Competitive political parties and election campaigns are central to the health of democracies. Parties andcampaigns require significant resources to be effective. India has developed complex election expenditure,political party funding, and reporting and disclosure laws. We suggest that these laws may have perverseimpacts on the electoral system: they tend to drive campaign expenditure underground and foster a relianceon unaccounted funds or ''black money.'' This tends to lead to an adverse selection system, in which thosewilling and able to work with black money dominate politics. We conclude with some possible remedies,including partial state financing of political parties, that might restore the health of India's electoral system.