As many countries take steps to oppose a belligerent China, they face an economic roadblock. With China’s vast resources and position as the world’s factory, the country can use its economic power as a foreign policy tool. For example, as relations with Australia plummeted over the question of where the coronavirus had originated, China banned beef from four major plants in Australia and slapped a steep tariff on barley. Both were devastating blows to Australia’s economy, which is now closely connected to China – Canberra’s largest trade partner.
India faces a similar problem – of even greater magnitude. The Chinese People’s Liberation Army has intruded into Ladakh and last fortnight launched an attack that killed 20 Indian soldiers. Paradoxically, even as the Chinese display military aggression against India, the Indian economy itself is significantly dependent on China. Chinese brands, supply chains and investments dominate the Indian markets. Experts argue that any sudden decoupling will hurt the Indian economy grievously.
Chinese money in Indian politics
While the economic effect of this Chinese dominance has sparked concern, so have its political consequences. The past week has seen two of India’s largest political parties trade charges about accepting Chinese money. The Bharatiya Janata Party alleged that the Rajiv Gandhi Foundation, a charitable foundation chaired by Congress president Sonia Gandhi, accepted Chinese money in 2005-’06. The BJP went on to accuse the Congress-led United Progressive Alliance of recommending “a free trade agreement with China, which was heavily tilted in favour of the Chinese” in return for this “bribe”.
In return, the Congress pointed out that Chinese companies such as Huawei and (the now-banned) TikTok have donated to the PM Cares, a Covid-19 emergency fund set up in March with Prime Minister Narendra Modi as chairperson. The Congress accused Modi of having a “soft spot” for China.
Ironically, even as both the Congress and the BJP discuss how Chinese money could influence Indian parties – and by extension the country’s sovereignty – there is a gaping elephant in the room that has been left unmentioned: party financing.
Wiping out a crime
Till 2016, it was illegal for an Indian political party to receive funding from foreign sources. Under the Foreign Contribution (Regulation) Act, this includes a company that has “more than one-half of the nominal value of its share capital held” by “corporations incorporated in a foreign country or territory”. In 2014, the Delhi High Court had found both the Congress and the BJP had violated this rule.
The response to this was political corruption at the highest level, as the law was itself changed to erase this crime by simply changing the definition of “foreign source”. Now, as long as a company had foreign investment limits as per Indian law, it was by law an “Indian company”.
At about the same time, the Modi government introduced electoral bonds, which made all corporate donations to political parties anonymous.
These two changes mean that Indian subsidiaries of foreign firms can anonymously fund political parties.
So alarming were these changes that the Election Commission itself argued in the Supreme Court that this new system would allow “unchecked foreign funding of political parties in India which could lead to Indian politics being influenced by foreign companies”.
Yet, remarkably, the system remained. The conflict of interest this leads to is grave and directly impacts India’s sovereignty. Even as China continues its policy of aggression against India in Ladakh, powerful subsidiaries of wealthy Chinese companies in India could secretly fund political parties that decide India’s foreign and military policy.
Foreign capital endangering sovereignty
On Monday, the Modi government banned 59 Chinese apps – ranging from image scanners, e-market places to social media forums – for being “engaged in activities prejudicial to sovereignty and integrity of India, defence of India, security of state and public order”.
If the Indian government thinks social media app TikTok is prejudicial to India’s defence and the Congress and the BJP think Chinese donations to funds influence political decisions, one could only imagine the danger to Indian sovereignty posed by hidden Chinese funding to political parties.
Indians deserve to know who is funding their political parties. That is the only foolproof way to protect the country’s sovereignty at a time of crisis like this.