In every major democracy around the world people look at the economic impact of any new legislation very seriously and a significant part of the public debate is about the socio-economic effects of any proposed law.

The surprising thing about the Jan Lokpal Bill and the entire debate around it, is that no one including people from the Anna Hazare team has said anything about the huge Economic Windfall that will accrue to India if the bill becomes law. The fact that no one has looked at this aspect or quantified the economic benefits of the proposed Jan lokpal legislation points to a big lacuna in our thinking.

There is therefore a clear need to move beyond the emotional issues that surround the debate today and look instead at the hard numbers in terms of expected economic and other benefits of a strong lokpal institution.

This paper examines the economic and security benefits that the Jan Lokpal Bill will deliver to the nation. The main argument here is that a tough lokpal law will bring about a major change in the investment climate in India through transparent decision making at all levels of government . This new transparency will then facilitate the following macro impacts over the next 15 years :


A. Economic Windfall facilitated by a Strong Lokpal Institution

1. FDI flows into India will triple from 2011 levels to exceed US $ 75 Billion by 2016 as a result of increased investor confidence

2. Clarity in policy and less corruption will catalyze the forecasted Goldman Sachs investment requirement estimate of US $ 1.7 Trillion in the Infrastructure sector in India … Investment multiplier impact of this investment could be of the order of US $ 5.1 Trillion by 2025. The Lokpal Institution will thus help create approximately 60 Million new jobs in India as the huge Infrastructure rollout happens.

3. India whose investment image has been badly hit as a result of the CWG and 2 G scams will resume an 8.5 % plus growth rate and sustain this over the next 15 years . This will enable India to become a US $ 5 Trillion Economy by 2025. The estimate does not include the huge positive impact if existing tax revenues are employed properly. Currently a very significant part of taxpayer money is getting eaten away by corrupt officials.


B. National Security Impact

One of the major arguments against the Jan Lokpal bill is that it will damage India’s security interests. Actually the opposite might be true :

1. Greater transparency in defence deals and procurement procedures as a result of a strong Lokpal will result in timely acquisition of equipment and spares for the armed forces which have been neglected for the last 10 years

2. Within an economy of US $ 5 Trillion that India will be by 2025, the size of the Indian Navy will triple as will the size of the Indian Air force. The Indian army will also be mordernized to be a leaner and more effective organization.

The key issue is that the above scenario will not materialize unless corruption is dealt with first. The recent experience with the 2G and CWG scams and the loot that has been going on in India with the active participation of government functionaries provides little confidence that an 8.5 % GDP growth rate will be achievable and sustained without an effective anti - corruption organization. The Lokpal bill is therefore “ THE BILL “ which will facilitate development in all spheres.

It needs to be understood that the Lokpal is not a cure for 100 % of the vast corruption problem that plagues India , but it will be an important deterrent. Secondly , it is also important to understand that immediately after the Lokpal bill is passed into law, there will be a period of considerable turmoil as the system tries to clean itself up. There will also be a big need to simplify laws and procedures relating to commerce.


C. Achieving A Quantum Leap in Mindsets

A strong lokpal institution will dramatically cut transaction costs for businesses in India and the resulting transparency will create immense opportunities for small businesses and for entrepreneurs right from the village level to the cities.

The Lokpal institution will facilitate an environment where Megaprojects in Education, Healthcare and Urban development can actually materialize as the leakage of funds can be reduced with nearly all of the money actually reaching the poor in our remote villages.

To make these large investments materialize, it is extremely important that the lower bureaucracy ( in government departments ) and the lower Judiciary at the district and state levels come under the investigative umbrella of the Lokpal. This is important as 95 % of the people are at this lower level. The current attention on the Prime Minister and the Supreme Court is not therefore the main issue in the Lokpal debate.

Any perceived threat from the Lokpal Bill need not materialize if certain Security related decisions of the Executive and the functioning of the higher Judiciary are kept out of the purview of the Lokpal . In fact the Times of India had come out with an excellent comparison of the Govt Bill and the Hazare teams bill and had even put in a third column of its own ( The Times of India version of the Lokpal Bill ... which is very good as it ensures that the Lokpal's power is checked through a proper process of appointment and dismissal of the lokpal ) ... those interested may please refer to the TOI website.

If Anna’s team fails and the Govt succeeds in steamrolling its own toothless version of the bill, the above forecasted growth in GDP will not materialize. In fact , if the Govt. version of the bill is passed, it will do immense harm to the Indian Economy and the 60 Million people who today may get jobs due to new investments…will remain jobless … creating huge demographic problems by 2025.


Anna Hazare’s team will do well to include some of the Economic Rationale presented above to support their argument for a Strong Lokpal Institution. The Lokpal Institution will greatly facilitate the Tripling of Indian GDP to US $ 5 Trillion by 2025. This in fact is the most important argument in its favour

Finally, it would be artless to think that the Lokpal issue will go away. In fact , given the response to team Anna’s movement , in the event the Jan Lok Pal Bill is defeated in Parliament ( because many MP’s have criminal records ), the people who are the sovereign , may actually demand a national referendum on the Lokpal issue. It may be noted here that the Indian constitution does not say anything against a National Referendum. A referendum on the Lokpal bill however , is not a good thing as some of the clauses in the Jan Lokpal Bill are dangerous and need to be removed. A referendum on the Lokpal bill will also mean that Parliament has abdicated responsibility. It is therefore the duty of the opposition to act and resolve the stalemate.