Economic Survey 2020 has given a thumbs up to the Modi government’s stressed asset resolution scheme Insolvency and Bankruptcy Code (IBC). The survey underscores that the IBC has improved the resolution process in India as compared to the earlier measures. The IBC proceedings take 340 days on average compared to 4.3 years earlier and resulted in the recovery of 42.5% amount involved compared to 14.5% under SARFAESI Act, the survey authored by Chief Economic Adviser K V Subramanian said.
The Insolvency and Bankruptcy Code was introduced by the Modi government in the year 2016. The code was brought in order to resolve the bankrupt and insolvent firms and realise the maximum possible value of their stressed assets for its creditors. The resolution is also supposed to get completed in a time-bound manner. National Company Law Tribunal (NCLT) was mandated to initiate the proceedings against the defaulter group and resolve the case in the time limit of 270 days.
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Hailed as one of the big-bang reforms of the Modi government, the code has a fair share of its criticism as well. The number of successful closures under the IBC has also been a dampener with only 1,045 cases getting closed out of 2,542 cases admitted under the IBC till September 2019, according to government data. However, in comparison to pre-IBC insolvency proceedings, the code promises hope. The average time taken to close the case as highlighted in the Economic Survey has also come down drastically. Successful resolutions under the IBC code include Bhushan Steel, Monnet Ispat, Essar Steel, Alok Industries, Jyoti Structures and Bhushan Power and Steel among others.
The Economic Survey was presented in the parliament by Union Finance Minister Nirmala Sitharaman on Friday. The survey has pegged the economic growth of the country at 6-6.5 per cent for the fiscal year 2020-21.