Till 1970, Indian political parties were free to accept donations and indeed obtained most of their funding from Indian firms. These were allowed to claim a tax deduction on their donations and so preferred to give money 'in white'. Till 1962, this sufficed to meet the needs of most—if not all—parties and certainly that of the Congress. The party felt the pinch for the first time in December 1966 before the fourth general election when then treasurer Atulya Ghosh bemoaned the drying up of contributions and resultant shortage of funds.
The Congress won that election by a hair, winning just 282 seats. The Syndicate, as the high command was then called, immediately concluded that this was because it had fallen short of funds. It blamed industry for diverting contributions to the much more business-friendly Swatantra Party and the princes for giving a good part of their contributions to the Jana Sangh (now bjp).