Dear Readers
Introduction: The festival of colours “Holi “(sprinkling of colours) is being celebrated across India by all among friends, family and acquaintances. The festival is a symbol of joy, love, harmony and victory of righteous over evil. The festival marks the killing of demon king Hiranyakashipu by Lord Narasimha (an incarnation of Lord Vishnu) for having declaring himself the Supreme Lord and having cruelty and unethical ways of governing.
Being pleased with devotional meditation of Hiranyakashipu without food for years, Lord Brahma granted him a boon that would allow no man, God or animal created by Brahma to kill him. Also, nobody could kill him at day or night, and no one could kill him in heaven or on earth. Also, no can could kill him with a weapon, or kill him either inside or outside his house.
At some point, Hiranyakashipu decided that he had to kill his son Prahlada because of his devotion to Lord Vishnu, whom he considered to be his adversary. However, each time he tried to kill the boy, Prahlada was shielded by Vishnu's mystical power. When questioned, Prahlada asserted that Vishnu was ubiquitous and all-pervasive rather than acknowledging his father as the ultimate ruler of the cosmos. Hiranyakashipu tried to kill his son Prahlada by having him and his aunt Holika sit atop a blazing fire. Holika possessed a unique blessing that shielded her from fire damage. While Holika was burnt in the fire, Prahlada was unharmed. This story is believed to be one of the many origins of Holi festival in India as per Hindu Mythology.
Now Hiranyakshipu’s anger had reached its peak. He dragged Prahlad and asked him if his Lord Vishnu was present in the room with them. Prahlad told him that the Lord was everywhere, and in frustration Hiranyakshipu mocked Prahlad and asked him if his Lord was present in a pillar next to them. Prahlad told him that he was. In rage, Hiranyakshipu hit the pillar with a sword, and out came a ferocious being who was half man and half lion. He dragged Hiranyakshipu to the threshold of the palace door (which was neither inside nor outside the house), placed Hiranyakashipu on his lap (which was neither on air nor on earth), and killed him with his claws at twilight (which was neither day nor night), without using any weapons.
Cover Story: Nirmala Sitharaman - Union Finance Minister, in her interim budget 2024, claimed for socio economic growth and fiscal prudence. The budget was concentrated around the concept “Viksit Bharat“ (developed and bloomed Bharat) aiming to control fiscal deficit, increase public capex on rails, roads and defence, and by having the revenue growth from direct and indirect tax and disinvestment. The budget envisages promotion of public and private investment in various areas like harvest storage, supply chain, marketing of harvest, roof top solarization, housing for poor and middle class, promotion of healthcare facilities by establishing more medical colleges and healthcare centres, self-reliance in oil seed production, dairy development, fishery ecosystem (matsya sampada yojana) and foreign investment. The budget has allocated Rs.2.52 lakh crore for modernization of railways which will accelerate Gross Domestic Product (GDP) growth and reduce logistics cost. Production Linked Incentive (PLI) schemes in Electronics and Information Technology hardware with enhanced allocation by 36% to Rs. 6200 crore will help benefit the sector. The expanded capex for infrastructure and housing will drive the demand for steel, cement, capital goods and will generate employment.
We hope the budget will live up to the expectations reflecting the government's continued focus on inclusive growth, economic stability, strategic global positioning, sector-specific developments, environmental sustainability, and tax reforms, with an overarching vision towards an economy of USD 35 trillion size by 2047 eliminating issues faced by poor and middle class people.
Indian Economy: PM Modi said India is moving fast and will become the 3rd largest economy in the world. The country’s potential growth is around 6.5 – 6.8% at present. Aligning with the Reserve Bank of India (RBI), ICRA calculated an economic growth of 6% for 3rd quarter of FY24. India needs to grow faster to become USD 35 trillion economy by 2047. Morgan Stanley research sees FY25 GDP growth slowing to a moderate level of 6.5% from 6.9% projected for FY24. Macro stability remains comfortable reflecting strength in funda-mentals. Investment activity has to be accelerated. Government and regulators must discuss simplifi-cation of KYC norms in the financial sector. It should not be complicated and conservative. Veteran banker Uday Kotak says “Zero accident policy is also dangerous. If you want to grow fast, there will be a need for good regulations. We may have some accidents but it is also how fast we respond and correct the accident“.
Rabi crops are being harvested and seasonal increase in production of vegetables has kept the inflation below 5%. RBI governor Shaktikanta Das says stable and low inflation at 4% will provide the necessary bedrock for a sustainable growth economy.
Global Economy: The US slowdown is uncertain, with potential intensified weakness in Europe and China. However, growth risks have eased, and forecasts suggest improving conditions by year-end. Inflation persistence could cause central banks to cut rates, leaving real interest rates higher. The US commercial real estate crisis is a significant risk. Inflation could fall faster due to weak growth or growing Chinese excess capacity. The 2024 forecast has been upgraded due to a brighter outlook for growth among mature economies, with projections increasing to 1.4% from 1.1% in January. The US now anticipates real GDP growth of 1.9%, while Euro Area forecasts have been downgraded.
IBC: Private capex investment is not picking up. Entrepreneurs are fearsome of debts if the business fails. There is no guarantee of continuation of enterprise. An enterprise may be facing many external factors like global competition, changes in government regulation and administrative delays, changes in banking regulations, undue delays by public sector undertakings (PSUs) and government in settling payments, arbitration verdicts being unnecessarily challenged, and others. History tells how external factors affect an enterprise and some of them are ultimately pushed towards liquidation. Business failures, delays and default in payment of lenders is termed as fraud. Some entrepreneurs are even put behind bars. In case of default or delay of payment, the enterprise is referred to National Company Law Tribunal (NCLT). The government has informed parliament that 21,205 cases are pending with different benches of NCLT as on 31 January 2023. The insolvent enterprise is usually sold to the highest bidder with the lenders taking a haircut of about 80-82% on an average. The enterprise has been fetching 15% of its valuation and that of 5% value of the new project. Bidders are one or few, and they take over the insolvent company at rock-bottom prices. Government has been selling PSUs. However, National Asset Reconstruction Company Ltd. (NARCL) would not run the enterprise better than the promoters if allowed to run the entire enterprise with restructuring the debt.
Government is likely to consider the proposal for mediation for debt resolution so that negotiation between creditors and defaulting enterprises are exclusively and inclusively determined.
This process is good where defaulting enterprises will have a chance to present their case and plan to make the payment and will also rule out multiple legal regulations. In the Insolvency and Bankruptcy Code (IBC) process, creditors get very little or nothing. Operations creditors like suppliers usually settle the case and collect their dues through an out of the court settlement which is better than getting into the IBC process. They get their dues after payment to the secured creditors.
RBI governor Shaktikanta Das said had recom-mended that the government introduce pre-packaged insolvency schemes for corporates i.e. out of court dispute resolution and settlement.
Ideally, promoters and founders of the alleged insolvent enterprises should be allowed to run the enterprises, with the control of finance being bestowed in the hands of experienced and independent persons having knowledge of the business, and not with resolution professionals.
Conclusion: MSMEs and start-ups enterprises are suffering more. They are becoming extinct and it is the families of the promoters, entrepreneurs and the employees who are getting subjected to severe hardship as a consequence. More importantly, people are becoming risk-averse and thus will prefer to be job-seekers instead of being job creators. For a country like India, this will become a huge problem going forward.
To become a USD 35 trillion economy by 2047, the government needs to take a realistic approach and resolve the issue of short delays and temporary defaults by borrowers through an inclusive and empowering growth for all citizens. Only then will we be able to nurture more entrepreneurs who can create the jobs and wealth that this country needs so dearly now.
Dr. H.P. Kanoria
Editor
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