Day 33 – Q 2.What is the ‘exit’ problem’ in Indian economy? Examine the recent steps taken by the government to address the same.
2. What is the ‘exit’ problem’ in Indian economy? Examine the recent steps taken by the government to address the same.
भारतीय अर्थव्यवस्था में ‘एग्जिट’ समस्या क्या है? इसके लिए सरकार द्वारा लिए गए हालिया कदमों की जांच करें।
Introduction:
The Indian economy has made great strides in removing barriers to entry for firms, talent, and technology but less progress has been made in relation to exit. Thus, over the course of six decades, the Indian economy has moved from ‘socialism with limited entry to “marketism” without exit’, where starting a business is easier but without an Exit option.
Body:
Steps taken by government to address Exit problem:
- Insolvency and Bankruptcy code.
- Resolution Corporation.
- Joint Lenders Forum.
- Recapitalization/Bailout.
- Restructuring of firm.
- Companies Act 2013: Outbound Merger which was not present earlier.
- Privatization.
- UDAY: For loss making Discoms.
Issues:
- Timeline: 180-days’ time period as given by IBC is very short and most of the project might end up with Debt Recovery Tribunal of NCLT.
- The focus of steps taken by government is more on recovery of dues, than revival of the company, thus collective resolution is hit.
- Crowding out: Every extra rupee that the government spends on the bailout of these firms by taking on their losses, it has to borrow. And for every rupee that the government borrows, there is one rupee less for the private sector to borrow.
- Specialists: Lack of insolvency specialists in our country might delay resolution.
- Opposition from Bureaucrats and opposition political parties leading to slow down in implementation of Privatization of PSU’s.
Note: Question asks for Examination of steps taken by Government Not Exit Issue in India. 1-2 lines explanation is needed in 1st part.
Conclusion:
Certain loopholes and issues have to be sorted out so that it doesn’t affect our growth and development. For Instance, recently Rural Electrification Ltd MD has stated that optimal solution and resolution will be impossible in the given time frame and majority of power projects will ultimately land up in NCLT.
Best Answer: No best answer.
