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The Chakravyuha Challenge Ease to enter barriers to exit

Budget - Dated:- 26-2-2016 - Indian Economy making great strides in removing barriers to entry for firms, talent, and technology but less in relation to exit The Economic Survey 2015-16 presented here today in the Parliament by the Union Finance Minister Shri Arun Jaitley invokes the legend of the Charkravyuha from the Mahabharata describing the ability to enter but not exit, with seriously adverse consequences. The Indian economy has made great strides in removing barriers to entry for firms, t .....

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ge share of inefficient firms with very low productivity and with little exit. This lack of exit generates externalities that hurt the economy. Impeded exit has substantial fiscal, economic, and political costs. Fiscal Costs: Inefficient firms often require government support in the form of explicit subsidies (for example bailouts) or implicit subsidies (tariffs, loans from state banks). Economic Costs: Misallocation of scarce resources and factors of production in unproductive uses including ov .....

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relation to diffused consumer interests. As a result it becomes difficult to phase out schemes and they become instruments of granting favors. For example, 50 percent of Central Sector Schemes that were allocated money in the Union Budget 2015-16 were 25 years old. Thus, extra vigilance is required to ensure that schemes remain relevant and useful over time. Institutions: Weak institutions increase the time and financial costs of exit. For example, with rising non-performing assets, recourse to .....

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