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Introduction of Lokpal at national & state levels and its impact on businesses & Indian economy

CONCEPT OF LOKPAL

It has been rightly observed that corruption and hypocrisy should not to be inevitable products of democracy as they sadly are today. Unfortunately, corruption is deep-rooted and all-pervasive in the modern Indian society. Earlier, people would have to use a bribe to right a wrong, but today a bribe is used even to do the right thing at the right time. In fact, any person who does not pay a bribe or use some contact in any filed is unable to get his or her work done in time, irrespective of whether such work is legal or illegal. There is not a single forum or organization, department or office whether government or private which unaffected from the pangs of corruption. Such widespread corruption throughout the system is what gave birth to the idea of Lokpal, which literally translates to “lok” meaning people and “pala” meaning protector/caretaker. Hence, when coined together, the word Lokpal means an office/ organization/institution that checks and/or curb corruption.

Ombudsman in India

The idea to establish an ombudsman and an anti-corruption body which will look into charges of corruption against government officials has been going around for almost fifty years now. And, the said thought of ombudsman got a definite shape and structure with the passing of the Lokpal and Lokayuktas Bill 2013 in the Lok Sabha on 18th December 2013. This ombudsman in India is known as the Lokpal or Lokayukta.

The Indian model of the Ombudsman, i.e. Lokpal, is a forum where the citizens can lodge a complaint against a public official, which would then be inquired into and the citizen would be provided with appropriate redressal.

LOKPAL AND THE ECONOMY

Both the jurists and the economists generally study the socio-economic effects of any new piece of legislation on the economy of the country where such legislation has been enacted and/or implemented. This goes to show us that the economy and legal system are interconnected and interdependent. Indeed, with the enforcement of the Lokpal and Lokayuktas Act 2013, Indian economists are optimistic that it will facilitate tripling of Indian GDP by 2025. While such numbers make us optimistic about the said Act, we must not forget some key factors like how exactly is the GDP of the nation linked with corruption or how far the Act will go to check corruption.  One of the ways of interlinking GDP and Lokpal is by linking decline in corruption indicators of economic development.

As a matter of fact, the Lokpal and Lokayuktas Act is a relatively new Act which requires many modifications. Firstly, this Act applies to those states which gives it their assent. Secondly, the Act mandates the authorities to report to the Lokpal. Nevertheless, we must remember the RTI Act, too was considered a weak law but it turned out to be an effective and important piece of legislation.

On the face of it, one can come to the conclusion that even though the said Act might reduce and/or check corruption but it cannot eliminate corruption from the very root and therein lies a problem.

Now by giving a hypothetical situation let us see how the said Act shall work at the grass root level in the informal sector which accounts for a whopping 91% of the total workforce. This informal work sector basically consists of farmer and their helpers, labours, domestic staff, drivers, chaiwallah and sabziwallah.

If we consider a hypothetical situation where Lokpal is strictly imposed without simultaneous changes in the corresponding laws, we will find that the informal sector will be the biggest losers. Firstly, the said sector is mostly illegal because they are not contractual workers. Thus, they are not protected under relevant laws like labour laws, licenses etc.; also, they do not pay any taxes to the government.

For example, the local chaiwallah in order to set up shop has to bribe the local police officer, local gang and/or political party officials, which he happily does to avoid paying a fixed amount to the municipality to obtain the proper licenses. If there are strict Lokpal laws, it would become impossible for such chaiwallahs to set up shop and perhaps even drive him and his family to destitution or take up a life of crime in order to sustain himself and his family. As a result of Lokpal, his customers ranging from working people to day laborers, maid and drivers would suffer as well as they cannot afford to get their cup of tea from the expensive tea-shops.

Hence, from the aforesaid example we can infer that corruption is intricately webbed in the social strata. To quote a study conducted by economists Nabamita Dutta, Saibal Kar and Sanjukta Roy – they combined the information on corruption with official data on employment in the informal sector and the results confirmed the intuition that corruption leads to a larger informal sector.

This in turn suggests that reducing corruption via the Lokpal Bill without eliminating its sources would reduce the size of this informal sector. It cannot be denied that there exists a causal relationship between corruption and the informal sector in India even though there are difficulties in measuring the proportion and equation between corruption and the informal sector. Such studies point to the potentially harmful consequences of cracking down on petty corruption while doing nothing to address its root causes.

It is therefore advised that the advocates of Lokpal must bear in mind that laws must change with changing times and keeping with the unique situation of the society under scrutiny. In India, there is a massive informal sector which propagates corruption. Hence, in order to tackle corruption through Lokpal, one must at first re-examine the socio-economic structure and factors which gives rise to such corruption. Having once identified such causes, the same must be eliminated in order to achieve parity.