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Indian Prime Minister Narendra Modi, centre, arrives for the Budget session of Parliament in New Delhi on Jan. 31. (MONEY SHARMA/AFP/Getty Images)

On eve of state polls, Indian PM Modi looks to clean up campaign funding

WT24 Desk

Indian Prime Minister Narendra Modi has moved to clean up political funding with limits on cash donations and new “election bonds,” but some politicians and election officials said the measures would have limited impact, Reuters reports.

With several state polls about to begin that will help determine his chances of re-election in 2019, Mr. Modi’s administration sought to tackle widespread perceptions of vote buying by capping cash donations to political parties at 2,000 rupees ($38).

Previously the ceiling was 20,000 rupees.

Announcing his 2017/18 budget, Finance Minister Arun Jaitley also unveiled a scheme under which donors could buy “election bonds” from a designated local bank and give them to political parties to deposit into their accounts.

Forcing donations through the banking system would mean the assets were declared and could therefore be traced.

The government also threatened action against political parties that did not file tax returns. They do not pay income tax, but filing returns could bring transparency to the system.

“This reform will bring about greater transparency and accountability in political funding, while preventing [a] future generation of black money,” Mr. Jaitley said.

The changes will not directly impact elections getting under way, but the government is likely to see them as a way to burnish Mr. Modi’s credentials as a graft-fighter after he announced a series of measures to tackle illicit wealth.

In another move that may catch the voter’s eye in the big battleground state of Uttar Pradesh this month, Mr. Jaitley bolstered rural and infrastructure spending.

The government also cut the basic personal tax and taxes on small firms that make up most of India’s businesses, offering relief to those strapped for cash after higher-value banknotes were scrapped in a radical move against undeclared wealth.

With no federal election funding, unaccounted cash has long been the lifeblood for political parties.

In some cases, they collect money from candidates and businessmen and spend it to stage rallies, hire helicopters and lavish voters with liquor, mobile phone credit, saris or simply cash.

“Elections are a business in India. The more you invest, the better your chance of winning. Money power and muscle power matter,” said H.S. Brahma, the former head of India’s election commission that oversees elections in the world’s biggest democracy.

“This [budget announcement] won’t do everything, but it is an important step.”

Indian election spending has ballooned in the past few decades as parties compete with ever more showy campaigns, and businessmen ratchet up donations to politicians in the hope of winning future building approvals or licenses.

Mr. Modi’s ruling Bharatiya Janata Party has been among the biggest spenders. In the 2014 national election, Mr. Modi trounced the opposition with a campaign that included 3D holograms of him giving speeches in villages across India.

Campaign spending in Uttar Pradesh, India’s most populous state with 200 million people, is forecast to hit a record 40-billion rupees.

“Whether the limit is 20,000 or 2,000 rupees, it is not going to help. State funding of elections is the only way to bring transparency “ said Damodar Rout, vice-president of a regional party that rules the eastern state of Odisha.

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