The Parliament passed the Insolvency and Bankruptcy Code 2016 on Wednesday. The new law will replace a string of archaic legislations helping companies exit businesses and improve the ease of doing business in the country. Shaktikanta Das, economic affairs secretary tells HT that this is a very significant reforms that will have far reaching implications for the economy. Excerpts.
How will the bankruptcy code boost economic activities?
In terms of importance, this is the second most important piece of legislature, next only to the goods and services tax (GST) bill. Even though the impact of the new rules may not be visible immediately, they will have long-term implications. There was a systematic vacuum in the entrepreneurial and business eco-system that needed to be plugged. The move will also deepen the bond market in the country besides giving confidence to the creditors and investors in India and abroad.
There were attempts in the past too to plug this loophole through acts such as SARFAESI and DRT. How is this law different?
This is far more comprehensive, allowing timely resolution of cases. Secured and operational creditors can seek recourse through this. As soon as the early signs of distress are noticed, the process of resolution can be initiated. So it gives a fair chance to recover the value of the company before it erodes further.
How will this impact the country’s rating in the World Bank’s Ease of Doing Business index?
India’s ranking (in the ease of doing business index) will significantly improve with the implementation of the bankruptcy code. But let me point out that the reform process that has been initiated would have even otherwise pushed up India’s rating in the Doing Business index. With the bankruptcy code coming in place, we hope to go up several notches from the current 130.
What are the highlights of the recently concluded Asian Development Bank annual meeting?
We emphasised that the ADB needs to be a bigger, better and faster bank to address the financing challenges in the infrastructure sector. There should be decentralisation of power and delegation of power to the country missions so that decisions and sanctions can be done faster. At the meet, we also highlighted the concrete steps taken towards structural reforms.