The decision to scrap Rs. 500 and Rs. 1,000 currency notes by the government of India it appears has come as a bolt from the blue for political parties in Uttar Pradesh. The political drama of Samajwadi Party and competitive campaigning by Bahujan Samaj Party, Bharatiya Janata Party and Congress had already ensured that four cornered election in UP will be fiercely fought.

currency notes

The decision to scrap higher denomination currency notes has only made the UP elections more competitive. With UP assembly elections, just around the corner the state witnessed an incident where sacks full of burnt Rs 500 and 1000 notes were found on roads in Bareilly.

Though the political parties are tight-lipped about the issue which is seen as crackdown against black money, this incident should not come as a surprise as it is a norm to keep aside a substantial amount of unaccounted funds for campaigning.

However, the incident of burning of currency notes after the government declared them as not legal tender shows that many in UP have been left high and dry that too at a time when elections are just few months away.

Role of cash during elections:

The role that cash plays in polls can be gauged from the fact that as much as Rs. 1,039 crore of the total collections by parties over the past three Lok Sabha polls (2004, 2009 and 2014) was made in cash against Rs. 1,299.53 crore by cheques.

Association for Democratic Reforms (ADR), which had analysed the I-T returns of political parties, said they declared collecting Rs. 2,356 crore during the three parliamentary elections. Of this, 44 per cent or Rs. 1,039 crore was in cash and the remaining was by cheque and in kind (Rs. 1,300 crore by cheque and Rs. 17 crore in kind).

While cash donations are declared by political parties in line with the Election Commission (EC) guidelines on transparency, seizures during polls indicate that much of the campaign funding is done through black money. For instance, around Rs 330 crore was seized by the EC in cash during the last general elections in 2014.

The incident of burning currency notes clearly indicates that all the efforts of the government to weed out black money will not be of much use unless and until political parties are barred from collecting cash donations. Political parties and elections are major sources of black money transactions.

The decision to scrape Rs. 500 and Rs. 1000 currency notes has ensured that leading political parties in UP Assembly elections are left to re-work strategies on how to manage the campaign on tighter budget.

With majority of all funds collected by parties coming from unknown sources, it should not come as a surprise that most of the contributions come as cash donations.

Though here one may say that all the political parties are on the level playing field as the decision has hit all parties. The crucial UP Assembly election now sees political parties in the process of filling up their treasuries as the high voltage campaign has become very expensive as use of hi-tech measures is a mandate these days.

With the old currency notes of Rs. 500 and Rs. 1,000 scraped at one shot interesting times will sure unfold as UP readies to elect a new government.

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