22 January, 2021

Another Indian Holy Cow

Our bankruptcy laws and procedures protect inefficient companies at the expense of workers and secured creditors.

Another Indian Holy Cow

DURING a conference in the mid-'80s, Professor Mrinal Datta Chaudhuri of the Delhi School of Economics came up with a brilliant critique on Indian policy-making. He said: "The problem with us is the incessant use of an obnoxious phrase called 'But in a country like India...'" Fifteen years later, I am amazed at how right Mrinal was—of the phrase being blithely used to justify ridiculous policies, design absurd systems and stymie reforms.

Bankruptcy restructuring and liquidation are classic examples of the destructive powers of that phrase. Most countries use 'bankruptcy' or 'insolvency' to define a state where a person or a company is unable to meet debt dues or payment obligations. But in a country like India, that won't do. So, we give corporate bankruptcy a biological dimension and call it 'industrial sickness'.

This has had devastating consequences. Once you use the word 'sickness', you subscribe to a Florence Nightingale worldview—that the sick and invalid need to be nursed back to health. Consequently, very little thought goes into...



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