Delivering the keynote address at a conference of the Central Bureau of Investigation (CBI) and state anti-corruption bureaus here, Manmohan Singh also announced that his government proposed to bring forward a Public Services Bill before parliament that would define a public services code of ethics and management.
While referring to the smash hit film that had brought Mahatma Gandhi back into the popular reckoning, his second mention of the Sanjay Dutt starrer in less than two months, Manmohan Singh said he was touched by one incident where a senior citizen was trying to get his pension without having to pay a bribe.
"In stripping his clothes, as an act of protest, this pensioner was stripping our system, exposing the ugly nakedness of the self-aggrandisement of those who man our institutions of governance."
"Any system in which a retired senior citizen is required to pay a bribe to secure his legitimate dues is a most despicable system," he emphasised, adding, "Such corruption must be visited by the sternest action to reform, restructure and rejuvenate the system."
The prime minister had recently watched a special screening of the film along with members of his staff and family.
Some of the other provisions of the proposed bill include protecting whistleblowers and having the objective of developing public services as a professional, politically neutral, merit based, and accountable instrument for promoting good governance and better delivery of services to all citizens.
Pointing out that the level of tolerance of people to corruption in public life and administration had changed, the prime minister said he was happy that India's ranking had improved in the global index of corruption in the last two years.
Graft watchdog Transparency International said in its report last week that India was perceived to be marginally less corrupt than in 2005 - climbing to 70 of 183 countries.
Alluding to economist Gunnar Myrdal's book "The Asian Drama" that identified corruption as one of the constraints on development, Manmohan Singh agreed with the author's perception that corruption in public life had contributed to India being a "soft state".
"The scale, the typology and the mechanisms of corruption may have changed, but the problem of corruption has not gone away," he said.
Detailing an all-inclusive strategy to combat corruption, Manmohan Singh made a fervent plea to the CBI to take a broader view of individual cases and be able to make a distinction between a "bonafide mistake" and deliberate "wrong-doing".
Some of the other elements underlined in this plan include elimination of all discretionary controls, reforming tax systems to make it simple and transparent, modernising the justice delivery system, reform of public procurement systems both civil as well as defence, with complete transparency in the tender processes at all stages.
The Right to Information Act, he said, was also a powerful to combat corruption in public life and empower civil society.
Manmohan Singh said he believed that a Citizen's Charter stating explicitly the rights of taxpayers and consumers of public services was important because a citizen would be able to secure his entitlement without recourse to corruption.
In a speech during his visit to South Africa last month, Manmohan Singh had made it a point to mention "Lage Raho Munnabhai", though not by name.
"I was heartened to see recently that back home in India the most popular movie this festival season is a film about a young man discovery of the universal and timeless relevance of the Mahatma's message."