New Delhi [India], December 27 (ANI): India must become comfortable with insolvency and bankruptcy if it is to build a dynamic, innovative, and risk-taking economy, Economic Advisory Council to the Prime Minister (EAC-PM) member Sanjeev Sanyal said on Friday, while also cautioning against the growing culture of untargeted welfare “freebies” and unsustainable pension commitments.
In an interview with ANI, Sanyal said a healthy economic system requires “continuous churn,” where inefficient or outdated companies are allowed to shut down and new enterprises emerge in their place. He stressed that bankruptcy should not be viewed as a moral failure but as a natural outcome in a society that encourages risk-taking.
“Old companies have to shut down, and new ones have to take their place. That constant change is necessary for long-term strength,” Sanyal said, adding that allowing large firms to fail is sometimes unavoidable.
Recalling the banking stress of 2017, Sanyal noted that the government’s decision to allow several major companies to go bankrupt helped clean up the system and ultimately strengthened the corporate sector. “This did not make the corporate sector weaker. In fact, it came back much stronger after the cleanup,” he said.
Using the airline industry as an example, he said the collapse of Jet Airways created space for other carriers to expand, reinforcing the need to allow failing companies to exit the market. Firms that fail to follow rules or meet standards, he added, should be allowed to shut down.
Sanyal also said success should not be viewed with resentment and that companies performing well should not be penalised. However, he underlined the importance of regulatory oversight where large firms misuse power or distort competition.
On financial markets, Sanyal highlighted India’s growing strength, stating that Mumbai has now become a more important centre for raising capital than London or Singapore. He said innovation is largely driven by risk-taking capital, such as equity and venture funding, and expressed hope that the top 20 companies in India’s stock market would be completely different over the next 25 years.
Comparing global trends, he said countries like the United States and China remain economically strong because their leading companies change frequently, whereas Europe’s largest firms have remained largely unchanged for nearly three decades, resulting in stagnation.
Turning to welfare policy, Sanyal drew a sharp distinction between essential safety nets and politically driven freebies. While he said a safety net is necessary in any risk-taking society, he expressed being “very, very uncomfortable with freebies.”
“In a risk-taking culture, failure is inevitable. Some people will fall off at the edges, and society must provide safety nets for them,” he said, adding that he supports targeted assistance for poorer sections to help them climb the economic ladder.
However, he criticised universal and non-targeted subsidies, citing free public transport for women as an example. “This is not targeted. A poor man is as deserving of support on public transport as a woman. These are clear cases of freebies rather than well-designed welfare,” he said, arguing that benefits should be linked to economic need rather than broad identity categories.
Sanyal also raised serious concerns over the reintroduction of old-style pension schemes for civil servants, warning that such commitments could create massive fiscal liabilities for future generations. “We are effectively creating liabilities for the next generation,” he said, noting that India’s working-age population is expected to begin shrinking in about 25 years.
Explaining the risks, he said that most pension systems operate on a pay-as-you-go basis, meaning a shrinking workforce would be burdened with supporting a growing retired population. “You will be loading that shrinking working population with the pensions of the previous generation, and they will not be able to pay it,” he warned.
Drawing comparisons with Europe, Sanyal pointed to ageing populations that have forced retirement ages toward 70 or even 75. “France today has more people receiving pensions than people working,” he said, cautioning that similar pressures could emerge in India if fiscal realities are ignored.
He also advised young civil servants not to assume long-term pension security under generous legacy schemes. “Over your working life, you will be taxed for 35 years. But when you reach the front of the queue, there may be no money left to pay you. The arithmetic simply doesn’t work,” Sanyal said. (ANI)
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