Self-seeking individuals scuttling intentions of Insolvency and Bankruptcy Code: CEA

Chief Economic Adviser Krishnamurthy Subramanian invokes concept of ‘Dharma’, urges socially optimal behaviour

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.