November 8, 2016, will go down as a historic day in the annals of Indian economy and politics. Prime Minister Narendra Modi’s demonetisation announcement silenced critics of his administration clamouring for ‘big bang’ reforms.

The move has found wide support from citizens and businesses alike. Although the merits and demerits of the policy are being debated, its efficacy will not be known for at least a couple of years.

Clearly, demonetisation has sent a strong signal to all stakeholders in the economy — political parties, businesses, domestic and foreign investors and citizens — that Modi is serious about transforming India from cronyism to meritocracy.

Transparent transactions

It is time politicians and political parties realised that India’s transformation requires transparency in funding elections. Since Independence, politics has been characterised by cronyism, unaccounted money, underworld influence, sleaze, corruption and similar unsavoury practices. Both institutional and retail corruption has had a debilitating effect on society. Political parties play the blame game while persisting with dubious fundraising methods to finance elections and party activities.

Most experts and citizens agree that corruption and creation of black money are entrenched in our politics and society. Businesses and citizens today are demanding a change.

Unfortunately, several State and central leaders elected ostensibly on an anti-corruption platform have betrayed voters with impunity upon occupying the corridors of power. Regrettably, the political system continues to produce and reward crooked politicians despite laws to limit poll expenses, asset declaration by contestants and exposing corruption through the Right to Information Act. And government officials continue to seek kickbacks .

To reduce the pernicious influence of black money in elections, Modi and experts suggested state funding of elections. Unfortunately, this is a bad, unworkable idea. Instead, the BJP can plant a bombshell of its own with a clear and committed plan towards transparency in electoral funding. Being the largest political party in the world with a patriotic fervour, the BJP is uniquely positioned to permanently change the political funding system. It must make a smart switch to fund electoral contests and party activities through membership fees. As little as ₹25 from each party faithful every month will suffice.

It can be done

With more than 11 crore members and offices manned by technology savvy experts, the party can fill its treasure chest with a yearly sum of ₹3,300 crore and a humongous sum of ₹16,500 crore over a five-year period. Assuming a cost of ₹10 crore to contest each Lok Sabha constituency and ₹3 crore for an Assembly constituency, it would cost the party approximately ₹14,000 crore to contest all 543 Lok Sabha and 2,872 Assembly constituencies across India every five years. The party would still be left with about ₹2,500 crore, a significant amount to spend on party affairs over the same period. Once a trend is set, other political parties will eventually follow, and that would certainly revolutionise the political system.

With a new political funding system in place, political parties must be prevented from relapsing into the shady practices of the past. Hence, it is imperative for the Government to enact laws that will compel them to disclose data on contributions and election expenditure.

Political parties must be subjected to the RTI Act and periodic independent audits. Independent special courts with adequate judicial powers to probe allegations of bribery must be established to mete out swift punishment to the corrupt. Life imprisonment and large penalties are warranted to induce fear and compliance with the law.

Along with the black money dhamaka , cleaning up the electoral system will benefit the poorer sections of society, extinguish a major portion of underground economy, normalise economic activities, boost GDP growth and improve tax collection.

India will move up in the ‘Ease of Doing Business’ list, entrepreneurship and innovation will flourish, And it will most certainly pave the way for India to become a global economic superpower.

The writer is a Bengaluru-based money manager

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