1. Jan Lokpal Bill
Economic Analysis & National Defence Impact Assessment
By : Ashish Puntambekar
The Nataraja Foundation, Mumbai
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 have said anything about the huge Economic
Windfall that will accrue to India if the bill becomes law …
essentially on account of the transparency that it brings into
Government and all other transactions.
The truth is that if the Jan Lokpal Bill is passed by Parliament, Indian
GDP will almost triple from US $ 1.8 Trillion currently, to US $ 4.5
Trillion by 2025.
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 ( Inclusion of PM, Communal Angle
etc ) 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 national defence 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. Strong Lokpal Institution… Economic Windfall …in Brief
1. FDI flows into India will triple from 2011 levels to exceed US
$ 75 Billion by 2016 as a result of increased investor
confidence in the Indian Economy.

2. 2. Clarity in policy and less corruption will catalyze the forecasted
Goldman Sachs investment 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.
( Please refer Annexure 1, for the employment Impact Calculation )
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 $ 4.5 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. I have not included this huge impact in my analysis.
Detailed Analysis of Economic Benefits Due To A Strong Lokpal
1. Jan Lokpal Bill as an FDI Catalyst
A strong Lokpal will catalyze a three fold increase in Foreign Direct Investment
( FDI ) as early as 2016...Equity FDI may go from US $ 25.834 Billion (Financial
year 2009 -10) … to US $ 75 Billion .
This will be a dramatic acceleration brought about , in the main by greater
transparency in government decisions.
For the record the following is the Govt. data on Equity FDI into India in the
recent past.
Year Equity FDI ( US $ Billion )
2005 – 2006 5.540
2006 – 2007 12.492
2007 – 2008 24.575
2008 – 2009 27.330
2009 – 2010 25.834
2010 – 2011 Data not available
Source : Govt of India, Ministry of Commerce website

3. Given the above track record in FDI , my personal forecast of the Anna Hazare
Effect “ Jan Lokpal Bill ”on future Equity FDI inflows into India is as follows :
Year Equity FDI ( US $ Billion )
2012 – 2013 35.00
2013 – 2014 45.00
2014 – 2015 60.00
2015 – 2016 75.00
Source : Forecast by , The Nataraja Foundation … The Indian Education Megaproject
http://www.nataraja.org.in/masseducationproject.htm
The main problem that I see with these huge FDI flows after the passage of a
strong Lokpal Bill is that India’s currency ( The Rupee ) will strengthen
considerably. There may be a need then for the RBI and the Government to
manage this problem of plenty by allowing some sort of Barter trade when it
comes to FDI. Specifically in Infrastructure , the Govt may allow companies and
foreign investors to bring in their equity contribution in Projects by supplying
Cement and Steel in lieu of cash equity … thereby reducing upward pressure on
the Rupee.
Apart from this upward pressure on the Rupee, the Lokpal Bill will be great for
FDI into India.
2. Jan Lokpal Bill as a Domestic Investment / GDP Catalyst
Anna Hazare’s Jan Lokpal Bill will also help catalyze Investment in Infrastructure
in India. This is because, with the current and huge corruption, most Indians are
also afraid to Invest in small projects and businesses.
Therefore if the Jan Lokpal bill becomes law, Investment, mostly domestic
( Please note that I am not counting FDI here ) could reach US $ 1.7 Trillion by
2018…This is an estimate by Goldman Sachs and it will materialize only if we
have good governance. This money will never come out of peoples pockets if
Scams such as CWG / 2 G continue.
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 economy is at this lower level. The current
attention on the Prime Minister and the Supreme Court in my view is not the main
issue in the Lokpal debate.

4. In my view the net Investment multiplier impact of this US $ 1.7 Trillion
investment in Infrastructure will be of the order of US $ 5.1 Trillion by
2020 … as the investment in Infrastructure will have huge catalytic impact on the
growth of other industries in India.
The Anna Hazare movement will thus help create in excess of 60 Million new
Jobs ( Please refer Annexure 1 ).
The Following are Indian GDP & Infrastructure Investment estimates by leading
global organizations :
GDP Projections ( US $ Trillion )
2025 2050
1. BRIC Report ( Goldman Sachs ) 3.17 27.80
2. McKinsey & Co. 4.01 -
3. Indian Education Megaproject ( Assumed ) 4.50 -
Infrastructure Investment Projections ( US $ Trillion )
1. Goldman Sachs ( Next 10 years ) 1.7
2. Indian Planning Commission ( XI th 5 year Plan ) 0.5
Source : BRIC Report ( Goldman Sachs ), McKinsey & Co. Indian Planning Commission
The above, in brief summarizes my view on the Indian Economy if Anna
Hazare and his team succeed in getting the Govt to table the original Jan
Lokpal Bill in Parliament or amending the one they recently passed. If they fail
and the Govt Succeeds in steamrolling / passing its own version of the bill
in the Rajya Sabha ( the toothless lokpal bill , passed by the Lok Sabha ), the
above forecasted growth in GDP will not materialize.
In short, 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, by which time the 300 Million young people forecasted by the census enter
the working age and do not find jobs. No one is currently talking of this
demographic nightmare that will happen in India by 2018. Already in 2012, the
first 3 % of this multitude has entered the market and there are no jobs for them.
Certain vested interests are saying that the Lokpal Institution will create a
bureaucracy of 50,000 – 60,000 officials. These same people are not telling the
country that simultaneously the Lokpal institution will facilitate 60,000,000 Jobs.
What is the cost – benefit debate in this ? Its very clear.

5. Further, 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 perview of the Lokpal . In fact the Times
of India had come out with an excellent comparison of the Govt Bill and the
Hazare team’s bill and had even put in a third column of its own ( The Times of
India version of the Lokpal Bill ... which in my view was very very good as
it ensured that the Lokpal's power was checked through a proper process
of selection and with a proper procedure for appointment and dismissal of lokpal
officials ) ... those interested may please refer to the TOI website.
B. National Security Impact Of The Jan Lokpal Bill
One of the major arguments against the Jan Lokpal bill is that it will
damage India’s security interests.
Actually, just the opposite is true. After the latest Bombshell dropped
by the Army Chief Gen VK Singh, regarding the scams in equipment
procurement ( TATRA Turck Deal ) and the fact that most of the
equipment with our Armed Forces is Obsolete ( 97 % Of the Indian
Air Forces Aircraft ), it makes sense to have a strong LOKPAL
Institution so that scams do not take place in the Procurement of
Military Equipment, that is so necessary for the security of our
country.
Specifically the Lokpal will ensure :
1. Greater transparency in defence deals and procurement
procedures as a result of a strong Lokpal. This will result in timely
acquisition of equipment and spares for the armed forces which
have been neglected for the last 15 – 20 years
2. Within an economy of US $ 4.5 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. This will be following the global
standard in advanced nations where the Navy and Air Force are
the major arms. In India, currently the opposite is true and our land
based forces are the biggest of the three.
The key issue here is that the above mordernization of the armed
forces will not materialize unless corruption is dealt with first.

6. 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 cities and towns
as well as in our remote villages. Improved utilization of existing tax
revenues is another major impact which I have not included in my
analysis.
If Anna’s team fails and the Govt succeeds in steamrolling its own
toothless version of the bill in the Rajya Sabha as well, 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

7. Tripling of Indian GDP to US $ 4.5 Trillion by 2025. This in fact is the
most important argument in its favour.
Finally, it would be artless for the political class 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 undermine our democratic system and therefore
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.
– Concluded –
Ashish Puntambekar
Project Designer
The Nataraja Foundation
www.nataraja.org.in
The Indian Education Megaproject … High Quality Education to 126 Million Children …
Totally Free of Cost
& The Mumbai Megaproject … Transforming Mumbai by 2025

8. Annexure 1
Job Creation Potential of The Jan Lokpal Bill
Assumption : This analysis assumes that the current decline in Economic Growth
Parameters is essentially the result of bad governance and the huge Corruption at
every level of Government in India.
The Analysis also assumes that if Corruption in Reduced and Governance /
Transparency is improved, the entire forecast of Potential Investments in India will be
realized. Lastly it needs to be mentioned that even Indian Citizens are not investing
because of Corruption and bad Governance. Any Potential FDI is a small part therefore
of the Total Investment that will happen as a result of the Jan Lokpal Bill becoming Law.
Calculation Of Employment Potential
Sample Project Size : US $ 11 Billion / Rs 50,000 Crores ( Actual Project )
As in a Large Capital Investment Project such as a
Refinery / ( Power Plant + Port ) Project
Actual Employment
Generated At Site : 80,000 Construction Labour employed … for 3 Years
Indirect Employment : 2,40,000 People … in Supporting Ancillary Industries
and Service Businesses in India…excluding Overseas
Employment ( Equipment Suppliers etc )… the project
Considered has a 40 % imported Equipment Component.
Total Employment : 3,20,000 People … For Three Years ( In India )
Potential Investment in India … US $ 1.7 Trillion … In Infrastructure Alone
( Source : Goldman Sachs )
To simplify the calculation, I am assuming that the above investment occurs in US $ 500
Billion Clips and we do this 3.5 times … for 10.5 years.
Total Employment Generated by a US $ 500 Billion Investment … Once every 3 Years
and continuing for a full period for 10.5 Years in all.
Employment Generated = 500 X 3,20,000 = 14.54 Million
11
These Employment Numbers are Valid For a Large Industrial Project and are directly and In-
Directly concerned with the project itself. The Investment Multiplier impact of such projects on
the economy will be a Factor of “ 3 ”. Net Employment Generated within the Economy will
therefore be = 14.54 X 3 = 43.63 Million
For Social Infrastructure Projects ( Education, Hospitals Etc ) … The Potential Employment
Generated will be much more and have an investment Multiplier Impact of between “ 4 ” and
“ 5 ” … Additional employment generated will therefore be anywhere between 58 Million and
72 Million People in India … by 2025 due, directly to the Lokpal Bill Becoming Law.
The Healthcare Industry itself is capable of employing 45 Million Additional People. This can
be verified from Independent Sources.