he Indian economy is at a delicate stage. While it is true that India is in the global spotlight as the fastest-growing major economy, and our every move is keenly followed and analysed by global investors, it is also right that mounting levels of stressed assets have almost choked the banks’ ability to lend, thwarting the takeoff of new projects. And yet, India Inc is being painted in a poor light and blamed entirely for the NPA mess. Our image is in tatters. The damage is irreparable. No doubt, some sectors of industry are over-leveraged and those like iron and steel, textiles, energy, infrastructure and civil aviation today make up much of the banks’ stressed-asset portfolios. But are all defaulters really wilful ones? At most, a few. What has started is, to put it bluntly, witch-hunting. Trial by media of high-profile cases has created a negative public opinion about India Inc. It is unfair to paint all with the same brush. Thousands of hard-working businessmen are victims of tough economic conditions, which affect other countries too, many of them in recession.
This needs to be said. For any hard-working person, his reputation is everything. Who will knowingly do something to destroy it? As it is, being an entrepreneur in India is a challenging task. On top of that, if a stigma gets attached to it for no fault of theirs, who would dare to tread that path?
And, mind you, India needs more entrepreneurs, with almost a million people joining the workforce every year. If we don’t groom the job-creators (entrepreneurs), we would have a bigger problem on our hands in the future. Thatís why we must behave more maturely when confronted with the NPA mess and not make haste in forming opinions. Yes, wilful defaulters must be named, shamed and penalised, but those who are genuinely victims of factors beyond their control should be spared.
Take the thousands of MSMEs (micro, small and medium enterprises) working as contractors in infrastructure projects. They take loans with whatever little capital they have for undertaking project work. When the government delays clearing the payments, they are the ones who suffer the most as they end up failing to service their debts. Then they get labelled as defaulters and are treated almost like untouchables are treated in the society. Is this fair?
Not that India Inc is all in the clear. Take roads. Promoters are at fault for overestimating traffic projections in their project-cost calculations. The government is at fault for inordinate delays in clearances, often prompting promoters to gold-plate project costs in anticipation of time overruns, adding to total cost. Bankers are at fault for not doing due diligence of project costs before approving loans. Then, when one or more of the variables don’t shape up as projected, the projects get stuck and, lo, there’s a problem on all stakeholders’ hands. So, who is at fault? Is it only the promoters, only the government or only the bankers?
There should be a constructive dialogue among stakeholders on how to get rid of the problem with the least damage. When we see the government and regulatory bodies intervene to clear projects that are stuck, or come up with sector-specific policy changes, schemes like strategic debt restructuring and re-financing, or the Bankruptcy Code to enable management change for reviving projects, it gives us hope. An abandoned project can only lead to value erosion and job losses, vitiating the social fabric. So let’s solve the problem, not play a blame game.
Indeed, India Inc needs government support to bounce back. Let us identify the wilful defaulters and give them exemplary punishment, but, at the same time, let us work together to give all the support needed to those who are victims of the system. This will be in the best interest of the economy’s long-term growth. It will also send out a very positive signal to the world about government-industry synergy in India. It will boost domestic entrepreneurship as well as encourage more foreign players to invest in India.
(The writer is president, Assocham)
Slide Show
The Insolvency and Bankruptcy Bill passed in Parliament this month aims at empowering entrepreneurs and lenders to move on financially when ventures fail, instead of being stuck with past decisions.
