IASToppers Editorial Notes 12th July 2016
Editorial Notes

Editorial Notes 12th July 2016

Deal economy vs. Rule economy; Environmental taxes and their usage; A draft bill on human trafficking.
By By IT's Editorial Notes Team
July 12, 2016


Polity & Governance

  • Reforms for rule-based governance
  • How useful would additional green taxes be in India?
  • Go back to the drawing board


Polity & Governance

GS (M) Paper-2 Topic: “Important aspects of governance”


Reforms for rule-based governance


While economic liberalization since 1991 has clearly transformed India’s business and entrepreneurial scene, it is obvious that the government and government institutions have seen little or no reforms at the same time.

  • As opportunities for the private sector have expanded significantly, the dangers and risks of lack of reforms in government have revealed themselves as scams. For example, the misuse of public sector banks and insurance companies through directed lending to cronies continues to this day, with Kingfisher Airlines being the classic example.
  • So, while the economy has moved ahead, government institutions have lagged. This is what Harvard professor Lant Pritchett describes as a “deal economy”—the nexus between politicians, bureaucrats and business—as opposed to “rule economies”.

What are the impacts of the deal economy on a nation like India?

Under the deal economy, lack of rules creates governance based heavily on political and bureaucratic discretion. Government decisions based on discretion instead of rules in dealing with public resources, contracts and money is a fertile ground for corruption. This has been shown again and again. This kind of corruption in doling out favours has significant impact on a nation like India.

First, this impacts the type and nature of politics and democracy. The quid pro quo type of economic model creates a nexus of vested crony interests and political process, with money power increasingly driving the political process that, in turn, creates a vicious cycle of money and political success to those pandering to or backed by crony capitalists.

Second, the deal-based governance fosters an economic model where political connections determine success. This phenomenon was also written about by Reserve Bank of India governor Raghuram Rajan before taking office. This, in turn, has structural implications on issues such as innovation, competition and efficiency—all important elements for a successful, sustainable economic model for a country like India.

What are the significant impacts of rule economy?

  • Rule-based governance creates transparency in its functioning and improves the trust between citizens/investors and government.

Example of Estonia:

  • Estonia, which was economically crippled due to the Soviet annexation from the 1940s to 1991, lifted itself up to become a country with the highest number of start-ups per capita. This was done through a host of market reforms since the mid-1990s—including free trade and privatization—designed to remove red tape and simplify the process of starting a business and, most importantly, following well laid-out processes.
  • A rule-based economy creates a framework that boosts efficiency, competition and opportunity for all investors.
  • It also has the effect of reducing the impact of money and cronyism on politics and democracy.
  • Twenty-five years on, a transformative idea is one where transparency, competitiveness, efficiency, creativeness, innovation and merit thrive. This will require us to move towards rule-based governance.

Any shift towards the rule-based governance in India?

  • There has been a shift towards rules and transparency. But a lot more needs to be done, especially with institutions that drive economic regulation and governance. For example, in 2008, India’s crony wealth reached 18% of GDP (gross domestic product), putting it on a par with Russia. Today it stands at 3%, a level similar to Australia.”
[Ref: LiveMint]


GS (M) Paper-2 Topic: “Government policies and interventions for development in various sectors and issues arising out of their design and implementation.”


How useful would additional green taxes be in India?


  • The central government disowned a draft national forest policy last month after first uploading it on the environment ministry’s website and inviting public comments on the same. Among other things, the draft policy discussed the possibility of levying an environmental cess, green tax or carbon tax.

However, a large part of taxes raised for environmental purposes are being diverted or lying unutilized.

The proposed additional tax would not be the first of its kind in India:

  • Under the Forest Conservation Act, 1980, any entity that diverts forest land for non-forest purposes is required to provide financial compensation for the purpose of afforestation in non-forest or degraded land, in order to compensate for the loss of forest cover.
  • In 2002, the Supreme Court had directed that a Compensatory Afforestation Fund (CAF) should be created to manage the funds generated.
  • Similarly, India’s Clean Environment Cess or coal cess acts as a carbon tax. The coal cess is levied on coal, lignite and peat at the rate of Rs.400 per tonne, and the funds raised are managed by the National Clean Environment Fund (NCEF), which was known as the National Clean Energy Fund earlier.
  • A bill to establish a National Compensatory Afforestation Fund under the Public Account of India and a State Compensatory Afforestation Fund under the public account of each state is currently pending with the Rajya Sabha. Currently, an ad hoc body called Compensatory Afforestation Fund Management and Planning Authority (CAMPA) is in charge of the funds generated for afforestation purposes.

Improper usages of the environmental funds:

Case of NCEF:

  • Substantial resources have been diverted from the NCEF towards myriad government schemes though it was originally instituted to fund research and development in the field of clean energy technologies. In 2014-15, about half of the money disbursed from the fund was directed towards the National Ganga Mission. A large part of the fund is also lying unutilized.

Case of CAMPA:

  • Even afforestation efforts seem to be suffering from a similar situation. According to a report of the Comptroller and Auditor General (CAG) of India, between 2006 and 2012, funds with CAMPA grew nearly 20 times, from Rs. 1,200 crore to Rs. 23,608 crore. However, this has not translated into a concomitant increase in funding afforestation efforts. Less than 5% of the money has been devolved to the states.

Environmentalists’ concerns:

According to some environmentalists,

  • While there is certainly a momentum for afforestation drives, such massive change does not show on the ground.
  • Also, the intention behind such enthusiasm for afforestation might be driven for reasons completely different from environmental protection. For example, state governments in Odisha and Andhra Pradesh have been carrying out plantation drives on common land being used by people for shifting cultivation to wrest control of the land rather than increase forest cover.
  • Ground verification is necessary to ascertain the authenticity of figures related to forest diversion as well as compensatory afforestation.
  • The time period for assessing whether or not targets have been met is not identical for each state. In fact, for some, no period has been given at all.
  • Moreover, afforestation efforts suffer from abysmally low survival rate of plants (it was at 10%).
  • India’s afforestation effort is either grossly inefficient or used as an excuse for evicting people from common property resources. According to news reports, the discarded forest policy also had provisions to facilitate the latter goal.


Whether or not the government introduces an additional green tax in its next forest policy is a matter of speculation. However, existing evidence shows that the utilisation of even currently available fiscal resources for furthering India’s environmental and afforestation efforts leave much to be desired.

[Ref: LiveMint]


GS (M) Paper-2 Topic: “Mechanisms, laws, institutions and Bodies constituted for the protection and betterment of vulnerable sections.”


Go back to the drawing board


  • Recently, the Ministry of Women and Child Development, released a draft bill on human trafficking — the Trafficking in Persons (Prevention, Protection and Rehabilitation) Bill, 2016.
  • Several NGOs have dubbed the proposed legislation as “vague and full of loopholes” and sought “better, wider, deeper consultation” on it.

Let’s find out why this drafted bill is called as “vague and full of loopholes”?

  • Nearly all NGOs have questioned how a draft meant to become a legislation on trafficking does not even define the term “trafficking”.
  • The draft bill was prepared in great secrecy by keeping major stakeholders out of the discussion.
  • The Draft Bill tackles trafficking solely through the lens of sex work. The tens of thousands of men, women and children who are routinely trafficked for marriage, domestic labour or bonded labour in fields, mines, and textile and beedi factories are ignored.
  • The provision in the Draft Bill that allows, among others, any social worker or public-spirited citizen to ‘rescue’ and ‘produce’ a ‘victim’ before the District Anti-Trafficking Committees it proposes to set up. This is unprecedented, opening the door to exactly the kind of moral policing that one begins to suspect. It could lead to harassment of not just sex workers but other ordinary people by overzealous, vigilante citizens.
  • By continuing to conflate “prostitution” with “commercial sexual exploitation”, the Draft Bill goes completely against the grain of what activists are fighting for, namely protecting the rights of adults who stay in prostitution voluntarily.
  • The draft bill has the conventional and simplistic approach to define ‘prostitution as exploitation’ whereas most reformers today look at the ‘exploitation of prostitution’ as the primary evil that must be addressed.
  • It is important, thus, to treat trafficking in children, adult trafficked labour, and forced sex work as separate categories, but the Draft Bill mixes up everything in its portmanteau approach.
  • The Draft Bill threatens basic constitutional freedoms of the persons it seeks to rescue. For instance,
  1. Article 22 gives a detained individual the right to consult a lawyer and be produced before a magistrate within 24 hours, but the Draft Bill allows persons to be directly produced before the member-secretaries of its District Anti-Trafficking Committees.
  2. The Committees can independently recommend that a victim be repatriated to her home State (or another State) for increased protection. This contravenes Article 19, which grants citizens the right to move freely across, and reside anywhere in, the country.
  • The enormous power and little accountability that is vested in the proposed District Committees is troubling. They raid and rescue, rescued persons are produced before them, and they are also responsible for post-rescue care. In effect, it would appear that they are policeman, judge and rehabilitator rolled in one. At present, despite its lacunae, the ITPA still has some processes in place. For instance, nobody can enter a brothel without a warrant, and only some categories of police officers have the power to raid a brothel. Now, these guidelines stand to be transgressed.
  • It duplicates several existing (and unimaginative) provisions: Anti Human Trafficking Units already work in districts and States, the ITPA’s present raid-rescue-rehabilitation approach is a dismal failure, and rescue homes today are often the site of fresh exploitation.
  • Thousands of placement agencies continue to be the chief source of human trafficking despite laws. The Draft Bill repeats the need for their registration without explaining how it will ensure it.

Provisions for voluntary prostitution:

  • In 2013, the Verma Committee had specifically clarified that “the recast Section 370 ought not to be interpreted to permit law enforcement agencies to harass sex workers who undertake activities of their own free will, and their clients”.
  • In 2015, a Supreme Court panel had recommended that the law relating to trafficking be read down for consenting adults in sex work and their clients.


These are but a few of the many shortcomings the Draft Bill needs to fix. If the Women and Child Development Ministry is serious about wanting to streamline existing anti-trafficking laws, plug the loopholes, and take the discourse ahead, it has to go back to the drawing board. This time, with experts.

[Ref: Hindu]


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