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1 Tuesday, December 20, 2016

2 Animations Presentation Statistics Vision Social Reality Economic Reality Current Reality Loops Local Industry Vision Social Reality Economic Reality FDI Credit Expansion Credit Establishment Bank Money Direct & Indirect tax Proposal Appeal Revenue after BTT Commodity Prices Currency Calculations Denomination Credit Cycle Internal Borrowings Banking System Disinvestment Anti-Social Industries High Denomination Currency Farmers Suicides Proposal Effects of Proposal Strategy Appeal Flawed Taxation System Linked Proposals Empowering Democracy Social Security Scheme Terrorism Analysis Proposed System Strategy

3 Vision Vasudhaiv Kutumbakam Capital Formation One Economy Revenue for Effective Governance

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5 Economic Reality Complex Taxation system Interest on External Debt Cost of running Government National Security Infrastructure, Agriculture, Needs of Common man

6 Effects of Fiscal Deficit on Local Industry Poor Infrastructure Unemployment Social Insecurities Uncompetitive Local Industry / Trade Reduced Rural Purchasing Power Policies Influenced by Foreign Interests Local Agriculture Rendered Uncompetitive Attract FDI Subsidies Curbed Fiscal Deficit

7 Effects of Fiscal Deficit on Credit Cycle & Government Revenue Unemployment Uncompetitive Local Industry / Trade Social Insecurities Inflation Deficit Budget Fiscal Deficit Hard Credit Policy Purchasing Power Reduced Conservative Lending Inadequate Tax Revenue to Govt. NPAs Increase Inadequate Capital Supply to Economy Low Demand / Recession GDP Growth Slows Down

8 Effects of Internal Borrowings on Fiscal Deficit Internal Borrowings Spent on NonDevelopmental Activities Fiscal Deficit Inadequate Tax Revenue to Govt. GDP Growth Slows Down

9 Effects of Fiscal Policy & External Borrowings on Credit Policy & Banking System Threat to Local Banking System National Policies Influenced Fiscal Deficit Expensive Capital Lending Rates Increase External Borrowings Bank Interest Rates Increase Tax Rebate + High Interest Rates on Savings

10 Effects of Fiscal Deficit on Disinvestment Policies & Reduced Social Spending Fiscal Deficit Reduced Social Spending Public - Private Partnership e.g. Toll Cost Burden Passed onto Common Man Purchasing Power Reduced Pressure to Disinvestment Threat to Organized Employment Govt. Control Lost in Essential Commodities [e.g. Oil, Medicines etc.] Scope for Market Exploitation Severe Impact on Weaker Sections Social Insecurities

11 Effects of Fiscal Deficit on Anti-Social Industries Increased Congestion, Accidents, Pollution Direct Ill Effects on Public Health Promoting Increased use of Oil Automobiles Increase in oil Import Losses (Subsidies) Fiscal Deficit Social Insecurities Lack of infrastructure / public amenities (e.g. public transport system) Promotion of Liquor, Gutkha, Cigarettes Inadvertent Promotion of Anti-Social Industries Promotion of State Run Lottery Schemes

12 Effects on Taxation System & High Denomination Currency Uncompetitive Local Industry / Trade GDP Growth Slows Down Inadequate Capital Supply to Economy Poor Credit / Capital Formation High Input Costs Expensive Capital Social Insecurities Fiscal Deficit Poor Governance Inadequate Tax Revenue to Govt. Parallel Economy Tinkering of Taxation System Black Money Non Traceable Transactions Flawed Taxation System Tax Evasion Ease of Cash Transactions Less Use of Banking System Large Denomination Notes Corruption Inflation Fiscal Deficit

13 Effects of Fiscal Deficit on Credit Cycle & Farmers Suicides Farmers Suicides Social Unrest Unjust Borrowings from Private Sources Inflation Low Credit Supply to Agriculture Hard Credit Policy Individual s Credibility NOT Established Deficit Budget Fiscal Deficit Poor Credit / Capital Formation Less Use of Banking System

14 Flawed Taxation System Narrow Base and Limited Coverage of Direct Taxation Direct to Indirect Tax Ratio is 44:56 Show Inequitable and hence Regressive Show Non-Productive Uncertain Inelastic Show Show Show Uneconomical Show Complex nature of taxes Show Tax laws open for interpretation How should it be Show Show Statistics

15 Currency Denomination Country Per Capita Income Highest Denomination USA $ 40,000 $ UK 20, Japan 40,00,000 10, India Rs. 46,000 Rs. 1, Currency Denomination Distribution Per Capita Income / Highest Denomination

16 Credit Establishment Less Use of Banking System Obstructs Credit Registration of a lot of Citizens in the National Economy

17 Proposal Withdrawal of Existing Taxation System Completely* (except Customs/Import Duties) * All Central, State and Local Government Taxes Direct and Indirect Every Transaction routed through a bank will attract a certain deduction in appropriate percentage as Bank Transaction Tax i.e. Single Point Tax Deducted at Source (say 2 %) This deduction is to be effected on receiving/credit account only This deducted amount will be credited to different Government Levels like Central, State and Local (as say 0.7 %, 0.6 % and 0.35 % respectively) Transacting Bank will also have its share in this deducted amount (say 0.35 %) as the Bank has a key role to perform Cash Transactions will not attract any tax Withdrawal of High Denomination Currency (say above Rs. 50) Government should make legal provisions to restrict cash transactions up to a certain limit (say Rs. 2,000) This means, Cash Transactions above this limit will NOT enjoy any legal protection.

18 Effects of Proposal Tax Revenue Increases by Orders of Magnitude Adequate Revenue to Government Adequate Revenue to Govt. Show Increase in Banking Transactions High Value Cash Transactions Not Practical Bank Transaction Tax (Say 2%) High Denomination Currency is Removed (Say above Rs. 50) Legal Provision Made Restricting Cash Transactions up to a Certain Limit (Say Rs. 2000) Existing Cash Deposited in Banks & Attracts BTT

19 Effects of Proposal Black Money Eliminated Adequate Revenue to Government Anti-Social and AntiNational Elements Effectively Checked Anti-Social and AntiNational Elements Effectively Checked Opportunities for Corruption Eliminated Tax Collection is Simplified Bank Transaction Tax (Say 2%) Fake Currency Eliminated High Denomination Currency is Removed (Say above Rs. 50) Legal Provision Made Restricting Cash Transactions up to a Certain Limit (Say Rs. 2000) Existing Cash Deposited in Banks & Attracts BTT

20 Effects of Proposal Industry Trade, Supply Stimulated Adequate Revenue to Government Market Demand Boosted Increase in Banking Transactions Part of BTT goes to Banks Bank Transaction Tax (Say 2%) Anti-Social and AntiNational Elements Effectively Checked Industry Trade, Supply Stimulated Purchasing Power of Society Increased Cheap and Easy Capital Net Banking Revenue Increases High Denomination Currency is Removed (Say above Rs. 50) Globally Competitive Interest Rates Legal Provision Made Restricting Cash Transactions up to a Certain Limit (Say Rs. 2000) Existing Cash Deposited in Banks & Attracts BTT

21 Effects of Proposal Cheap and Easy Capital Prices Drop Show Commodities and Services are FREED from Tax Influence Bank Transaction Tax (Say 2%) Adequate Revenue to Government Anti-Social and AntiNational Elements Effectively Checked Anti-social and antiindustry national elements Trade, checked Supply effectively Stimulated Purchasing Power of Society Increases Market Demand Boosted Focus Shifted to Innovation from Tax Manipulation High Denomination Currency is Removed (Say above Rs. 50) Industry Trade, Supply Stimulated Legal Provision Made Restricting Cash Transactions up to a Certain Limit (Say Rs. 2000) Existing Cash Deposited in Banks & Attracts BTT

22 Effects of Proposal Adequate Revenue to Government Industry Trade, Supply Stimulated Industry Trade, Supply Stimulated Money Supply Regulated SLR Revised Adequate Revenue to Govt. Tax Revenue Increases by Orders of Magnitude Bank Transaction Tax (Say 2%) Anti-Social and AntiNational Elements Effectively Checked Black Money is Converted into White High Denomination Currency is Removed (Say above Rs. 50) Legal Provision Made Restricting Cash Transactions up to a Certain Limit (Say Rs. 2000) Existing Cash Deposited in Banks & Attracts BTT

23 Effects of Proposal Social Security Restored Anti-Social and AntiNational Elements Effectively Checked Empowered Government Govt. Debts Checked Effective Governance Industry Trade, Supply Stimulated Employment Opportunities Cleansed Political System Black Money Eliminated Budgetary Provision for Political System Fiscal Deficit Recovered Adequate Revenue to Govt. Bank Transaction Tax (Say 2%) High Denomination Currency is Removed (Say above Rs. 50) Legal Provision Made Restricting Cash Transactions up to a Certain Limit (Say Rs. 2000) Globally Competent Agro-Segment Appropriate subsidies Existing Cash Deposited in Banks & Attracts BTT

24 Increased Purchasing Power Building Individual s Credibility Cheap and Easy Credit Availability Anti-Social and AntiNational Elements Effectively Checked Decentralized Revenue Collection System EMPOWERED INDIA Revenue for Banking Budgetary Provision for Political System Bank Transaction Tax (Say 2%) Elimination of Black Money Social Security Scheme Industry, Trade, Supply Stimulated Tax Burden Reduced with BTT Creativity FREED from Tax Manipulation High Denomination Currency is Removed (Say above Rs. 50) Elimination of Means & Motives for Corruption Adequate Revenue to run Govt. Programs Legal Provision Made Restricting Cash Transactions up to a Certain Limit (Say Rs. 2000) Existing Cash Deposited in Banks & Attracts BTT

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26 Jai Hind!

27 Back

28 Distribution of Central Government s Direct & Indirect Tax Revenues Back All figures in Rupees Crores

29 Distribution of State Governments Direct & Indirect Tax Revenues Back All figures in Rupees Crores

30 Distribution of Central & State Governments Combined Direct & Indirect Tax Revenues Back All figures in Rupees Crores

31 Distribution of Centre & State Governments Combined Direct & Indirect Tax Revenues for the Year Back

32 Back

33 Back Highest Three Denominations account for 95 % of the Total Currency Money while 37 % of our Population is below Poverty Line with Poverty Line = Rs. 20/-

34 Back Comparison of Currency Denomination Distribution: Indian Rupee & U. S. Dollar Note: Absence of Denominations Larger Than $ 100 in U. S. and the fact that considerable part of the U. S. Currency in $ 100 and $ 50 Bills is in use outside U. S. it being an International Currency.

35 Credit Expansion through Banking System Banks Primary Deposits Cash Reserves Loans / Derivate Deposits A B C D E Eventually 20, , Original Primary Deposit 2 - Original Excess Reserves 3 - Total Capital Formation through Credit Expansion with Original Primary Deposit of Rs. 2000

36 Back Analysis of Commodity Prices Product MFG Cost Taxes Sales Price Chinese Cost Cement Bag 90 ~ 160 ~ Motor bike 21,000 21,000 42,000 25,000 Petrol 35 / liter 38 / liter 73 / liter - 20 / liter 45 / liter - Diesel All figures in rupees 25 / liter

37 Sample Calculations Narrow Money (Transaction Money) (M1) = Currency Money + Demand Deposits For year Currency Money = 9,50,000 Demand Deposits = 7,18,000 Narrow Money (M1) = 16,68,000 Assuming 20 % of M1 to be active in Daily Bank Transactions, Amount of Money in Daily Bank Transactions (D1) = 3,33,600 Amount of money in Yearly Bank Transactions (Y1) = D1*365 = 3,33,600*365 = 12,17,64,000 Consider Bank Transaction Tax as 2% (notional) with shares of Central Government=0.7%, State Government=0.6% and Local Government=0.35%. Combined Revenue for Centre (0.7%) and States (0.6%) = Y1 * 1.3/100 = 12,17,64,000 * = ~ 15,83,000 Revenue of State Governments (0.6 %) = ~7,31,000 Revenue of Local Governments (0.35 %) = ~4,27,000 Revenue for Banks (0.35 %) = ~4,27,000 All figures in Rupees Crores

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44 Dependency on FDI

45 Dependency on FDI China India

46 Back All figures in Rupees Crores

47 The National Reform Bill The Doctrine Show Implementation Members of Parliament Political Leaders & Parties The Citizens Charter of Demand Business Leaders Experts Media Show Show Show Advertising Campaign Pratishthan Public Presentation Media Tools The Indian Citizen

48 Empowering Democracy Implementation of proposal. Its Effects are Enough revenues with government to make legal provision of funds for political system High valued cash transactions difficult Increase the use of the banking system Effective taxation system leading to eradication of black money. Provision for funding of the political system Funding of the political parties based on a per person amount for the entire population for a five year period. Say Rs. 100/person Total population is to be considered while making this provision The actual fund availability will be in proportion to the actual voting percentage This funding will be available only to Registered political parties securing more than a certain minimum percentage of votes cast Sample Calculation for funding political parties Giving healthy monthly allowances to the elected representatives The proposal for allowance of elected representatives

49 Empowering Democracy Calculations Back At the Central Level: Total provision for the entire population for the period of 5 years 121 Cr. * 100 (per Person Amount) = Rs. 12,100 Cr. Provision per year Rs. 2,420 Cr. The total Amount available in proportion to a total valid votes percentage Say 60% Amount available for 5 year period = 12,100 * 60/100 = 7,260 Cr. At the State Level: State population say 10 Crores Funds provision for 5 year period = 10 Cr. * Rs. 100 = Rs. 1,000 Cr. At the Local level: Population of the urban areas is say, 10 Lakh Funds provision for 5 year period = 10 L * Rs. 100 = Rs. 10 Cr. Actual funding will depend upon the total percentage of votes cast.

50 Empowering Democracy Allowance for Elected Representatives Back For MPs at Rs 10 Lakh/month For MLAs at Rs 5 Lakh/month For Corporators at Rs. 1,00,000/month For Village Development Officer at Rs. 10,000/month The spending with these provisions will be - At the central level *10L*12 = Rs. 942 Cr. against a projected revenue of ~Rs. 7,46,651 Cr. = ~0.13 % of the revenue - At the state level (e.g. Maharashtra) 366*5L*12 = ~Rs. 220 Cr. against a projected revenue of ~Rs. 50,000 Cr. = 0.44 % of the revenue - At the local corporation level (e.g. Aurangabad) 100*1,00,000*12 = Rs. 12 Cr. against a revenue of ~Rs. 250 Cr. = 4.8 % of the revenue

51 Empowering democracy Improved governance Increased law and order Politics professionalized as the qualified people will take it up Improved functioning and decision making Increased stability of government Decreases ill-influence Dignity & public trust restored of local parties in national politics corruption and criminals Eradication of Black Money Assured clean funding Appropriate remuneration for elected representatives at all levels Politics focused on real issues and national interests Political parties interested in increasing voting Funding to political parties based on the percentage of votes won Transparency in politics Decreased dependence on Effective funding available for political parties depends upon voting percentage Legal provision of funds for politics at all levels Provision of funding for political parties based on population

52 Jai Hind!

53 Social Security Proposal A Social security identification (SSID) is issued to every Indian Citizen. To begin with the beneficiaries of the Social Security Allowance Scheme will be all adult citizens of India beneath the poverty line. For every deserving adult, a fixed amount (linked to DA), Social Security Allowance, is credited per month into a unique bank account linked to the SSID Say Rs. 2,000/ pm -- Based on Food (Rs. 900/-) + Shelter (Rs. 500/-) + Clothing (Rs. 300/-) + Health (Rs. 300/-) Government will remove all non-merit subsidies thus freeing up revenue to pay the Social Security Allowance to the deserving citizens All Social security allowance beneficiaries can get credit of Rs. 50,000/- (upper limit) from banks Restrictions to ensure correct usage - No rights to SSA beneficiaries on income for hereditary property - SSA amount can t be used as security against any other loan Uniform implementation throughout the country

54 Social Security Proposal Calculations In first phase, scheme will be implemented for people below poverty line. Number of people below poverty line (monthly income below Rs. 300/-) is 30 Cr Total monthly expenditure = Rs. 2,000 * 30 Cr = Rs. 60,000 Cr Total yearly expenditure = Rs. 60,000 Cr * 12 = Rs. 7,20,000 Cr Excluding current expenditure of Government over subsidies of 1,50,000 Cr, additional yearly expenditure will be 7,20,000-1,50,000 = Rs. 5,70,000 Cr Rs. Considering current national income of Rs. 40,00,000 Cr, this additional expenditure would be ~15% of national income

55 Improved quality of life Social security Balanced Development (Rural and Urban) Decreased Social Unrest (reduced Naxalism, terrorism, extremism, etc.) Dissemination of Population Increased Business / Employment opportunities locally Opportunities of Corruption are reduced (PDS, fuel etc.) Market driven quality supply of goods & services Credit / Capital expansion in the banking system Price distortion removed as a whole Farmers suicide checked Assured dignified existence for every citizen Hugely increased demand for goods and services (Necessities) Effective implementation of child welfare laws & schemes SSA beneficiaries will not have right on income from hereditary property Increase in Purchasing power of the poor people Increased use of Banking system Social Security Allowance (Say Rs. 2,000 monthly) (linked to DA) (Food, clothing, shelter, health insurance) SSA can t be used as security for any other loan Bank account for SSA (associated with SS Code) Unique SS code for every citizen Establishment of Individual credibility with bank Saved Gov. Revenue Expenditure Maximum Credit Limit For SSA beneficiaries up to say, Rs. 50,000 Credit available to the poor Withdrawal of Non-merit subsidies (Central and State)

56 Jai Hind!

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67 Back Government Officials H.E. Smt. Pratibhatai Patil, Hon. President of India (Personal meeting twice) Dr. Montek Singh Ahluwalia, Dr. Bhalchandra Mungekar, Deputy Chairman, Planning Commission (Book) Member, Planning Commission (Presentation) Dr. Adarsh Kishore Saxena Ex-Union Finance Secretary (Presentation in the presence of Smt. Pratibhatai Patil) Mr. Johny Joseph Chief Secretary, Maharashtra (Presentation To CM, Maharashtra ) Mr. Agarwal Dr. Parthasarathy Shome, Ex-Chief Economic Advisor to the Union Finance Minister (Presentation North Block) Finance and Planning Secretary, Maharashtra (Presentation To CM, Maharashtra ) Mr. Sangith Rao Principal Secretary, Maharashtra (Presentation To CM, Maharashtra )

68 Back Economists & Experts Dr. D. R. Pendse Dr. Narendra Jadhav P B Sawant Justice Supreme Court Chandrahas Deshpande Sunil Bhandare Jairaj Salgaonkar V. M. Govilkar R A Mashelkar M N Chaini

69 Political Leaders Back Congress Manmohan Singh, Hon. Prime Minister P. Chidambaram Union Finance Minister (Book) (Book) Sushil Kumar Shinde, Union Power Minister Prithviraj Chavan MOS, PMO s Office (Meeting) V George P.A. to Smt Sonia Gandhi (Presentation) Pawan Kumar Bansal, Minister of State for Finance (Presentation) Vilasrao Deshmukh, CM, Maharashtra (Presentation)

70 Political Leaders Back BJP Yashwant Sinha Arun Shourie Sushma Swaraj SS Ahluwalia Gopinath Munde Nitin Gadkari Rajeev Chandrashekhar Vinay Sahasrabuddhe Sudheendra Kulkarni LK Advani Bhairon Singh Shekhawat Balbir Punj Sompal Shastri

71 Political Leaders Mohan Rawle Suresh Prabhu Political leaders Raj Thackeray Shweta Paralkar Shishir Shinde Shiv Sena MNS Rajan Shirodkar Back

72 Political Leaders Sharad Pawar Political leaders D Raja Dr. Kango NCP Jayant Patil CPI Back

73 Back Industrialists Deepak Ghaisas I-Flex solutions Narayan Murthy Infosys Arvind Padhye TCS Pune Center Head

74 Back Media Experts Kumar Ketkar Loksatta Raju Parulekar E TV Rajeev Khandekar Star TV Yamaji Malkar - Sakal Prem Shankar Jha Hindustan Times

75 Back Creative Artists Vijay Tendulkar Mangesh Tendulkar Sachin Pilgaonkar Ashok Saraf Nivedita Saraf Nina Kulkarni Mohan Joshi Kiran Shantaram Atul Parchure Prashant Damle Swapnil Bandodkar

76 Educational Institutions Goa Commerce College Osmania university NGOs Loksatta Maitri i-watch Prayas (Reli group) Back

77 Terrorism in India

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81 How we can tackle this problem?

82 Terrorism Analysis Reduced Social Spending Lack of Education & Skills Flawed Taxation System Inadequate Money Supply to Economy High Commodity Prices due to Heavy Indirect Taxes No Access to Credit Tax Evasion Under-utilized Banking System Unemployment Reduced Purchasing Power Individual s Credibility not Established Deprivation from Resources and Means (Credit) to Acquire Them Poverty

83 Terrorism Analysis Loss of faith in peaceful, democratic process, no hopes of getting justice without resorting to violence Desperation Rebellious Tendency Deprivation, Extreme Disparity, Envy Sense of Hurt, Damage to Self Esteem, Indignation Poverty Social Oppression (Communal / Religious / Caste / Linguistic etc.)

84 Physical constraints (Porous borders, unregulated coastlines) Lack of clear and firm Foreign (therefore, Defense) policy Parallel economy, Corruption, Fake / high denomination currency Terrorism Public sympathy, Weak national Character Birth of a militant Logistic support, funding and training etc from hostile foreign organizations / nations Systemic Administrative weaknesses in governance and law enforcement Propaganda for masses, Indoctrination of individuals Religious Dogma Perceived Historical injustice Political / Economic / Philosophical ideology Loss of faith in peaceful, democratic process, no hopes of getting justice without resorting to violence

85 Proposal Withdrawal of existing Taxation System Completely (except Customs/Import Duties) Every Transaction routed through a bank will attract a certain deduction in appropriate percentage as Bank Transaction Tax i.e. Single Point Tax Deducted at Source (say 2 %) This deduction is to be effected on receiving/credit account only This deducted amount will be credited to different Government levels like Central, State and Local (as say 0.7 %, 0.6 % and 0.35 % respectively) Transacting Bank will also have its share in this deducted amount (say 0.35 %) as the Bank has a key role to perform Withdrawal of High Denomination Currency (say above Rs. 50) Cash Transactions will not attract any tax Government should make legal provisions to restrict cash transactions up to a certain limit (say Rs. 2000)

86 Effects of Proposal Reduced social spending Lack of education & skills Flawed taxation system Inadequate money supply to economy High commodity prices due to heavy indirect taxes No access to credit Tax evasion Under-utilized banking system Unemployment Reduced purchasing power Individual s credibility not established Deprivation from resources and means (credit) to acquire them Adequate revenue with Government Poverty

87 Effects of Proposal Unemployment High commodity prices due to heavy indirect taxes Flawed taxation system No access to credit Tax evasion Under-utilized banking system Inadequate money supply to economy Reduced purchasing power Individual s credibility not established Single point taxation system Deprivation from resources and means (credit) to acquire them No Black Money Poverty

88 Effects of Proposal Individuals credibility established Banking transactions increased Unemployment Reduced purchasing power No access to credit Under-utilized banking system Inadequate money supply to economy Individual s credibility not established Deprivation from resources and means (credit) to acquire them Poverty

89 Effects of Proposal Industry, trade, supply stimulated Cheap & easy capital Unemployment Single point taxation system Purchasing power increased Reduced purchasing power Individuals credibility established Deprivation from resources and means (credit) to acquire them Poverty

90 Effects of proposal Physical constraints (Porous borders, unregulated coastlines) Lack of clear and firm Foreign (therefore, Defense) policy Parallel economy, Corruption, Fake / high denomination currency Terrorism Logistic support, funding and training etc from hostile foreign organizations / nations Systemic Administrative weaknesses in governance and law enforcement Public sympathy, Weak national Character Birth of a militant Poverty Adequate revenue with Government Individuals credibility established Single point taxation system No Black Money Purchasing power increased Industry, trade, supply stimulated

91 Effects of Proposal Physical constraints (Porous borders, unregulated coastlines) Lack of clear and firm Foreign (therefore, Defense) policy Parallel economy, Corruption, Fake / high denomination currency Terrorism Systemic Administrative weaknesses in governance and law enforcement Public sympathy, Weak national Character Birth of a militant Social Security Adequate revenue with Government Individuals credibility established Logistic support, funding and training etc from hostile foreign organizations / nations Empowered Government Single point taxation system No Black Money Purchasing power increased Industry, trade, supply stimulated

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93 Jai Hind!