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Bankruptcy code, black money steps stand out: Subhashis Gangopadhyay

Weak bankruptcy regimes lock up valuable capital with inefficient managers and allow them to strip the assets of the company they run for their personal benefit

Business Standard 

Subhashis Gangopadhyay

There are two things that stand out in this . First, the finance minister committed to implementing a Comprehensive Bankruptcy Code that will follow global standards. This is something that Manmohan Singh initiated in 1991, but like so many things with him, good ideas never got closure and, hence, were never implemented.

Weak bankruptcy regimes lock up valuable capital with inefficient managers and allow them to strip the assets of the company they run for their personal benefit. It also has a political fall-out. Labour will correctly oppose a hire-and-fire labour policy when owners of bankrupt firms continue in management, with generous capital and interest subsidies. Labour loses trust in a system where they are retrenched for business decisions by managers going wrong, while the same managers do not suffer the consequences of their bad decisions..

Read our full coverage on Union Budget The other surprising thing in the is the set of strict laws with penalties for black money stashed abroad. Of course, strict laws do not translate into quick and efficient enforcement. Also important is the commitment to move towards a cashless digital in both the provision of subsidies and skill vouchers, as well as enabling the use of cards for private transactions.

Subhashis Gangopadhyay
Research Director, IDF; Director, School of Humanities and Social Sciences, Shiv Nadar University

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First Published: Sun, March 01 2015. 00:22 IST