Dear All, I am appending below an advance copy of an article titled "War on Corruption Strategic Impact" that has been

sent to a magazine for publication. It is too long to be published in a newspaper, for which a shorter version has been sent, but has not yet been published. If you have the time, do peruse it. Regards. Vijay Oberoi WAR ON CORRUPTION- STRATEGIC IMPACT By Lt Gen Vijay Oberoi and Ashish Puntambekar Introduction Corruption is undoubtedly the hottest subject in India today. The credit for bringing it in focus must naturally go to Anna Hazare and the team that had the brilliance of making him the leader of the movement. Today, Anna is drawing crowds because the populace is fed up of mounting corruption in all fields of official and private interaction in our country. While a strong Lokpal Bill will help in prosecuting many corrupt leaders and officials, it is just one action that will rid the country of massive corruption. It will undoubtedly help, but much more effort would be needed at many levels. Besides enactment of the Lok Pal Bill, the government will have to carry out a major exercise on simplification of rules and procedures in all ministries and departments, especially relating to permissions/sanctions and to prepare clear and precise guidelines relating to business activity. In army parlance, corruption is being currently tackled at the tactical level. For much higher dividends, we need to upgrade it to the strategic level and fight a war against corruption, consisting of many battles. Besides benefits at the individual levels, India would reap major strategic gains by eradicating corruption or at least bringing it down substantially. Corruption Status Corruption in our country has now reached every nook and cranny of our daily living. It is not just the political leaders; senior bureaucrats; judiciary; and the hierarchy of the police; that are manifestly corrupt, but most if not all government servants, at all levels are as corrupt to a lesser or greater degree. Similarly, the corrupt include revenue officials; lower judiciary including their subordinates; the rank and file of the police, besides the hierarchy; and railway officials at every level. While the Lokpal Bill focuses on the big fish, the huge shoals of smaller fish in every walk of life, amounting to nearly 95%, will also need to be tackled simultaneously. The Media debate has not highlighted this, though it is included in the Jan Lokpal bill We must also not forget the private sector. Here too corruption prevails at all levels, from corporate houses to the fields of education, medical practice, law, chartered accountancy and especially the entire entertainment industry. Even the media has its share of corruption. It manifests itself as biased news, paid news, suppressing of facts; manipulating statistics and facts and even actively working for influencing decisions of the government, as it was clear from the Radia Tapes episode.

Multi-faceted Approach The aim of listing out the above is to emphasize that corruption has to be attacked at all levels and not just at the Lokpal or Lokayukt levels. In military terms, what is being attempted by Annas Team is to fight just one battle in the big war against corruption and that many battles of varying intensities need to be fought at successive levels of governance as well as in the private sector. Only then will we be able to make a substantial dent in achieving a relatively corruption-free society in our country. Let us now reflect on how widespread corruption has adversely impacted and continues to impact at the strategic level. Since Independence, we grew at the so-called Hindu rate of growth of 2.5 to 3 per cent for decades, on account of the command economy and the overbearing controls of the government, better known as the licence permit raj. That was the start of corruption. In the early Nineties, we opened the economy somewhat and the results were spectacular, but now on account of rampant corruption that has increased exponentially, the Growth Rate is slowing down. The reason is that no attempt was made to change the system of governance, as it suited the corrupt leaders and officials eminently! Impact at Strategic Level Now, we can come to the main purpose of this article, which is to show how widespread corruption has adversely impacted and continues to impact at the strategic level. Our economy is currently stagnating on account of slow decision making; bureaucratic red tape; lack of transparency; and widespread corruption. The military is hollow on account of no modernization and its downgrading in society, which is both misguided and intentional. A powerful and prosperous nation needs a vibrant economy and a strong military. One complements the other. The following paragraphs will highlight the economic and security benefits that eradication of corruption at all levels will deliver to the nation. A substantive dilution of corruption will bring about a major change in the investment climate through transparent decision making at all levels of the government and the reduction of money being sucked away by the corrupt, which finds its way in nonproductive assets or is whisked away abroad. This transparency will then macro impact on both the economy and the military. Economic Windfall Equity FDI Equity FDI into India in the recent past is as under: 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: Government of India, Ministry of Commerce website) Reduction in corruption is likely to result in Equity FDI tripling from from US $ 25.834 billion (F Y 2009 -10) to US $ 75 billion (F Y 2015-16). This dramatic acceleration will be brought about by greater transparency in

government decisions, as a result of increased investor confidence, broadly in the following manner: 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) One of the drawbacks is likely to be that these huge FDI flows may strengthen the Rupee considerably. There may then be a need for the RBI and the Government to manage this problem of plenty by allowing some sort of barter trade when it comes to FDI. Domestic Investment / GDP Catalyst The following are Indias GDP & Infrastructure Investment estimates by leading global organizations: GDP Projections (US $ Trillion 2025 2050 BRIC Report (Goldman Sachs) 3.174 27.80 McKinsey & Co. 4.01 - Indian Education Megaproject (Assumed) 4.50 Infrastructure Investment Projections (US $ Trillion) Goldman Sachs (Next 10 years) 1.7 Indias Planning Commission (XI th 5 year Plan) 0.5 (Source: BRIC Report (Goldman Sachs), McKinsey & Co. Indian Planning Commission) In Infrastructure, the government may even 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. It would be possible to achieve the forecasted Goldman Sachs investment requirement of US $ 1.7 trillion in the infrastructure sector, leading to a multiplier impact of the order of US $ 5.1 trillion by 2025 and consequently creating approximately 60 million new jobs. However, it will materialize only if we have good governance. This money will never come in if scams such as CWG / 2 G continue. The current debate both inside and outside parliament has not even looked at this economic windfall that will accrue to the nation due to the greater transparency brought in by the Lok Pal institution. Our badly hit investment image as a result of major scams will then change and we would be able to sustain an 8.5 % plus growth rate over the next 15 years, enabling us to become a US $ 5 trillion economy by 2025. Increase in tax revenues would be in addition. Impact on Security Greater transparency in defence deals and procurement procedures will result in timely acquisition of equipment and spares for the military, which has been neglected for nearly two decades.

With a US $ 5 trillion economy by 2025, the army can become a modernized, lean and hi-tech force and the size of the navy and air force can triple, if needed. Development of our border areas and on the creation of massive infrastructure, including roads in remote border areas, specifically along the northern borders, will get a boost. This is an area that has been terribly neglected thereby seriously undermining Indias security interests. Changing Mindsets The third and equally important impact would be a quantum leap from current mindsets. Transaction costs for businesses would be dramatically cut and transparency will create immense opportunities for small businesses and entrepreneurs from the village level upwards. The changed environment will facilitate megaprojects in education, healthcare and urban development as the leakage of funds will reduce, with nearly all funds actually reaching the poor in our remote villages. Ultimately, it is only educated citizens who can guarantee the future of our democracy. However, the government is studiously ignoring many pragmatic recommendations made, including a self-financing project for building 30,000 schools at no cost to the government prepared by one of the authors and submitted to the ministries of education and HRD, as well as the Planning Commission. Maybe the Lok Pal Bill and the other actions to end corruption will bring in accountability and responsibility and even quality education will get its due in future. Conclusion The people are fed up with all types of corruption. Political leaders must understand that the people want change and they want it fast. They will not accept any delaying tactics or weak dispensations, which have been the hallmark of our politicians. It is therefore in the interests of the political class to give the people a strong Lok Pal institution (with proper checks and balances on the Lokpals power).Political parties that do not see the writing on the wall will become irrelevant in India.If the war on corruption fails or if only one or two battles succeed, the above forecasted growth will not materialize. If the government refuses to change, it will do immense harm to the economy and the forecast of nearly 60 million new jobs due to new investments will not materialize, creating major demographic and security problems by 2025. Lt Gen Vijay Oberoi is a former Vice Chief of the Indian Army and Ashish Puntambekar is a Project Designer at The Natraja Foundation.