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Friday, March 29, 2024
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Modi is taking on the rich and mighty, and ignoring shrill, self-serving economists

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Twelve wilful defaulters of corporate India attempted to buy stressed assets, prompting the government to ask banks to be vigilant.

Is Modi protecting the loan-defaulting dirty dozen of India Inc., or is he calling them to account?

No market economy can operate efficiently without an orderly and speedy bankruptcy process. The problem of a poorly conceived and sclerotic bankruptcy process in our country has been recognized for years (actually, this being India, it has been recognised for decades). The country tried various options—tied up with acronyms—BIFR, CDR, Sarfaesi and so on.

Despite good intentions, none of them worked.

The impression gained ground that the control of the process by powerful crony capitalists was at the root of this paralysis. Rakesh Mohan and Montek Ahluwalia, economists associated with earlier dispensations, kept pleading, but were unable to break the proverbial Indian logjam.


Here are other sharp perspectives on wilful defaulters:

Rajeev Chandrasekhar, MP
Shekhar Gupta, Editor-in-Chief, ThePrint
Prashant BhushanSupreme Court lawyer


When our present rulers took power in 2014, they were confronted with a government-owned banking system stuck with staggering levels of bad loans—not loans to impoverished farmers, but to companies, many of which were controlled by rich, powerful and influential plutocrats. The present government abandoned the platitudinous patchwork efforts of the past and came up with a well-thought out law incorporating best practices from around the world. For once, different government agencies (RBI, SEBI, MoF, CBDT etc.) did not work at cross-purposes. The process started to gain traction.

But this being India, every attempt was made to delay or derail the new law. Luckily, even our courts decided that procrastinating stay orders were not in the country’s interest. And then, Aha! Some clever lawyer discovered that the new law could also be subverted by crony capitalists, who, like Brutus, are honourable men. The very promoter who presided over bankrupting the company would bid to buy it back for pennies on the dollar.

It is to the credit of this government that it realised that allowing discredited promoters to ram a bulldozer through this loophole in the law, would destroy the moral and political legitimacy of our legal system. It has decided to ignore the shrill and self-serving objections of “committed” economists, who are suddenly arguing that erstwhile promoters would pay the highest prices. Touche!

The recent ordinance bodes well for the country. But let us not declare victory this soon. We must remember that powerful, entrenched, rich promoters will continue to fight a rearguard action. It would do us all much good to remain vigilant, and to support a government that seems to take fiscal morality seriously.

Jaithirth Rao is an entrepreneur and a writer. 

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2 COMMENTS

  1. Thank you for summing up your opinion with the words ‘fiscal morality’, but just wondering why has this succinct piece NOT received prime position on the website?

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