Steps to revival

That’s a big positive as the Court has made it clear that the decision of the Committee of Creditors or lenders will be final and binding, which should help faster resolution of more such cases.

Last weekend, the Supreme Court approved the resolution plan of ArcelorMittal to pay Rs 42,000 crore to local financial creditors and take over Essar Steel after setting aside a ruling of the National Company Law Appellate Tribunal, marking a closure to an important case under the Insolvency and Bankruptcy Code. That’s a big positive as the Court has made it clear that the decision of the Committee of Creditors or lenders will be final and binding, which should help faster resolution of more such cases. It will also mean the entry of the world’s largest steelmaker into one of the biggest markets having agreed to infuse Rs 8,000 crore into the bankrupt company which it is acquiring. But the bigger challenge lies ahead. It concerns one of the most competitive sectors in India — telecom — with a Supreme Court ruling on dues in adjusted gross revenue hitting two major players, Vodafone Idea and Bharti Airtel, leading to the foreign telecom company reporting the highest ever quarterly loss by an Indian corporate of Rs 50,921 crore a week ago, and Bharti Rs 23,045 crore.

The problem is not restricted to just the telecom sector. The latest development is bound to trigger fresh concerns for Indian banks, which had an exposure of Rs 1.15 lakh crore to the telecom sector at the end of September this year. These lenders will be further weighed down because of extra provisions and the need for capital if the issue is not swiftly sorted out by the government. Vodafone, which had indicated its inability to invest more, is no ordinary firm. It is one of India’s largest FDI investors and a global telecom player. It has taken a lot of effort, including by the NDA government, to undo the damage caused by the decision of the UPA government to tax the company retrospectively over seven years ago.

What is worrying is the reluctance or failure of the government and policymakers to recognise the inter-connection — the knock-on impact of such decisions on other sectors such as banking. In such a scenario, a good decision, like the reduction of corporate tax, which makes India one of the most competitive tax regimes, will be neutralised at a time when the country is hoping to attract global supply chains shifting from China. The mood among investors is more sombre, compared to the start of this fiscal, especially with indications that growth could well be sub 5 per cent and with little clarity on a global economic recovery next year too. Retaining the trust of investors — be it local wealth creators or foreign entities — is an ongoing process, which is why the government should move quickly on the strategic sell-off of BPCL and Air India, address sectoral issues and further strengthen India’s dominant state-owned banks to revive lending.