Funding of political parties and financing of their election campaigns are important issues seen as influencing politics in democratic countries. Scholars have highlighted the issue of campaign finance reform as well as the relation between campaign spending and electoral outcomes (Nice, 1987; Cox and Thies, 2000; Stratmann, 2006; Rekkas, 2007; Milligan and Rekkas, 2008; Gowda and Sridharan, 2012; Magee, 2012; Weintraub and Brown, 2012; Kapur and Vaishnav, 2018). Electoral contests are occasions when colossal amounts of money are splurged by candidates and political parties to raise their winning chances. Both the incumbents and challengers spend money to win elections. It is generally believed that there is a complementary relation between high campaign spending and high vote share, leading to favourable electoral outcomes, but research studies point out that this is not as linear as it appears to be.

In India it is the EC that regulates campaign finance and spending. Political parties are known to spend money often in excess to the legally permissible limits on campaigning, including distribution of cash, liquor and ‘gifts’ in the constituencies, to strengthen their electoral chances. The use of ‘black’, ‘dark’ or unaccounted money has often been reported in Indian elections. Elections are an expensive affair in India. A considerable amount of money is needed to compete in an election. How do political parties finance their campaigns? How is this money raised by them? Where do they get the money from? What do they spend the money on apart from campaign material and rallies? Financial contribution to and campaign expenditure by political parties in India have come under much focus in contemporary times.

What Is the Money Spent On?

Election campaigns are expensive affairs. The spatial spread of campaign territory necessitates substantial expenditure for mobilising support. The larger the territory, the bigger are the resources needed for an effective campaign in contemporary democracies. Each party needs to take its ideas and programmes to the citizens to keep itself alive in the public mind. Maintaining a constant presence in the public space needs resources. A constant supply of propaganda paraphernalia requires considerable spending capacities. Funds have to be raised and allocated to all campaign modes, such as rallies, roadshows, advertisements, signages, broadcasts, and so on.