such account or of any part thereof’.

[iv] Under s.78 of the Representation of People Act, ‘Every contesting candidate at an election shall, within thirty days from the date of election of the returned candidate or, if there are more than one returned candidate at the election and the dates of their election are different, the later of those two dates, lodge with the district election officer an account of his election expenses which shall be a true copy of the account kept by him or by his election agent under section 77’.

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