Why create a national Linux distribution?
Why not just adopt a set of standards and loose guidelines, and create
incentives for OSS adoption?
Why not let the best of breed solution emerge bottom-up, rather than be
forced top-down?
Why not choose FreeBSD for that matter?

1. Fragmented package managers: There are too many different package
managers and package formats. e.g., rpm and pkg
Choosing one distribution eliminates that confusion.

2. Application compatibility: We want to catalyze the application
ecosystem. We want applications to run everywhere without hassle.
The national distribution will help that goal.

3. Domestic security audit: The whole point of creating the national distro
is so that Indian programmers can vet the Ubuntu source-code for
vulnerabilities.
It's not that we don't trust the international community. Pragmatically
speaking, domestic due diligence is necessary with any technologies we
adopt.

4. Scope for future internationalization of applications. I want to see
applications internationalized and reused in China, and India, and
elsewhere.
If we're all using Ubuntu, and following the same I18N practices, this goal
is achievable.

5. Reduce government waste:  The government, trying to create indirect
incentives for adoption of OSS will make a bureaucratic mess of things.
Having an unambiguous standard, codified in the form of the national
distribution, may be the more efficient way.

Hence, I conclude: "One distribution to bind them all!"
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