Economic Survey: Finance Ministry proposes five-point plan to facilitate corporate exits

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Published: February 26, 2016 2:35:26 PM

It has said that “India seems to have a disproportionately large share of inefficient firms with very low productivity and with little exit.

corporates-l-ThinkstockIncreasing transparency and highlighting social costs and benefits of various schemes and entitlements.

The Economic Survey 2015-16 has suggested a five-pronged plan to facilitate exit by corporates. It has said that “India seems to have a disproportionately large share of inefficient firms with very low productivity and with little exit.  This lack of exit generates externalities that hurt the economy.”

 The five-point action plan to facilitate exit includes:

–Promoting competition via private sector entry rather than change of ownership from public to private.

–Direct policy action through better laws like the Insolvency and Bankruptcy Code 2015 will expedite exit. Institutions to be made stronger, but flexible, by empowering bureaucrats and reducing their vulnerability.

–Increase the use of technology to remove persistent distortions by bringing down human discretion and layers of intermediaries.

–Increasing transparency and highlighting social costs and benefits of various schemes and entitlements

–Showcasing exit as an opportunity towards a newer and better tomorrow.

While stating that the Indian economy has moved from ‘socialism with limited entry to “marketism” without exit’, the Economic Survey 2015-16 states that the challenge of facilitation of exit is not restricted to the public sector “but is increasingly being seen in the private sector.”

The survey says that impeded exit has fiscal costs, economic costs and political costs associated with.

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