The Dynamics of Political Parties in India: Formation, Registration, and Funding

Political parties are the lifeblood of any democracy, and in India – a country with the world’s largest electorate – they play an especially critical role. From shaping national policy to representing regional aspirations, political parties connect citizens with governance. But how exactly are these parties formed? How does the Election Commission regulate them? And where does all the campaign money come from? Understanding these dynamics is essential for anyone studying India’s political landscape or aspiring to report on it.

India’s multi-party system: why so many parties? 🔗

India operates a multi-party system, which means multiple political parties compete for power at national, state, and local levels. This is in contrast to countries like the United States or the United Kingdom, which largely function with two dominant parties. India’s vast size, linguistic diversity, caste dynamics, and regional identities have naturally given rise to a large number of parties representing different interests.

As of the latest data from the Election Commission of India (ECI), there are 6 recognised national parties, around 58-60 recognised state parties, and over 2,000 registered but unrecognised parties (RUPPs) in the country. The six national parties currently are the Bharatiya Janata Party (BJP), Indian National Congress (INC), Aam Aadmi Party (AAP), Bahujan Samaj Party (BSP), Communist Party of India – Marxist (CPI-M), and the National People’s Party (NPP).

This multi-party structure often leads to coalition governments, where no single party wins a clear majority and must ally with smaller parties to form government. Coalition politics has been a defining feature of Indian governance, especially at the central level during the 1990s and 2000s, and continues to shape politics in many states.

National parties vs. state parties 🔗

The distinction between national and state parties is not just about geography – it determines several practical privileges. A national party gets a reserved election symbol that can be used across the entire country, free airtime on state-run broadcasters like Doordarshan and All India Radio during general elections, two free sets of electoral rolls, and the requirement of only one proposer for filing nominations. A state party enjoys similar benefits, but only within the state where it holds recognition.

The ECI reviews the status of political parties periodically based on their electoral performance. A party can gain or lose its national or state status after Lok Sabha or state assembly elections. For instance, in April 2023, the ECI revoked the national party status of three parties – the Trinamool Congress (TMC), the Nationalist Congress Party (NCP), and the Communist Party of India (CPI) – because they no longer met the required criteria.

How are political parties formed in India? 🔗

Forming a political party in India is a constitutional right. Any group of citizens can come together to establish a political party, provided they follow the procedures laid out by the Election Commission. The process begins well before the formal registration step.

A new political party typically starts with a clear ideology or manifesto, a written party constitution, a defined organisational structure (including office-bearers like president, general secretary, etc.), and a dedicated group of members who support its formation. The party’s constitution must outline membership rules, organisational hierarchy, procedures for internal elections, dispute resolution mechanisms, and the process for merger or dissolution.

Registration with the Election Commission 🔗

Registration is governed by Section 29A of the Representation of the People Act, 1951, which empowers the Election Commission to prescribe guidelines for registering political parties. While it is not mandatory for every association to register with the ECI, doing so is essential for any party that wants to contest elections and avail the benefits under the Act.

The registration process involves several key steps. The party must submit an application to the Secretary of the Election Commission within 30 days of its formation, as per the prescribed guidelines. The application must be on the party’s letterhead and accompanied by a non-refundable processing fee of ₹10,000 via demand draft.

Along with the application, the party must submit its constitution or rules and regulations, which must contain a specific provision stating the party bears allegiance to the Constitution of India and upholds the principles of socialism, secularism, and democracy, as well as the sovereignty, unity, and integrity of India. Additionally, affidavits from at least 100 members confirming they are not members of any other registered political party must be provided.

Once the application is submitted, the ECI publishes a notice in two national and two local daily newspapers, as well as on its website. The public is given 30 days to raise objections. After verifying all documents and handling any objections, the ECI approves the registration. The entire process typically takes 4 to 6 months.

Recognition criteria: becoming a national or state party 🔗

Registration alone does not make a party “recognised.” A registered party becomes a recognised state party if it meets any of the conditions set by the ECI, such as securing at least 6% of valid votes polled in the last assembly election in a state and winning at least 2 seats in that assembly. For national party status, a party must fulfil conditions like being recognised as a state party in at least four states, or securing 6% of valid votes in four or more states at a general election along with winning at least 4 Lok Sabha seats.

These conditions must continue to be met. If a party fails to satisfy the recognition criteria after subsequent elections, it can be downgraded or de-recognised by the ECI.

Internal democracy: elections within political parties 🔗

One often-overlooked aspect of political parties in India is their internal democratic functioning. The ECI requires that a party’s constitution clearly outline the process for organisational elections at different levels, the periodicity of these elections, and the terms of office for party office-bearers.

In theory, political parties are expected to hold regular internal elections to demonstrate democratic functioning. After registration, parties are required to conduct internal elections at regular intervals and report these to the ECI. This is meant to ensure that leadership within a party is chosen through a democratic process rather than through hereditary succession or autocratic decisions.

In practice, however, internal party democracy remains a contested issue in India. Many parties have been criticised for concentrating decision-making in the hands of a few leaders or families, with internal elections being largely symbolic. The ECI has limited enforcement power in this regard – it can set requirements but has no mechanism to annul elections within a party or force a leadership change. This gap between the letter of the law and ground reality is an important area of ongoing debate in Indian politics.

Political finance: how are parties funded? 🔗

Political funding is arguably the most complex and controversial aspect of party dynamics in India. Running election campaigns, maintaining party offices, paying staff, organising rallies – all of this requires money. The sources of this money, however, have long been a subject of scrutiny.

Sources of party income 🔗

Political parties in India draw their income from both known and unknown sources. Known sources include membership fees, sale of party publications, bank interest, party levies on elected representatives, sale of assets, and voluntary donations above ₹20,000 (where the donor’s identity must be disclosed). Unknown sources include contributions from meetings, sale of coupons, miscellaneous income, and – until recently – electoral bonds. Any donation below ₹20,000 does not require disclosure of the donor’s identity.

The data paints a concerning picture. During the fiscal year 2021-22, the combined income of India’s eight national parties was approximately ₹3,289 crore. Of this, roughly 66% – about ₹2,172 crore – came from unknown sources, according to an analysis by the Association for Democratic Reforms (ADR). This raises serious transparency concerns.

Electoral bonds: rise and fall 🔗

One of the most significant – and controversial – developments in Indian political finance was the introduction of electoral bonds in 2018. These were bearer instruments sold by the State Bank of India in denominations ranging from ₹1,000 to ₹1 crore. Individuals, groups, or corporations could purchase them and donate them anonymously to any registered political party.

The stated purpose was to bring transparency to political funding by moving donations through banking channels. In reality, critics argued the scheme did the opposite – it allowed anonymous, unlimited donations, shielding the identity of donors from the public while reportedly giving the ruling party access to donor information. Over the lifetime of the scheme, approximately $1.98 billion (nearly ₹16,000 crore) flowed through electoral bonds, with the BJP receiving the largest share.

In February 2024, a five-judge bench of the Supreme Court of India unanimously struck down the electoral bond scheme as unconstitutional. The court found that the scheme violated citizens’ right to information under Article 19(1)(a) of the Constitution and could facilitate quid pro quo arrangements between corporations and political parties. The State Bank of India was ordered to disclose all bond purchaser and recipient data to the ECI, which subsequently published it on its website.

Electoral trusts and corporate donations 🔗

With electoral bonds gone, corporate donors have shifted to an older mechanism: electoral trusts. Introduced in 2013, electoral trusts require donors to disclose their identities and the amounts donated – a significant improvement in transparency compared to the bond system.

In the financial year 2024-25, nine electoral trusts donated a total of approximately ₹3,811 crore to political parties, nearly triple the ₹1,218 crore donated through trusts the previous year, as reported by The Wire. The BJP received roughly 82% of the total trust-based donations. The Prudent Electoral Trust, backed by Bharti Enterprises, emerged as the single largest donor trust.

This surge in corporate funding – even through more transparent channels – has raised concerns about the outsized influence of big business on the electoral process. As one analysis by Al Jazeera noted, the concentration of donations towards the ruling party raises questions about equal electoral competition and whether corporate funding effectively creates a cycle of mutual benefit between donors and governing parties.

Regulatory framework and compliance 🔗

Political parties in India are required to follow certain financial compliance rules. They must file annual financial reports with the ECI, showcasing their funding sources and expenditures. Under Section 29C of the Representation of the People Act, 1951, parties must publicly disclose donations exceeding ₹20,000. Donors who contribute via bank cheque or digital payment to a registered party can claim a tax deduction under Section 80GGC of the Income Tax Act.

The ECI has also been actively cleaning up the registry of political parties. Many registered but unrecognised parties were found to be either non-existent, not contesting elections, or involved in financial irregularities. In 2022, the ECI removed 87 such parties from its registry after finding their registered addresses to be fraudulent. The Income Tax Department also raided several unrecognised parties suspected of money laundering and tax evasion.

The role of the Election Commission in regulating parties 🔗

The Election Commission of India serves as the primary regulatory body for political parties. Its powers are derived from Article 324 of the Constitution and the Representation of the People Act, 1951. The ECI’s responsibilities include registering parties, granting and revoking recognition, allotting election symbols, enforcing the Model Code of Conduct during elections, and monitoring election expenditure.

The ECI also plays a crucial role in symbol allotment. Recognised national and state parties get reserved symbols that cannot be used by any other party. Candidates from registered but unrecognised parties are allotted symbols from a pool of free symbols, and they receive lower priority compared to candidates from recognised parties. This system helps voters identify parties on the ballot, which is especially important in a country with significant illiteracy rates.

However, the ECI’s power has its limits. It cannot directly regulate internal party affairs, enforce leadership changes, or penalise parties for a lack of internal democracy. Strengthening the ECI’s regulatory authority over party governance is a reform that many political analysts and civil society groups have long advocated for.

Challenges and the road ahead 🔗

India’s political party system faces several persistent challenges. The opacity of political funding – despite the Supreme Court’s intervention – remains a key concern. The dominance of money power in elections often tilts the playing field in favour of well-funded parties and candidates. Internal party democracy is more aspirational than real in most Indian parties. The proliferation of thousands of registered but inactive parties clutters the electoral space and sometimes serves as a front for financial impropriety.

Reforms are needed on multiple fronts: stricter enforcement of financial disclosure norms, greater powers for the ECI to regulate internal party functioning, caps on corporate donations, and perhaps even state funding of elections – an idea that has been discussed by several Law Commission reports but never implemented.

For journalism students and political reporters, understanding these dynamics is not just academic. The way parties are formed, funded, and regulated directly impacts the quality of democracy. Reporting on political finance, party structures, and ECI decisions demands a nuanced understanding of both the legal framework and the ground realities.

What do you think? Should India consider public funding of elections to reduce the influence of corporate donations on political parties? And can internal party democracy ever become a reality without stronger enforcement mechanisms from the Election Commission?

References

1. https://www.eci.gov.in/list-of-political-parties
2. https://en.wikipedia.org/wiki/List_of_political_parties_in_India
3. https://www.shankariasparliament.com/current-affairs/gs-ii/how-political-parties-are-registered-in-india
4. https://en.wikipedia.org/wiki/Electoral_bonds
5. https://en.wikipedia.org/wiki/Political_funding_in_India
6. https://www.stimson.org/2024/indias-electoral-bond-conundrum/
7. https://www.journalofdemocracy.org/online-exclusive/the-bjp-claimed-this-financial-tool-would-clean-up-indian-politics-it-did-the-opposite/
8. https://m.thewire.in/article/government/corporate-donations-via-trusts-triple-to-rs-3811-crore-bjp-receives-over-80-report
9. https://www.aljazeera.com/features/2026/2/18/quid-pro-quo-how-indian-firms-fund-parties-whose-governments-help-them