Insolvency Overhaul Key to India's Economic Growth

The Economic Survey highlights the importance of an improved insolvency framework for achieving sustained economic growth. Key recommendations include higher costs to deter frivolous filings and enhancing operational efficiencies under the Insolvency and Bankruptcy Code. The focus is on faster resolution and better asset recovery, especially benefiting MSMEs.

The Economic Survey underscores the necessity of enhancing the insolvency framework to ensure sustained economic growth, targeting a 7-8 percent increase over the next decade. It advocates for imposing higher costs to discourage frivolous filings during resolution processes.

Amidst ongoing delays in insolvency resolutions, the Survey, presented in Parliament, calls for reforms aimed at boosting operational efficiency within the Insolvency and Bankruptcy Code (IBC) framework, effective since 2016. It emphasizes the Code's transformative impact on India's banking sector and the debtor-creditor dynamics.

Creditors have recovered approximately Rs 3.6 lakh crore through resolved stressed assets, with the Code deterring debtors from late-stage distress resolution. As of March 2024, many applications for insolvency proceedings were withdrawn pre-admission, highlighting early-stage distress resolution successes.

(With inputs from agencies.)