Sectors under greater regulatory scrutiny lead in political donations

From FY23 to FY25, three sectors made the largest political donations in India

In a book called The Constructive Parliamentarian, editor N M Ghatate recounts a moment in Atal Bihari Vajpayee’s career as an MP. On August 17, 1962, Vajpayee moved a private member’s Bill in the Rajya Sabha seeking to curb the growing influence of money in politics. The future Prime Minister warned that excessive corporate involvement would harm democratic functioning. Although the Bill was rejected, as is the fate of most private member’s Bills, Vajpayee’s concerns appear prescient today.

 

Big money in Indian politics is entrenched. Political donations have increased almost every year, with the largest such contributions in the last two decades being made in FY25. From FY23 to FY25, three sectors made the largest political donations: Real estate, infrastructure and construction; power and metals; and steel and mining, with a few political parties receiving bigger chunks than others. 

 

Donations to political parties rose from Rs 15 crore in FY04 to Rs 309 crore in FY14, and further to Rs 680 crore in FY17. They peaked at Rs 4,461 crore in FY20 and then fell to Rs 861 crore in FY21, when India was battling the coronavirus. It was a blip and donations rebounded sharply to Rs 7,149 crore in FY24 and reached a record high of Rs 8,335 crore in FY25. Donations have surged 555 times in 22 years whereas the wholesale prices rose just 2.4 times, suggesting that the “price of entry” into Indian politics is growing at a rate that far outstrips the purchasing power of the average citizen.

 

Trust and bonds

 

The trajectory runs alongside regulatory changes in political funding. In 2003, the Supreme Court made it mandatory for political parties to disclose before the Election Commission donations exceeding Rs 20,000. A decade later, in 2013, the Congress-led UPA government introduced the Electoral Trust Scheme, allowing donors to route contributions through registered trusts. Although the mechanism disclosed the names of donors, it acted as a veil between donors and political parties.

 

In 2017, the BJP-led NDA government introduced the Electoral Bond Scheme to enable complete donor anonymity. The system was criticised for undermining transparency and accountability in political finance and the Supreme Court struck it down in 2024.

 

Costs of Democracy: Political Finance in India, a book edited by Devesh Kapur and Milan Vaishnav, says reforms over the years have changed the nature of donations but the volume of money given has increased. As the state exercises its regulatory power over the economy, the incentive for companies to make political donations increases.

 

Between FY14 and FY17, donations routed through electoral trusts accounted for 27 per cent to 47 per cent of total political party funding. With the introduction of electoral bonds in 2017, the funding landscape shifted dramatically. Between FY17 and FY24, donations through bonds ranged from 31 per cent to 74 per cent of all political funding.

 

However, following the ban on electoral bonds in February 2024, the role of trusts resurged. In FY25, electoral trusts once again became central to political financing, contributing 53 per cent of all donations to parties in India.

 

Between FY04 and FY25, political parties in India received Rs 33,843 crore in donations. The BJP was the highest recipient in 20 out of these 22 years, with the Congress leading only in FY06 and FY07. The BJP’s share in total donations stood at 74 per cent in FY04 and increased to 79 per cent by FY25. The party governed India in FY04 and its share in donations came down for the next three years when it was out of power. However, even before returning to power with a full majority in 2014, the BJP received over half of the political donations in FY08 and for three years in a row since FY12. The party has got the lion’s share of donations since FY14 but barring FY16.

 

From FY04 to FY24, more than 85 per cent of all political donations were made by companies and the rest by individuals.

 

Sectors and regulations

 

A comparison of sectors that made the highest political donations in five countries in FY24 shows significant variations. In India and Australia, real estate, infrastructure, construction companies were the largest contributors to political parties. In the United Kingdom, the IT sector dominated, while in the United States, pharmaceuticals and health care firms accounted for the highest share. In South Africa, metals, steel and mining companies were the top donors. (Chart 3)

 

Vignesh Karthik K R, postdoctoral research fellow of Indian and Indonesian politics at the Royal Netherlands Institute of Southeast Asian and Caribbean Studies, said political donations in India, South Africa and Australia have a broadly similar pattern. The comparatively younger Commonwealth economies remain heavily dependent on primary and natural resource sectors that are subject to intensive state regulation.

 

“Actors operating in these industries, therefore, seek closer proximity to the government,” Karthik said.

 

The more mature economies of the US and the UK are anchored in industrial and service sectors that are regulated through established legal and institutional frameworks, explaining why industries such as pharmaceuticals and IT dominate political donations in these contexts, he said.

 

Extractive industries lead in making political donations, said Sarthak Bagchi, a research scholar at Leiden University in the Netherlands. “Many businessmen-politicians also originate from these sectors, further strengthening proximity to the government.”

 

A regulatory gap has enabled corporate funding in Indian politics to “intensify”, scholars say.

 

Bagchi argued: “Unlike individual expenditures, donation limits in India are subject to relatively few restrictions. Although political parties submit disclosure reports, there is no rule mandating their verification by the government, independent auditors, the Comptroller and Auditor General, or any constitutional body responsible for overseeing party finances.”

 

Karthik said “business actors” are embedded in society and their engagement with politics is neither anomalous nor avoidable. “Since the economic liberalisation of the 1990s has expanded the scale and reach of business activity, the presence of business interests in the political sphere has only intensified.”