Arthakranti

A design towards Principled, Prosperous & Peaceful living

Wednesday, November 16, 2016

Arthakranti

A design towards Principled, Prosperous & Peaceful living

Vision

Vasudhaiv
Kutumbakam

Need not click - Auto Run

Arthakranti

A design towards Principled, Prosperous & Peaceful living

Social Reality
Our nation is like a huge ship sailing
in the middle of the sea. Just when it
looked like sailing smooth, it hits a
hidden rock suffering damage
causing water to rush into
compartments from the bottom.
The Unorganized Class at the
bottom is in panic and is running
around screaming for survival. The
only way is to move upwards.
The Organized Class sleeps
behind closed doors, feeling
secured with pensions, insurance
and provident funds. They do hear
an odd scream but pretend not.
The rich and Elite Class the
blessed few are up enjoying the
view. They do not even know that
the ship is sinking. But this
ignorance real or fake will not
stop any of us from sinking in the
worst scenario.

Arthakranti

A design towards Principled, Prosperous & Peaceful living

Economic Reality
Let us say our economy is like a multi
storied building. The overhead water
tank on the roof is the Treasury. The
floors from the top downwards are the
various heads of government
expenditure in order of priority.
There are pipes leading water down
from the overhead tank to the various
levels - their taps are dry. On
investigating, we realize that the
overhead tank is only half filled and
the lower levels will not get any water
unless the tank fills completely. This
gap in the overhead tank is the Fiscal
Deficit.
We check the main reservoir on the
ground floor and find that it does
contain a lot of water. The pump is
running at full speed.
The pipes which lead this water up into
the overhead tank the taxation system
- are so impossibly twisted, choked and
corroded that they leak at many points.
A lot of water is leaking out of these
pipes and that is why the overhead tank
does not ever get filled up!

Arthakranti

A design towards Principled, Prosperous & Peaceful living

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

Arthakranti

A design towards Principled, Prosperous & Peaceful living

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

Arthakranti

A design towards Principled, Prosperous & Peaceful living

Effects of Internal Borrowings on Fiscal Deficit

Internal
Borrowings

Spent on NonDevelopmental
Activities

Fiscal
Deficit

Inadequate Tax
Revenue to Govt.

GDP Growth
Slows Down

Arthakranti

A design towards Principled, Prosperous & Peaceful living

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

Arthakranti

A design towards Principled, Prosperous & Peaceful living

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

Arthakranti

A design towards Principled, Prosperous & Peaceful living

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

Arthakranti

A design towards Principled, Prosperous & Peaceful living

Effects of Fiscal Deficit 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
Government

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

Arthakranti

A design towards Principled, Prosperous & Peaceful living

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

Individuals Credibility
NOT Established

Deficit
Budget

Fiscal
Deficit

Poor Credit /
Capital Formation

Less Use of
Banking System

Arthakranti

A design towards Principled, Prosperous & Peaceful living

Flawed Taxation System

Narrow base and limited coverage of Direct Taxation
Direct to Indirect tax ratio is 40:60
Inequitable and hence Regressive
Non-Productive
Uncertain
Inelastic
Uneconomical
Complex nature of taxes
Tax laws open for interpretation

Arthakranti

A design towards Principled, Prosperous & Peaceful living

Currency Denomination

Country

Per Capita
Income

Highest
Denomination

USA

40,000 $

100 $

400

UK

20,000

50

400

Japan

40,00,000

India

Rs. 37,000

10,000

Rs. 1,000

Per Capita Income /

Highest Denomination

400

37

Arthakranti

A design towards Principled, Prosperous & Peaceful living

Arthakranti

A design towards Principled, Prosperous & Peaceful living

Highest Three Denominations account for

91% of the total Currency Money while
Per Day Income of 78% Population is
Less than or Equal to Rs. 20

Arthakranti

A design towards Principled, Prosperous & Peaceful living

ArthaKranti Proposal
Withdrawal of existing Taxation System completely (except Customs and 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 a share in the deducted amount as it has to
perform a key role (say 0.35%)
Cash Transactions will not attract any tax
Withdrawal of High Denomination Currency (above Rs. 50)
Government should make legal provisions to restrict cash transactions up to a certain
limit (say Rs. 2000)

Arthakranti

A design towards Principled, Prosperous & Peaceful living

Effects of ArthaKranti Proposal

Adequate
Revenue to
Government

Tax Revenue
Increases by Orders
of Magnitude

Adequate
Revenue to
Government

Increase in
Banking
Transactions

High Value Cash

Transactions
Not Practical

Bank Transaction Tax:

the ONLY Tax,
Deducted Automatically
(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

Arthakranti

A design towards Principled, Prosperous & Peaceful living

Effects of ArthaKranti 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:

the ONLY Tax,
Deducted Automatically
(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

Arthakranti

A design towards Principled, Prosperous & Peaceful living

Effects of ArthaKranti 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:

the ONLY Tax,
Deducted Automatically
(say 2%)

Anti-Social and AntiNational Elements

Effectively Checked

Industry /
Trade Supply
Stimulated

Purchasing
Power of
Society
Increases
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

Arthakranti

A design towards Principled, Prosperous & Peaceful living

Effects of ArthaKranti Proposal

Cheap and Easy

Capital

Prices
Drop

Commodities and
Services are FREED
from Tax Influence
Bank Transaction Tax:
the ONLY Tax,
Deducted Automatically
(say 2%)

Adequate
Revenue to
Government

Anti-Social and AntiNational Elements

Effectively Checked

Anti-social and antiIndustry

/
national
elements
Trade Supply
effectively
checked

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

Arthakranti

A design towards Principled, Prosperous & Peaceful living

Effects of ArthaKranti Proposal

Adequate
Revenue to
Government

Industry/Trade
Supply
Stimulated

Industry/Trade
Supply
Stimulated

Money Supply
Regulated

Adequate
Revenue to
Government

SLR
Revised

Tax Revenue
Increases by Orders
of Magnitude

Bank Transaction Tax:

the ONLY Tax,
Deducted Automatically
(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

Arthakranti

A design towards Principled, Prosperous & Peaceful living

Effects of ArthaKranti Proposal

Social
Security
Restored

Anti-Social and AntiNational Elements

Effectively Checked

Empowered
Government

Govt. Debts
Checked

Effective
Governance

Cleansed
Political System

Fiscal
Deficit
Recovered

Bank Transaction Tax:

the ONLY Tax,
Deducted Automatically
(say 2%)

Industry/Trade
Supply
Stimulated

Employment
Opportunities

High Denomination
Currency is Removed
(say above Rs. 50)

Black Money
Eliminated

Budgetary
Provision for
Political System

Globally
Competent
Agro-Segment

Adequate
Revenue to
Government

Appropriate
Subsidies

Legal Provision Made

Restricting Cash Transactions
up to a Certain Limit
(say Rs. 2000)

Existing Cash
Deposited in Banks &
Attracts BTT

Arthakranti

A design towards Principled, Prosperous & Peaceful living

Increased
Purchasing
Power
Building
Individuals
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:
the ONLY Tax,
Deducted Automatically
(say 2%)

Creativity FREED
from tax
Manipulation
High Denomination
Currency is Removed
(say above Rs. 50)

Elimination of
Means & Motives
for Corruption
Legal Provision Made
Restricting Cash Transactions
up to a Certain Limit
(say Rs. 2000)

Elimination of
Black Money

Social Security
Scheme
Industry/Trade
Supply
Stimulated
Tax Burden
Reduced with BTT
Adequate
Revenue to Run
Govt. Programs

Existing Cash
Deposited in Banks &
Attracts BTT

Arthakranti

A design towards Principled, Prosperous & Peaceful living

Arthakranti

A design towards Principled, Prosperous & Peaceful living

Jai Hind!