India, among the world’s fastest growing emerging economies, is likely to maintain the “high growth rate” of 7-8 per cent over the next decade, Finance Minister Arun Jaitley said, emphasising that landmark reforms such as the Insolvency and Bankruptcy Code offer an attractive and conducive environment to foreign investors to the country.
“Unquestionably it has now been established over the last few years that India is a fast growing economy, faster than some of its contemporaries amongst the emerging economies and my own view is that India, over the next decade or so, is likely to maintain this high growth rate of at least 7-8 per cent,” Jaitley said addressing the inaugural address through video conferencing at the ‘Conference on Insolvency and Bankruptcy Code- A New Paradigm for Stressed Assets’ at the Indian Consulate General here.
The conference, attended by Principal Economic Advisor in the Ministry of Finance Sanjeev Sanyal, Insolvency and Bankruptcy Board of India (IBBI) Chairman M S Sahoo and Consul General Sandeep Chakravorty, industry analysts, investors and policy experts, was organized by the Federation of Indian Chambers of Commerce and Industry (FICCI) in partnership with the IBBI and the Consulate General of India in New York.
Jaitley said the seven per cent economic growth rate by Indian standards is now considered to be the “lower end of the moderate growth rate. Our aspiration is to touch and cross that 7 per cent”.
Highlighting the investment opportunities in India through the Insolvency and Bankruptcy Code (IBC) process, the Finance Minister said given the future potential of the Indian economy, the fair manner in which the IBC is now proceeding, “it’s a great opportunity as far as investors are concerned and therefore those seriously thinking about investment in india.
“There can’t be a better opportunity than the present one which is being offered through the IBC process itself. This is the right time and right place to be in india for these kinds of investments.” He noted that about 1200 applications have been filed as far as resolution under the IBC are concerned and about 1000 cases are pending. This means that over the next few months these assets will go in for a bidding process and it’s a great opportunity to come and look at these assets, he said. Jaitley also pointed out that a large number of those who are bidding for the assets are domestic investors but this is a great opportunity in india for investors to come and bid for these assets. “The number of assets that are going for takeover through the IBC process is extremely large. Inevitably seeing the attractiveness of the proposal, I think it is inevitable that foreign investors would have a lot of interest as far as many of these projects are concerned. This also then would be directly related to how we see the Indian economy over the next 1-2 decades,” he said.
Jaitley stressed that even though it has been a little less than two years since the Insolvency and Bankruptcy Code of India became operational, it was anticipated that in the initial stages there will be some teething troubles.
“But I must confess that it’s moved on and it’s effectiveness has proved far better than what I had anticipated. Our experience of the last two years indicate that a large number of cases have resulted in a situation where the lender-borrower relationship in india has now significantly changed,” he said.
Through various stages of the IBC process, including the Committee of Creditors, Jaitley said the government has made sure that it maintains an “arms-length distance” from this process, which is governed by the rules and regulation. “The government has no favourites in the case of any bidding process. It has been demonstrated in all the cases which have happened,” he said. “The entire process has resulted in an early harvest as far as the IBC is concerned. The only downside has been that in some of the cases because of appeals and counter-appeals and litigations the process has got somewhat delayed. But then the Supreme Court has stood up to the occasion,” he noted.
Jaitley also understood that this reform has presented a great opportunity as far as entrepreneurship in India is concerned and a large number of investors have been coming in, showing a lot of interest, then bidding and counter bidding so that they are able to get hold of the companies itself.
“The other unintended consequence of this has been that after the IBC becoming operational, a very large number of potential debtors who fear that they are about to touch or cross the red line after which they will be in the NCLT (National Company Law Tribunal) are now refraining themselves from becoming defaulters. They are borrowing, they are bringing in partners but they are making sure that they don’t cross the red line,” he said.
As a result of this, even without resorting to the IBC process, “the mere danger that you may get into that process itself is resulting in a lot of recoveries for the banks and other creditors,” he added Jaitley expresses satisfaction that the government’s experience with regard to IBC so far has been extremely good and even though it had anticipated many more roadblocks in the initial years of bringing the code, “in my own assessment it has been far smoother than what I had anticipated.
“In the coming months and years, because the initial law itself has been laid down, I expect this process to be much more expeditious than what it has been in the past.”
Source: Livemint, December 5,2018