The economic survey talks about “Chakravyuha” by which it means

1. Difficult entry of firm in market
2. Difficult exit of firm from market

Select the incorrect answer using the codes given below:
a) 1 only
b) 2 only
c) Both 1 and 2
d) None of the above

Ans- a*

Explanation-  It is the difficulty of exit of firm from the market.

Chakarvyuh is the name of a military strategy described in Hindu Epic Mahabharatha. During the great Mahabharatha war Kauravas’ army general created a chakarvyuh to trap elder Pandava Yuddhisthira. This if successful would have resulted into the defeat of Pnadavas. Only Arjun knew how to break this by entering into it and exiting out of it. Unfortunately when the war was going on and Kaurav’s army proceeded to trap Yuddhisthira, they were stopped and challenged by Arjun’s son Abhimanyu.  Abhimanyu knew only how to enter into it but not how to exit. As a result he went inside this but could not come out and died fighting valiantly. This phenomenon is now commonly in India reffered to as getting trapped in chakarvyuh when you can’t escape out from any situation.

Indian firms due to the existing laws , rules and regulations face the big problem when businesses go bust. The current laws make it almost impossible for firms to close business. This is often  a disincentive for strating a business based on innovative and risky idea.

Economic survey address the situation by 5 ways- first,  by promoting competition via private sector entry rather than change of ownership from public to private. Secondly, direct policy action through better laws like the Insolvency and Bankruptcy Code 2015 will expedite exit. Thirdly, use of technology to layers of intermediaries. The fourth is increasing transparency and highlighting social costs. Finally, showcasing exit as an opportunity.