Indicating that some stakeholders’ actions were scuttling the intended outcomes of the Insolvency and Bankruptcy Code (IBC), Chief Economic Adviser Krishnamurthy Subramanian invoked the concept of ‘Dharma’ on Friday to urge Indian industry to stop being ‘practical’ and strive to be ‘ideal’, instead.
The IBC regime, he said, had helped India emerge from a ‘feudalistic system’ where a corporate debtor felt it was his ‘divine right’ to retain control, and shifted the focus to a ‘Creditor in Control’ regime.
Citing India’s ancient literature, including the Bhagavad Gita, Mr. Subramanian said problems arise when there is a wedge between socially optimal behaviour and conduct that is individually optimal for an economic agent.
“I think, in the case of IBC, you can clearly see that there are some actions that every stakeholder can take, which would be optimal for the entire IBC system as a whole; visibly what every entity is doing that is basically privately optimal for them. And this wedge is what’s actually leading to the preservation of this Nash equilibrium, where we are stuck where we are,” he said.
“When you think about the concept of Dharma from an economic angle, you start realising why it was such a powerful idea… (it means) there is a much bigger goal… And in some sense, if you think from an economist’s perspective, Dharma is actually this concept of aspiring for what is socially optimal,” he said at a CII meet on five years of the IBC, urging industry captains to think beyond the “I, Me and Myself” perspective.
Stating that some listeners may just think of him as a ‘young guy just talking impractical stuff’, the CEA said that he ‘thoroughly disliked’ the word ‘practical’ as it often becomes an alibi for compromises.
“In contrast, the word that really inspires me a lot is ‘ideal’. So why don’t we actually think about disbanding that word ‘practical’, and instead actually stick on to the word ‘ideal’. And I think just that simple thing you can do, can do us a world of good,” he asserted, adding that detailed suggestions to fix the IBC may not suffice ‘unless this macro perspective of Dharma’ is taken into account and acted upon.
“I am absolutely sure that progress will happen going forward. And the next time we’re actually talking, maybe at the 10th anniversary of IBC, we will all be congratulating ourselves at the wonderful progress that we’ve made in the next five years,” he concluded.
