Insolvency and Bankruptcy Code: What's all the noise about?

There have been major debates, whether the implementation of IBC is a boon or a bane

The Government of India implemented the Insolvency and Bankruptcy Code (IBC) to consolidate all laws related to insolvency and bankruptcy and to tackle Non-Performing Assets (NPA)— a problem that has been pulling the Indian economy down for years.

About one year ago, India’s NPA ratio was higher than any other major emerging market (with the exception of Russia), higher even than the peak levels seen in Korea during the East Asian crisis. Sectors such as energy and infrastructure, metals and mining, procurement, construction, and so on, in particular, had taken hits and showed signs of weakness. Making things worse, India’s crème-de-la-crème thought they could walk away from their debts without facing any consequences.

The Code provides an order of priority to distribute assets during liquidation. 

It is unclear why: (i) secured creditors will receive their entire outstanding amount, rather than up to their collateral value, (ii) unsecured creditors have priority over trade creditors, and (iii) government dues will be repaid after unsecured creditors.

Supreme Court upholds Bankruptcy Code, rejects promoters' challenges 

The Supreme Court on Friday upheld the constitutional validity of the Insolvency and Bankruptcy Code (IBC) in its entirety. The IBC law was passed in 2016 to prevent defaulting promoters from regaining control of their companies.

While upholding the law, a bench led by Justice RF Nariman rejected the plea to give operational creditors parity with financial creditors. On related parties, the apex court said that it should mean a person connected with the business.

The order also upheld the Section 29A of the IBC which bars promoters of a company facing insolvency proceedings from bidding for it to regain control.

Success Of IBC, 2016.

the total flow of resources to the commercial sector in India, both bank and non-bank, and domestic and foreign (relatable to the non-food sector), has gone up from a total of Rs 14,530.47 crore in FY17 to Rs 18,469.25 crore in FY18 and to Rs 18,798.20 crore in the first six months of FY19. These figures show that the IBC is largely successful.

According to legal observers, the SC order is a setback for the Essar Group promoters, Ruias, who have offered to clear all dues to regain control of Essar Steel. Otherwise, ArcelorMittal’s bid of `42,000 crore has been approved by the committee of creditors. A final ruling on this matter is pending before the Ahmedabad bench of the National Company Law Tribunal, which is expected to give its order on January 31.

According to statistics, India is ranked 103 in the World Bank’s rankings of how nations handle insolvencies. Before the introduction of IBC, it took companies about four to five years to dissolve its operations; the number has dropped drastically to a year. This has not only increased the ease of doing business but also imbibed a stronger sense of trust in lenders and investors.

India’s Economy is on the higher side compared to China. As per IMF Estimates, India Growth Rate Would be 7.5 & 7.7 for 2019 and 2020 respectively.

Read More at : https://www.viharastudyhall.com/post/india-to-be-top-emerging-economy-in-2019-2020

There have been major debates, whether the implementation of IBC is a boon or a bane. Or is it just a great move with teething problems. Historically, the entire process of insolvency and liquidation has always been in the hands of the shareholders and debt holders. Generally, by the time the entire process was over, the assets were eroded with very little left for distribution.

All in all, the IBC seems to be in its elementary stage, backed by a strong structure and framework. The government is continuously evolving and bettering the provisions of the code; furthermore, the Supreme Court (SC) has also amended it multiple times already.

The general belief is that it will certainly enable banks to take early legal steps. The aim of the IBC is to develop a proper insolvency resolution process, which focuses on resolution and not become a recovery mechanism. Now, it seems to be a work in progress, with better future prospects if it overcomes its present obstacles, plugs gaps and tackles important issues.

The Insolvency and Bankruptcy Code is

a comprehensive and systemic reform, which will give a quantum leap to the functioning of the credit market. It would take India from among relatively weak insolvency regimes to becoming one of the world’s best insolvency regimes. It lays the foundations for the development of the corporate bond market, which would finance the infrastructure projects of the future. The passing of this Code and implementation of the same will give a big boost to ease of doing business in India.

Reference: Forbes India, Finance Express, ET.

#Finance #Economy #Yojana #2019 #prelims #upsc #tnpsc #Group1 #Group2Mains

#Budget #IBC #SupremeCourt #Essar

Support our Blog by subscribing to Vihara here. We welcome your comments at aspirantsabode@viharastudyhall.com

Black, dream, rollback: How Budgets got their names

Black, dream, rollback: How Budgets got their names

Every Budget has a personality. It could try to please all, punish a particular section, present a radical future vision, or disappoint everyone. The Budgets that stand out for their unique aspects get tags that describe them succinctly. Black Budget, Rollback Budget and Dream Budget are some of the Budgets that are remembered for their uniqueness. 

Black Budget 

Yes, it was grim enough to deserve this tag. Yashwantrao B. Chavan, the finance minister in the Indira Gandhi government, presented this Budget in 1973. The darkest part of his Budget was a deficit of Rs 550 crore. There was another reason it could have attracted the 'black' tag : it proposed to nationalise the coal mines. This was to allow uninterrupted supply of coal in line with the growing demand for coal in industries like power, cement and steel. However, the Budget hit coal production in the long run and India had to depend on coal imports. 

Rollback Budget

It was the infamous Budget 2002-03 by Yashwant Sinha, finance minister in then NDA government, that came to be called the Rollback Budget due to Sinha buckling under pressure of the opposition parties and within his own to roll back several proposals. Sinha had raised PDS prices of LPG, kerosene and sugar, cut interest rates for small savings, reduced subsidy on fertilisers and income-tax rebate under Section 88. Due to populist pressures, Sinha had to roll back several of his proposals. However, he was able to rescue some key structural changes introduced in the Budget such as taxing dividend incomes in the hands of investors and linking small saving rates to market-determined rates of interest. 

Dream Budget

In 1997, P Chidamabram — then a member of Tamil Manila Congress and the finance minister in the HD Deve Gowda government — presented what came to be known as the Dream Budget. Chidambaram heavily slashed income and corporate taxes with an eye on increasing compliance. The economic theory of Laffer Curve sets up a relationship between rates of taxation and the government revenue. A general interpretation means raising taxes cannot be a surefire way to raise revenues. Chidambaram's cut in corporate taxes was in the hope that it would increase tax compliance as high rates had proved to be discouraging. Chidambaram abolished the surcharges on corporate tax and reduced the tax rate to 35 per cent. He also cut the peak rate of customs duty from 50 per cent to 40 per cent.

What is the Laffer Curve?

The Laffer Curve is a theory developed by supply-side economist Arthur Laffer to show the relationship between tax rates and the amount of tax revenue collected by governments. The curve is used to illustrate Laffer’s main premise that the more an activity — such as production — is taxed, the less of it is generated. Likewise, the less an activity is taxed, the more of it is generated.

Laffer- Curve

The Deve Gowda government fell a month later. Though the immediate impact of Chidambaram's revolutionary move could not be gauged as the Asian crisis besieged the economies in the region, his tax cuts did have a positive impact on the economy in the long run. In fact, his 1997 Budget was seen in continuation of the reforms and liberalisation ushered in by Manmohan Singh during the PV Narsimha Rao government in 1991 

#Finance #Economy #Yojana #2019 #Atal #GokulMission #Schemes #prelims #upsc #tnpsc #Group1 #Group2Mains #LafferCurve #Budget #Economictimes

Support our Blog by subscribing to Vihara here. We welcome your comments at aspirantsabode@viharastudyhall.com

Yojana - January 2019

Economy - Prelims Topics

MS Swaminathan- National Commission on Farmers (NCF)

NCF Commission made several goals for ensuring sustainable agriculture and food security and submitted the report in 2006. During 2014-19, several decisions have been taken to fulfil the objectives mentioned in the report.

Some of them are: Designating the Ministry of Agriculture as Ministry of Agriculture and Farmers’ Welfare Issuing Soil Health Cards to all farmers to promote the adoption of balanced nutrition.

Pradhan Mantri Krishi Sinchayee Yojana allocating budgetary and non-budgetary resources for micro irrigation

Creation of Gramin Agriculture Markets provide scope of direct sales to consumer (retail and bulk)

Introduction of Agricultural Produce and Livestock Marketing Act 2017 and Agricultural Produce and Livestock Contract Farming Services Act 2018 supported by Negotiable Warehouse Receipt system for increased institutional credit to farm sector.

From Kharif 2018 onwards, MSP of notified crops would be minimum of 150% of the cost of production.

First International Congress took place in New Delhi in 2016

Rahstriya Gokul Mission contributing in conservation and sustainable use of indigenous breed of cattle

Temple Tree

Recognising the critical role of mangroves in the conservation of coastal ecosystem that “Chidamabaram Temple” chose mangrove plant (Excoecaria agallocha) as the “Temple Tree” A “Charter for Mangroves” was prepared and with the help of Government of Japan and IITO, an International Society for Mangrove Ecosystem(ISME) was formed in 1990.

ElectroNic SUbmission of REturns- ENSURE

A portal ENSURE- National Livestock Mission-EDEG developed by NABARD and operated under the Department of Animal Husbandry, Dairying & Fisheries was launched for Direct Benefit Transfer.

“ENSURE” (https://ensure.nabard.org) so that the information related to beneficiary and processing of application can be made readily available.

ENSURE Portal for DBT India’s Heaviest Communication Satellite GSAT- 11 Launched

GSAT-11 is India's heaviest satellite which weighs 5854 kg.

It was launched on December 5, 2018.

It will boost the broadband connectivity to the rural and inaccessible Gram Panchayats in the country coming under Bharat Net Project, a part of Digital India Programme.

Bharat Net Project aims to enhance the public welfare schemes like e-banking, e-health and e-governance.NANO Mission

The Government of India, in May 2007, has approved the launch of a Mission on Nano Science and Technology (Nano Mission) with an allocation of Rs. 1000 crore for 5 years.

The Department of Science and Technology is the nodal agency for implementing the Nano Mission.

Atal Innovation Mission

Set up by: NITI Ayog Includes: Self-Employment and Talent Utilization (SETU)

Focus to create and promote world class innovation and entrepreneurial ecosystem Atal Tinkering Laboratories under the Atal Innovation Mission aims to create innovators and the Atal Incubation Centres would provide support to these innovations to scale up to market and helps to create enterprises around these innovations.

AIM intends to support the establishment of new incubation centres called Atal Incubation Centres (AICs) that would nurture innovative start-up businesses in their pursuit to become scalable and sustainable enterprises. AIM will provide a grant-in-aid of upto Rs. 10 crore for a maximum period of 5 years to cover the capital and operational expenditures to establish the AIC. Atal Innovation Mission AIM has partnered with Ministries of Housing and Urban Affairs, Road Transport and Highways, Agriculture and Family Welfare, Drinking Water & Sanitation and Railway Board. Under this challenge, AIM will invite prospective innovators, MSMEs and start-ups to design market-ready products using cutting edge technologies or prototypes across pre-identified 17 focus areas.

National Challenge for Youth-“Ideate for India- Creative Solutions using Technology”

Ministery for Electronics & IT, Law & Justice launched a National Challenge for Youths, “Ideate for India - Creative Solutions using Technology”, at New Delhi in December 2018.

The aim of this National Challenge is to give school students across the country a platform and opportunity to become solution creators for the problems they see around them and their communities.

The National Challenge is open to students of classes 6 - 12 all across the country

U K Sinha Committee

RBI has set up an expert committee under former Sebi chairman U K Sinha to suggest long-term solutions for the economic and financial sustainability of the MSME sector.

They will identify the ‘structural problems’ affecting the growth of the small-scale sector.

The eight-member committee will also examine the factors impacting credit flow to MSMEs and propose measures for leveraging technology in accelerating the growth of the sector.

Such a high-level committee has been assigned to examine MSMEs because these enterprises contribute about 40% to India’s export and 45% in the manufacturing sector.The report will be submitted by the end of June 2019.

Yojana January 2019

Innovation Oriented Initiatives in Higher Education

Higher Education Department of the Ministry of Human Resource and Development has launched several new and innovative programs to make higher education persuasive and effective.

MIC and ARIIA MHRD Innovation Cell (MIC) and Atal Ranking of Institutions on Innovation Achievements (ARIIA) are launched to foster the culture of innovation in all higher education institutes across the countries.

It aims at creating 1000 Institutes Innovation Centres (IIC) GIAN: Global Initiative for Academic Network It aims to connect the Indian academia with the international pool of scientists and entrepreneurs by inviting them to teach and participate in research in Indian HEIs.

Innovation Oriented Initiatives in Higher Education

SPARC: Scheme for Academic Research and Promotion by Collaboration Under this, 600 joint research proposals will be funded for 2 years to facilitate strong international research collaboration with leading foreign universities.

Digital India e-learning It is a virtual classroom initiative to enable youth outside the campus to access best quality teachers and courses without paying hefty fees.

Uchhatar Avishkar Yojana (UAY)

It promotes industry sponsored outcome-oriented research project with an outlay of Rs. 475 cr. For 2 years starting from 2016-17 Funding Pattern: MHRD-50%, 25% by Industry and 25% Host institute.

Research and Innovation Under this initiative, 20 new Design Innovation Centres(DIC), one Open Design School and a National Design Innovation Network are to be setup

Innovation Oriented Initiatives in Higher Education

IMPRINT: Impacting Research Innovation and Technology It is the first of its kind MHRD supported Pan-IIT + IISc joint initiative to address the major science and engineering challenges that India must address and champion to enable, empower and embolden the the nation for inclusive growth and self-reliance.

Pradhan Mantri Gramin Digital Saksharta Abhiyan (PMGDISHA) programme: Another six crore adults are to be made digitally literate in the next two years. Rural BPO scheme is another initiative to take the IT industry to smaller towns and cities. More than 19,000 BPO seats have been allocated in 64 towns across 23 states/Union Territories, including four in the Northeast. This will not only uplift the employment ecosystem in small towns but will also help in reducing migration to cities.

Digital Payments: India’s unique innovations in the field of digital payments such as BHIM, UPI (Unified Payments Interface), USSD (Unstructured Supplementary Service Data) and Aadhaar Pay have offered affordable digital payment solutions to people. Steep growth has been registered in digital transactions in the last six months.

UPI/BHIM transactions have increased to 3.31 lakh transactions per day from near zero. Digital wallet transactions have doubled, and debit card payments (Rupay) have increased four-fold. Hundreds of villages and townships across the country have become completely digital payment enabled in a very short span of time. The government is targeting 2,500 crore digital payment transactions this year.

According to a Boston Consultancy Group-Google study, India is poised to become a 500 billion-dollar digital payments market by 2020.

Adding More Meaning to Money

Pradhan Mantri Jan-Dhan Yojana Launched on: August 28, 2014 Aim: access to financial services to the excluded sections Target: to cover 6 crore uncovered rural and 1.5 crore urban household.

Recent Updates:

Overdraft Limit extended from 5000 to 10,000 INR

No conditions for overdraft upto 2,000

Age limit for overdraft: 18-65

Accidental insurance cover for new RuPay card holders raised to 2 lakh.

Pradhan Mantri Suraksha Bima Yojana

Launched on: May 9, 2015

Coverage of Rs. 2 lakh for death due to accident Coverage of Rs. 1 lakh for permanent disability Age group: 18-70 years • Premium: Rs. 12 per year

Pradhan Mantri Jeevan Jyoti Yojana

Launched on: May 9, 2015

Coverage of Rs. 2 lakh for death due any reason

Age group: 18-50 years With effect from September 1, 2018, Ministry of Finance has revised the premium payment structure on quarterly basis depending on the request date of the Account holder into the scheme

The revised structure is as follows:

June, July and August – Annual Premium of Rs 330 is payable

September, October and November – Premium of Rs 258 is payable

December, January and February – Premium of Rs 172 is payable

March, April and May – Premium of Rs 86 is payable.

Atal Pension Yojana

Launched on: May 9, 2015

The Central Government would also co-contribute 50% of the total contribution or Rs. 1,000 (US$14) per annum, whichever is lower, to each eligible subscriber account, for a period of 5 years.

The minimum age of joining APY is 18 years and maximum age is 40 years.

The age of exit and the start of pension would be 60 years. Therefore, a minimum period of contribution by the subscriber under APY would be 20 years or more.

Monthly contribution ranges between 210 to 1454 Rs.

#Finance #Economy #Yojana #2019 #Atal #GokulMission #Schemes #prelims #upsc #tnpsc #Group1 #Group2Mains

Support our Blog by subscribing to Vihara here. We welcome your comments at aspirantsabode@viharastudyhall.com