Indian economic strategy in the new globalisation

by Vijay Kelkar and Ajay Shah.

A great global order has run astray. For over half a century, the world operated under an open system of movement of goods, services, capital and people, a system that was built by the post-war Western powers. India, for all its post-independence suspicions of the market and the world, was a big beneficiary of this order. From 1991 to 2011, India’s GDP growth quadrupled, not solely from an act of internal genius, but on the back of a global system that allowed Indian goods and services to find markets, that established the flow of capital, technology and business knowledge into India. Global companies brought new levels of productivity and knowledge into India, while foreign financial firms gave capital to India’s high-tech sector, and foreign buyers purchased Indian services exports that are at a run rate of $400 billion a year. Foreign companies provided the foundational technologies -- the CPUs, operating systems, the Internet and all the systems software -- on which India's knowledge economy was built. The champions for Indian openness, such as Jagdish Bhagwati and Ashok Desai, were proved right in abundance.

We must first confront a difficult truth: India's growth from 1991 to 2011 was partly built on a global system's benign neglect, a diplomatic dividend that has now been fully spent. In those years, India did not always play by the rules. We, as a nation, maintained a plethora of tariff and non-tariff barriers, all the while taking for granted the access granted to us by a world that was, for the most part, exceptionally indulgent. This indulgence stemmed from the West's perception of India as a decent, democratic country that would, in time, graduate to being a valuable successful country that would be a good citizen in the world economy. The West saw the idea of India; they felt India was a nation on a path to prosperity that was worth supporting, even if it did not always reciprocate with fair play when it came to economic nationalism. This benign neglect is an important element of India's growth story in the great years of 1991-2011, an element that is often neglected.

That era is now over.

The year 2016 was clear and sombre turning point. Donald Trump's rise to power and his subsequent policies of "America First" signalled the end of the post-war consensus on globalisation. At about the same time, China became estranged from the world due to its sustained use of unfair trade practices, going beyond tariffs to a dogged pursuit of economic nationalism where the ability of foreigners to operate in China is undermined. What we are witnessing is not a temporary hiccup, but a major change in the world economy. This is a new Globalisation, where the two poles of the old order (the US and China) are either hostile to the system or using it to their own unfair advantage.

So far, the US economy has endured the Trump shocks. We should not, however, be complacent about this good fortune. There are concerns about what will happen in the US economy on four fronts: local inflation which would then require tough monetary policy, loss of export competitiveness, adverse impact upon investment through increased uncertainty and punishment from the financial markets (Shah, 2025). Just as there are `gains from trade' with GDP growth induced by liberalisation, economic laws work in reverse also: Deglobalisation will harm growth, and the two epicentres of this problem are China and the US. All this paints a more sombre outlook for the world economy. A US with policy capabilities akin to those in an emerging market will be viewed with greater hesitation by global investors, inducing new stresses in financial markets. This is bad for the significantly outward-oriented economy that modern India has become: we need a successful prosperous world economy in order to sustain our rise.

For us in India, this is not a crisis moment on the scale of 1991. We are not facing an immediate balance of payments collapse. But it is an inflection point of equal, if not greater, long-term significance. The old strategies will no longer work. We cannot continue to rely on the indulgence of an open world that supports the rise of India. The path to India's ascent has just become considerably harder, and a commensurate, well-thought-out response is required.

The task of economic thinkers in India today is to strategise that response. Many good writings have emerged on this: Chinoy, 2025; Das, 2025; Ninan, 2025; Rao, 2025; Sengupta, 2025; Sharma, 2025. In this article we draw on all these and synthesise a full picture.

The New Core: Embracing the OECD (ex-US)

The first step in this new world is a pragmatic reassessment of our trade partnerships. If the US and China are now problematic partners, where does India’s future lie? The answer is to pivot aggressively and strategically towards a new core: the set of countries we can term the "OECD ex-US." This group includes the United Kingdom, the European Union, Japan, Canada, Australia, South Korea and many others. Adjacent to this are sophisticated countries such as Taiwan which are not members of the OECD. These are advanced, rules-based economies that remain committed, for the most part, to an open global system. While there are blemishes -- such as the agriculture policies of the EU -- by and large this remains the the sensible and stable core of globalisation today.

It is worth prioritising engagement with them as (a) They have a high level of GDP and (b) Their democratic and pro-globalisation policy frameworks are grounded in the Second Globalisation. Advanced mature democracies operate as institutions; policy movements are not personalised into the whim of a leader; when an agreement is made, it will stick for a long time, which is the time horizon required for private firms to commensurately respond.

We in India need to push on two approaches with these countries.

First, we should work with these countries to construct a new system of globalisation, where a variety of the unfair practices that were tolerated under the GATT or WTO are blocked [EiE Ep96 Is globalisation doomed?] That would be the best response. India has the opportunity to be in the founding group of such a new system. Once this is up and running between a core of important countries, such a system can be presented as an open system available to all countries, should they commit to deep globalisation on a defined set of conditions. The Trans Pacific Partnership ("TPP") -- which morphed into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) with the 11 countries going ahead without the US -- and the EU are examples of modern multilateral deep trade agreements.

Alongside this, we should make it a top priority to seek a new style of Free Trade Agreements (FTAs) or Comprehensive Economic Cooperation Agreements (CECAs) with every country in this bloc. The term `Deep Trade Agreements' (DTAs) vividly suggests the nature of bilateral trade agreement that is now desirable. The recent Indo-UK FTA is a step in the right direction. But it must be seen as the beginning, not the end. A DTA is not just about reducing tariffs; it is about harmonizing regulations, setting common standards, and creating a predictable legal and business environment that supports free movement of goods, services and capital. Such agreements would allow Indian firms to integrate into advanced global supply chains, gaining access to high-quality technology, capital, and markets.

This strategy demands an Indian retreat from the traditional protectionist approach. Our long-held reliance on high tariffs and a Byzantine web of non-trade barriers, a long list of redlines that subverted meaningful trade deals, is no longer viable. The benign indulgence we enjoyed in the past is gone. Our traditional ways, in a world of rising trade tensions, will be met with a reciprocal, and likely unpleasant, response. The United States is going through the throes of a great upsurge in populism; we cannot afford to provoke a turn towards aggressive economic nationalism, and a rejection of the global trading system, from the rest of the advanced economies. The message must be clear: India is no longer an aspiring economy seeking special treatment, but a serious global player willing to offer an equal, level playing field, and engage in deep globalisation.

This idea is not unique to us. Sensible policy thinkers the world over are looking at the wreckage of the post-Trump trade environment, and thinking on similar lines (Froman 2025, Hinz et. al. 2025).

Such deep engagement would make many new kinds of economic activity possible, which are presently not undertaken:

• Consider the German automotive industry under conditions of a DTA with the EU. Indian firms could then become part of the BMW or Mercedes-Benz supply chain, not just for low end parts, but for high tech components and software of the future automobile. This would require harmonising standards and IP protections.
• Consider the Japanese electronics or South Korean shipbuilding industries. A DTA with these countries could create conditions for them to see India as a China+1 partner (or really, OECD(ex-US)+1) for their advanced manufacturing.
• There are remarkable developments in defence R&D and manufacturing currently emerging, in the coalition of Poland and South Korea. Under conditions of deep integration with these countries, there is an opportunity for India to be a manufacturing platform for this joint work, harnessing Indian skills and geographical remoteness. This would simultaneously give India access to high technology and better defence equipment.

The Inward Turn: Removing the Domestic Shackles

Maximising our engagement with the OECD ex-US bloc is only half the battle. The other, and perhaps more difficult, half is to look inwards. To trade more intensely and successfully with a smaller, more discerning group of partners, Indian firms must be more globally competitive. This requires a sweeping agenda of domestic policy reforms that remove the shackles upon the domestic economy. Eight things loom large.

I. The indirect tax system

The current Goods and Services Tax (GST) regime, while a monumental step forward, is plagued by a major flaw: it fails to fully reimburse exporters for all indirect taxes paid. For the GST to actually be the promised "destination-based consumption tax", you do not tax non-residents. The existing system leaves many taxes (cesses, electricity, fuel, municipal taxes) embedded in the cost of production, which are not refunded to the exporter, thus making Indian exports artificially expensive. Input tax credit (ITC) has to flow fully, so as to generate the complete refund at the point of export. We advocate for a move to a single, low-rate GST, coupled with a simple carbon tax (Kelkar and Shah 2022, Kelkar, Modi and Shah 2025). Such a system would not only make Indian goods more competitive but would also align with evolving global standards, such as the European Union’s Carbon Border Adjustment Mechanism (CBAM), which taxes imports based on their carbon footprint (Jaitly & Shah, 2023).

II. Regulatory reform

We need to build on the intellectual foundation of the Financial Sector Legislative Reforms Commission (FSLRC). The FSLRC’s core ideas -- checks and balances for regulators that wield legislative and executive and judicial power -- are not limited to the financial sector. They must be applied across all statutory regulatory authorities in India. When regulators are enveloped in checks and balances, their arbitrary power will be diminished and their behaviour will become more predictable. This predictability is the bedrock of business confidence, both for domestic firms and foreign investors. This agenda is the sensible interpretation of the fashionable word `deregulation' (Shah, 2025; Krishnan, 2025).

III. Improving the judiciary

None of this can succeed without fundamental improvements in the Indian judiciary and legal framework. The delays in Indian courts, and the risk of matters being decided incorrectly, are a major drag on economic activity. Businesses, both Indian and foreign, are hobbled by disputes that can last for decades. This unpredictability hinders modern business arrangements which are grounded in contracts that perform as promised, and help to create a significant "India risk" premium. There is now a body of knowledge and experience in building better courts which can be brought to play upon this problem (Shah, 2024).

IV. Cities are where production actually happens!

Whether it is services or manufacturing, export oriented production happens in cities. There is a direct connection between the Indian urban reforms agenda -- the economies of agglomeration of talented people into livable spaces -- and the ability of India to produce and export. Thus far, there is little to report on the agenda of decentralisation to city governments, and to better town planning. A great deal of knowledge has now been developed in the country and can be usefully deployed into these questions.

V. Solve the logjam in agriculture

We have long known that Indian agriculture is broken owing to the comprehensive array of state intervention. The Indian state is overseeing and subsidising a faulty system of intervention that is inducing a health crisis through bad nutrition and the burning of fields. Indian protectionism in this field is proving to be disproportionately costly for the overall Indian economy. This underlines the priority of obtaining progress in this area. The essential idea is to have a full play of the price system in agricultural inputs and outputs, with freedom for individuals to buy and sell land, to sell agricultural products, to trade in commodity futures markets in India and abroad, to store agricultural products, and to move agricultural products within India and across the border. Achieving these changes will need to be done with a comprehensive sense of all the margins of adjustment (partial liberalisation is harder for the people) and political wisdom. The metaphor of structural adjustment programs is required for solving the sites of the highest intervention in the past, i.e. Punjab and Haryana.

VI. Macroeconomic resilience

In this turbulent environment, it will be particularly important to maintain macroeconomic stability. The path to macroeconomic stability lies not in autarkic instincts, or stifling private sector innovation, but in creating institutions for resilience. India has made one big movement forward in the form of the inflation targeting system [EiE Ep68 Inflation targeting], which has now delivered better CPI inflation stability from 2015 onwards. We must keep a zealous watch on CPI inflation, and ensure it does not deviate from 4% as is specified in the inflation target. With that problem mostly under control, there are now four areas of work for establishing macroeconomic resilience:

1. There is a problem with fiscal prudence, with a debt/GDP ratio that has risen considerably, and a primary deficit which is well above zero in all years. New institutional designs such as a Fiscal Council can help in this journey.
2. There is a problem with exchange rate inflexibility: a floating exchange rate [EiE Ep67 Exchange rate flexibility] is a great shock absorber when faced with difficult times (Shah, 2024).
3. Much needs to be done to create robust and resilient financial markets, which can absorb shocks in times of need (Shah 2026).
4. The gradual dismantling of the financial repression system (Chitgupi et. al. 2024) will create a new kind of strategic depth for the Indian state in terms of its ability to borrow from voluntary lenders, both onshore and offshore.

VII. Finance as the brain, financing as the raw material

The financial sector itself needs a fundamental overhaul, again drawing on the FSLRC’s vision. Indian firms currently operate with a significant disadvantage: a higher cost of capital compared to their global peers. This is a direct consequence of the malfunctioning financial system and the partially closed capital account. The Indian system of financial repression -- where the state uses regulation to appropriate a portion of private savings -- must be dismantled. Financial reforms will increase the quality of thinking that finance, the brain of the economy, is able to put in when allocating scarce domestic savings. By liberalising the capital account in a careful, sequenced manner, we can allow Indian firms to access the cheapest possible capital from global markets, making them more competitive.

VIII. Improved engagement with the information space

Economic policy acts through the process of reshaping the optimisations of self-interested people, about the nature of government coercion and the strategy for future policy reforms and institution building (Shah, 2018). In this, the communication strategy of the government achieves importance. Central to the 1991-2011 macroeconomic boom was the trust and respect of the private sector, for a shared understanding of the strategy for reforms, carried across multiple elections and multiple teams. As the old adage runs, the policy maker must `say what you will do and then do what you just said'. The modern information environment has become more daunting, with the rise of social media. In such an environment, there is great value in a government that is known for truth telling. A strong orientation towards truth speech would be a powerful asset in improving the structure of expectations of the private sector.

All large global firms are looking to do less in the US and in China. If we play our cards right, India can be a OECD(ex-US)+1 centre of activity for many important firms. But this requires profound improvements in how the Indian state treats foreign firms. India needs to move towards a system of OECD-quality tax treaties and bilateral investment protection agreements. Most importantly, we need a clear Parliamentary law that establishes equal treatment for foreigners, moving away from a mindset of economic nationalism. This would send an unmistakable signal to the world that India is a safe and predictable place to do business.

Engaging the Giants from a Position of Strength

Once India has put its own house in order and established a new core of trade partners, it will be in a position of strength to deal with the two most difficult partners in the new world order: the United States and China.

The problems presented by these two countries are indeed knotty and cannot be solved with chest-thumping nationalism or bluster. Dealing with leaders who have an inward-looking political style requires deft handling and a deep understanding of their political economies. Public posturing or slighting them will not be consistent with Indian interests. The union government needs to create a sophisticated brains trust with a profound understanding of the US and China: their domestic politics, their economic vulnerabilities, and their negotiating styles—to do better in these complex engagements. Through border conflicts in Doklam and Galwan, the Chinese state has primed the Indian intellectual community with questions and concerns, and a significant depth of knowledge on the path forward is now understood (Bambawale et. al., 2021).

The problem of Chinese overproduction is real and immediate (Patnaik and Shah, 2024). The Chinese state's policy of subsidising its firms to maintain employment, which leads to a glut of cheap exports, is a form of economic warfare. It is not just unfair; it is destructive to the manufacturing bases of other nations, including India. A vigorous set of barriers against Chinese imports is not just justified, but necessary. However, this is not an argument for complete disengagement. There are many paths to engagement with China that can and should be pursued, particularly in areas where our interests align, such as in global institutions or in addressing global challenges. Collaboration between China and India is essential for global decarbonisation.

The United States presents a different, and perhaps more fundamental, challenge. The US, which built the old world order, is now in a period of self-doubt and retreat. There is no guarantee that a post-Trump environment will get the US back to its former normalcy as a champion of free trade. The protectionist genie is out of the bottle. Until the US finds its footing again, our primary strategy must be to embrace the OECD ex-US bloc. We should engage with China where it is rational, while recognising the sustained misbehaviour by China against India on numerous episodes before, and we should wait for the US to find its feet one day.

Conclusion

In summary:

1. India was a great beneficiary of globalisation
2. We must recognise that the nature of globalisation has changed, and that this is detrimental to India's interests
3. This is an important turning point in India's history; it is our duty to strategise a response.
4. India needs to be a prime mover of a new deep globalisation arrangement between the advanced economies -- excluding the US -- and India.
5. India needs deep trade agreements ("DTAs") with the advanced economies, excluding the US.
6. The competitiveness of producing in India needs to be addressed by domestic reforms: a globalisation-ready indirect tax system, regulatory reform, financial sector reform, legal system reforms, an environment of institutions for macroeconomic stability, making better cities, solving the policy stuck in agriculture, and shifting the communication strategy in favour of more truth.
7. We should engage with the highly flawed objectives of the US and China from such a vantage point of strength.

The era of India’s economic rise on the back of an indulgent, open global system is over. This is not a Balance of Payments crisis, where we have to mortgage RBI's gold in London, but it is an equally important moment. Our future depends on it. The leadership needs to take the opposition into confidence, as was done by A. B. Vajpayee in 1998 after the nuclear tests, and collaboratively lead this transformation. For all of us in India, for the people and the firms, this is a time to rise to our best and prove our mettle.

The authors are with the Pune International Centre and XDKR Forum.

Bibliography

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The economies of Russia and Ukraine in the war

by Rounak Hande, Ayush Patnaik, Ajay Shah, Susan Thomas.

The war that began in February 2022 had substantial implications for the economies and measurement systems of both countries. Long-running wars, or strategic wars, are wars of attrition. These are shaped to an important extent by the working of the economy. The outcome on the battlefield relies on the ability of the state to foster a well functioning economy and produce or obtain adequate resources including soldiers and their supporting civilian teams, their food and health care, and their materiel.

The traditional understanding of strategic war, with its focus on the functioning of the economy and the productive capacity in the defence industrial base, has evolved and changed in this war. A new age of standoff weapons has given attacks deep inside Russia, the likes of which did not happen even during World War II. The sanctions imposed upon Russia reflect a new level of capability in economic statecraft, which was not in play in any important conventional war prior to this. These developments in the conduct of war encourage us to observe the facts as we see them unfold, and not go by our traditional knowledge about strategic war.

Understanding the true state of the economy is thus an important element of understanding the Russian invasion of Ukraine. Conventional economic measurement faces difficulties in this environment, which has encouraged an alt data literature in bring pieces of the puzzle together. A new paper Shedding light on the Russia-Ukraine War by Rounak Hande, Ayush Patnaik, Ajay Shah, Susan Thomas contributes to this literature by carefully harnessing night time light data to obtain fresh insights into the war. The major ideas from this paper are summarised here.

The difficulties of measuring economic activity through nighttime lights data

Alas, the simple economists' dream, of using nighttime lights data as an easily observed GDP proxy, has been belied. In previous work (Patnaik et. al. 2021), we found important gains over the conventional NASA/NOAA or World Bank data, through a bias-correction algorithm that thinks better about clouds.

There are unique problems in working with nighttime lights data for Russia and Ukraine. These include the far longitudes, gas flaring, and aurora borealis. We carefully solve each of these questions and develop a sound methodology for the measurement of nighttime lights in places like Russia and Ukraine.

Aggregate economic impact

At an aggregate level, how are the economies of Russia and Ukraine faring, after the war started?

The aggregate nighttime lights for Russia shows roughly zero growth from 2022 to 2025. As the Russian economy has been turned into a war economy with a significant increase in military expenditures as a share of GDP, the stagnation of nighttime lights suggests a decline in the civilian economy.

Figure 1: Time series of aggregate nighttime lights of Russia (measured in January):

Most Russian gas production takes place in the Yamal-Nenets Autonomous Okrug, and economic activity there has been strong, which runs against the conventional understanding that Russian gas exports have declined sharply.

With Ukraine, there was a sharp decline from 2022 to 2025. For both countries, 2023 was a low and then there has been some recovery.

These measures focus on the boundaries of the two countries. Their interpretation for the military aspects of the war needs to reckon with the extent to which relevant production capacity extends beyond the border. In Russia's case, North Korea is an important site for war production. In the case of Ukraine, the defence industrial base and the economy of Europe is available, as long as relatively few voters in Europe support Russia.

The economy near the front

Close to the battlefront, we expect a combination of the impact of fighting, evacuations, blackouts, destruction of productive capacity, and the presence of troops and their logistics tail.

The oblasts where the war is taking place, and Crimea, have fared surprisingly well. Perhaps the nighttime lights associated with the logistics tail of armies in action -- which cannot quite be interpreted as economic activity in the way that nighttime lights data is normally interpreted -- exceeds the adverse impact of destruction of the productive economy.

The footprint of standoff weapons

Further away from the battlefront, there would be an adverse impact upon the economy through the new level of presence of stand off weapons. Modern war is unique in the extent to which a trench is hard to overcome, but it is not that difficult to hit a factory that is 200 kilometres in the rear. Hence, we expect to see a footprint of standoff weapons deep into the backfield.

Figure 2: Difference in pre-war and post-war growth rates:

A growth reversal is visible in locations within Russia that are hundreds of kilometres inside the Ukraine border. The radiance at the regions of Russia near Ukraine contracted by 10-58.8%, while eastern regions maintained growth of 8-18.56%.

Reversal of gains from trade

At various elements of the Russian international border, the natural economic geography had unfolded in response to the proximity to economic activity across the border. The adverse impact upon the local economy, the distortion away from the natural organisation reflecting proximity to the economy across the border, is likely to vary based on the intensity of new restrictions imposed by the bordering country.

A growth reversal is visible in the map above, at locations near the border with European countries -- which have imposed sanctions more completely -- as opposed to the border with other countries.

Changing economic geography

Over the many years of the ongoing war, the economic geography has been reshaped through government and private decisions. Understanding this map of shifting economic geography is important from the viewpoint of understanding regional economics, and for resource allocation in long range strikes and in air defence.

Figure 3: Shifting centre of gravity of the Russian economy (map):

The Ukrainian economy has shifted West, away from the war zone. The Russian economy has shifted East, away from Europe and the war. There was an eastward shift of the economic center of Russia by 245 kilometers between January 2019 and January 2025. We are able to see maps of levels and growth rates of subnational nighttime lights that yield fresh insights into the working of the Russian economy.

Conclusion

Nighttime lights data is one tool in the arsenal of economic measurement. In combination with other pathways to measurement, this gives fresh insights into the Russian and Ukrainian economies, and insights into this important strategic war. We are at the edge of the seat, waiting to do our January 2026 update.

Reproducible Research

For transparency and reproducibility, all data processing and analysis for this study can be replicated using our open Google Colab notebook. The notebook allows users to download satellite data, run the code, and generate all results and plots in a fully reproducible cloud-based environment—no manual installation of libraries or dependencies required.

The vector boundary data and the notebook will be made available here:

GitHub repository
Google Colab notebook

 

The authors are researchers at XKDR Forum, Bombay.  

Registration of security interest: A peculiar Indian problem

by Pratik Datta.

When a lender extends credit to a company, it often secures repayment by way of a security (often referred to as a “charge”) created over certain assets or properties of that company. Company law usually requires such security to be registered with an agency. For instance, in the UK, company charges are registered with the Companies House. Registration of security could serve three different purposes:

1. the purpose of registration of security could be to publish the existence of such security to make it available for public inspection. This gives potential lenders to the company information about the extent of prior lending to the company which may rank ahead of their own contemplated advances. Such information may also be of interest to credit analysts, resolution professionals, shareholders and investors.

2. registration may be necessary for ‘perfection’ of the security. That is, registration may be treated by law as a necessary part of the process whereby a person obtains a security interest against the company. Without registration, the person in question would fail to obtain security interest and so would not be able to rely on it against the unsecured creditors of the company during the company’s insolvency.

3. registration could be used in law as a way of determining priority among secured creditors. For example, the law could require that priorities among secured creditors be determined by the date of registration of the security instead of the date of creation of security.

In India, we have a peculiar situation. When a bank or notified financial institution extends a secured credit facility to a company, three different registrations are necessary under three different laws for the same security.

1. Under section 77 of Companies Act 2013, a company creating charge on its assets or properties is required to register the particulars of such charge with the Registrar of Companies (‘RoC’). This involves providing the relevant information in Form No. CHG-1 (for charges other than debentures) or Form No. CHG-9 (for debentures), getting it signed by both the company and the charge holder, and then filing the Form along with the underlying credit agreement with the ROC.

2. Under section 23 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’), the particulars of every transaction (involving banks and notified financial institutions) creating security interest must be filed with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (‘CERSAI’). This involves filing Form I with CERSAI.

3. Under section 215(2) of the Insolvency and Bankruptcy Code 2016 (‘IBC’), a financial creditor (which typically includes banks and regulated financial institutions) is mandatorily required to submit financial information and information relating to assets, in relation to which any security interest has been created, to an Information Utility (“IU”). Unlike RoC or CERSAI, IUs are required to authenticate and verify information of default, and issue a record of default in Form D to its registered uses.

As a result of these legal provisions, every single secured credit transaction in India has to be mandatorily registered with the RoC, the CERSAI as well as an IU. More than increasing compliance burden, this institutional overlap increases the legal uncertainties around security creation and enforcement, with potentially adverse implications for the entire secured credit landscape. A recent case illustrates the point.

Case in point

In Bizloan Pvt. Ltd. v. Mr. Amit Chandrashekhar Poddar (“Bizloan judgment”), the NCLAT was seized of a unique situation where a corporate credit transaction was registered only with CERSAI but not with RoC. Bizloan Private Ltd. (“Bizloan”) provided financial credit facilities to Autocop (India) Pvt. Ltd. (“Autocop”) in the form of sales bill discounting and purchase bill discounting of Rs. 1 crore in aggregate. Subsequently, Autocop went into corporate insolvency resolution process (“CIRP”) under the Insolvency and Bankruptcy Code 2016 (“IBC”). Bizloan filed its claims in Form C during CIRP, which were admitted in full without indicating if they were secured or unsecured. It was only when Bizloan received the final resolution plan for Autocop that it realized that Bizloan had been classified as an unsecured financial creditor. Bizloan challenged this classification but by then Autocop had been put into liquidation. The NCLT dismissed Bizloan’s challenge. Consequently, Bizloan approached NCLAT in appeal.

Bizloan’s arguments

1. Bizloan argued that proving security interest in liquidation proceedings under IBC should be governed by Regulation 21 of the IBB (Liquidation Process) Regulations, 2016, which states:

The existence of a security interest may be proved by a secured creditor on the basis of -

1. the records available in an information utility, if any;
2. certificate of registration of charge issued by the Registrar of Companies; or
3. proof of registration of charge with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India.

Evidently, proof of registration of charge with CERSAI is sufficient for proving security interest in a liquidation by virtue of Regulation 21(c) of the Liquidation Regulations.

2. Bizloan further argued that section 238 of the IBC overrides provisions of other statutes. Therefore, if there is any inconsistency between IBC and any other statute, IBC and the regulations issued under it should prevail.

Liquidator’s arguments

1. The Liquidator relied on section 77(3) of the Companies Act 2013, which states:

Notwithstanding anything contained in any other law for the time being in force, no charge created by a company shall be taken into account by the liquidator appointed under this Act or the Insolvency and Bankruptcy Code, 2016 (31 of 2016), as the case may be, or any other creditor unless it is duly registered under sub-section (1) and a certificate of registration of such charge is given by the Registrar under subsection (2).

The underlined portion of the above provision was inserted through the Eleventh Schedule of the IBC itself, which came into effect from November 15, 2016. The liquidator highlighted that the words “shall” makes him duty bound to follow the above provision. Further, if there is any conflict between section 77 of Companies Act 2013 and Regulation 21 of the Liquidation Regulations issued under the IBC, the former will override the latter since section 77 is a specific provision dealing with the particular situation (that is, registration of charges) and it explicitly uses the words ““notwithstanding anything contained in any other law”. Since Bizloan’s charge was not registered with the RoC under section 77 of the Companies Act 2013 and only registered with CERSAI, Bizloan cannot be treated as a secured financial creditor in liquidation governed by the IBC.

2. The liquidator further argued that Regulation 21 is an outcome of section 52(3)(b) of the IBC, which states:

Before any security interest is realised by the secured creditor under this section, the liquidator shall verify such security interest and permit the secured creditor to realise only such security interest, the existence of which may be proved either – (a) by the records of such security interest maintained by an information utility; or (b) by such other means as may be specified by the Board.

The liquidator argued that section 52(3) applies only before a secured creditor chooses to “realise” its security interest, which does not come into the picture in Bizloan’s case since Bizloan had effectively “relinquished it security interest to the liquidation estate” and was to receive the sale proceeds in terms of section 53 of IBC.

3. The Liquidator further highlighted that Regulation 21 uses the words “may prove”, which is discretionary and not mandatory. In contrast, section 77 uses the word “shall” which is mandatory and binding.

4. Additionally, the Liquidator argued that if there is a conflict between section 77 and Regulation 21, Regulation 21 of the Liquidation Regulations issued under section 240 of the IBC will have to give way to section 255 of the IBC, which amended section 77(3) of the Companies Act explicitly giving more weightage to section 77 of Companies Act 2013 in matters of registration of charges on a company’s assets or properties.

5. The Liquidator also drew attention to section 20(4) of the SARFAESI Act 2002, which reads:

The provisions of this Act pertaining to the Central Registry shall be in addition to and not in derogation of any of the provisions contained in the Registration Act, 1908 (16 of 1908), the Companies Act, 1956 (1 of 1956), the Merchant Shipping Act, 1958 (44 of 1958), the Patents Act, 1970 (39 of 1970), the Motor Vehicles Act, 1988 (49 of 1988), and the Designs Act, 2000 (16 of 2000) or any other law requiring registration of charges and shall not affect the priority of charges or validity thereof under those Acts or laws.

Accordingly, the Liquidator argued that SARFAESI Act 2002 is ‘only in addition and not in derogation of’ the provisions of Companies Act 2013 and any other law. Therefore, registration with CERSAI under SARFAESI Act 2002 cannot affect the priority of charges or validity thereof under those other Acts or laws.

NCLAT’s judgment

The NCLAT noted the well-established principle of statutory interpretation that a latter law prevails over an older law. Accordingly, it observed that the IBC came into effect on December 1, 2016 while the amendment to section 77(3) of Companies Act 2013 came into effect earlier on November 11, 2016. Further, Regulation 21 of the Liquidation Regulations came into effect on December 15, 2016, after the amendment to section 77(3) of Companies Act 2013. Therefore, NCLAT concluded that the IBC will override the amended section 77(3) of Companies Act 2013. Consequently, it was held that security interest of a creditor can be proved if the same is available only in CERSAI. It is not completely and exclusively dependent on charge registered with RoC under section 77 of Companies Act 2013. As a result, Bizloan should be treated as a secured financial creditor based on its CERSAI registration pursuant to Regulation 21 of the Liquidation Regulations.

Analysis of NCLAT’s reasoning

The NCLAT’s reasoning is problematic. The general principle of statutory interpretation that a new law overrides an old law is based on the assumption that if both laws have been enacted by the Parliament at different points in time, it is reasonable to assume that the latter law reflects the latest policy intent of the Parliament and therefore, should prevail over the earlier law.

When IBC was enacted by the Parliament, section 255 of IBC amended section 77(3) of Companies Act 2013 to clarify that a liquidator appointed under IBC must take into account a charge created by a company only if such charge was registered under section 77 of Companies Act 2013. The Parliamentary intent was clearly to ensure that only charges registered under section 77 of Companies Act 2013 are taken into account in a liquidation under IBC.

The Ministry of Corporate Affairs (“MCA”) notified different provisions of IBC at different points in time because of administrative convenience. Parliamentary intent cannot reasonably be determined based on whether a provision of IBC was notified before another provision of the IBC by the MCA, that too within a span of a month. Therefore, the fundamental basis of NCLAT’s reasoning stands of unsure footing.

Policy issues

The NCLAT noted that RoC and CERSAI registrations serve different purposes. Registration of charges with RoC under section 77 of Companies Act 2013 is relevant for determining priority of claimants of a company during liquidation under IBC or winding up under Companies Act 2013. In contrast, CERSAI registration under section 20 of SARFAESI Act 2002 is relevant for realization of security interests by banks and notified financial institutions through the SARFAESI Act 2002. It is also noted that CERSAI registration helps in fraud prevention by allowing lenders to check if the asset being offered as security is already hypothecated or mortgaged.

On closer examination, these stated purposes do not appear to be mutually exclusive. When a bank or a notified financial institution extends secured credit to a company, the borrower company is mandated by law to register the charges with the RoC under section 77 of Companies Act 2013. This RoC data is available for public inspection. Potential lenders to the company can use the RoC data to check if the company has already given any of its assets or properties as security to any prior lender(s). Clearly, fraud prevention in corporate lending by banks and notified financial institutions cannot be a reason for setting up CERSAI.

CERSAI becomes relevant only for fraud prevention in the case of loans extended by banks or notified financial institutions to non-corporate borrowers such as individuals, sole proprietorships, societies, partnerships etc. The RoC does not have information on prior borrowings by such non-corporate borrowers or the existing security on the assets or properties of such borrowers. In such cases, CERSAI plays a legitimate role in fraud prevention.

The problem in the current institutional design lies is the overlap between RoC, CERSAI and IUs with respect to corporate secured lending. Banks and notified financial institutions have a strong incentive to register security interests in corporate lending transactions with CERSAI because it enables them to enforce such security interests through the special out-of-court enforcement mechanism under SARFAESI Act 2002. These lenders also have an incentive to get the same information filed with an IU so that they can rely on the IU’s record of default in insolvency proceedings under IBC. And the corporate borrower is anyways legally mandated to register the security with RoC under Companies Act 2013. Overall, these laws have created layers of institutions over one another for the same purpose, muddying the functional clarity between RoC, CERSAI and IUs.

Conclusion

The blurring of functionalities between the RoC, CERSAI and IUs not only creates avoidable transaction cost in corporate secured credit transactions, it also leads to legal risks around security creation as the Bizloan judgment illustrates.

Registration of a particular security interest against assets or properties of a particular corporate debtor should be done only once. Let’s assume that the registration agency is RoC. The corporate debtor should register a particular security interest only once with the ROC. In case of default, that RoC registration alone should be enough for banks and notified institutions to use enforcement rights under SARFAESI against such corporate debtors. Similarly, the same ROC registration alone should be adequate proof of security interest against a corporate debtor for the purposes of IBC. The law should not require the same security interest against the same corporate debtor to be registered with CERSAI or any IU.

CERSAI would, of course, remain relevant for registration of security interests against non-corporate borrowers. The case for IUs is more nuanced. The BLRC had envisaged an open competitive industry in the market for information required for insolvency and bankruptcy. This should be achieved by enabling multiple private competing businesses to perform the role of RoC, which would require a fundamental rethinking of the RoC as a state monopoly under Companies Act 2013. Adding an additional layer of IUs over the existing RoC to perform exactly the same function is not exactly the reform that the BLRC had envisaged.

The legal mechanics of achieving these outcomes is not particularly complex. Suitable amendments would be required to Companies Act 2013, SARFAESI Act 2002 and Insolvency and Bankruptcy Code 2016 and some subordinate legislations issued under these statutes. But first of all, the MCA (for RoC and IUs) and Ministry of Finance (for CERSAI) need to recognize the problems with the current laws on registration of security interests and agree on the policy pathway ahead.

The author is a lawyer.

Announcements

Call for Papers: 16^th Emerging Markets Conference

14^th - 17^th December, 2025

XKDR Forum in collaboration with Vanderbilt law School is inviting papers to be submitted for the 16^th Emerging Markets Conference, 2025. In the past, the audience for these events has comprised of academics, participants from the legal and financial industry, policy makers from government and regulators.

Details of the previous conferences can be viewed at https://emergingmarketsconference.org/. The conference aims to cover presentations and discussions across the following set of research topics:

• The sources of economic success or failure in EMs.
• Finance in EMs (households, financial markets, financial intermediaries, firms and finance, finance and growth).
• Political economy, law, public administration, regulation in EMs.
• The impact of populism upon the possibility of sustained growth.
• Insights into large EMs that matter in and of themselves.
• Insights from narrow research projects that illuminate EMs in general.
• The new phase of globalisation and its consequences for international trade, international finance and the nature of the EM firm.
• Features of a society that enable or disable convergence into the ''normal'' package of high levels of freedom and prosperity.
• The puzzles faced by all kinds of decision makers: individuals, civil society actors, firms, all levels of government.
• Grand challenges such as climate change: implications for EMs and ramifications of choices made in EMs.
• State capability in EMs.

The ideal papers for EMC shed light on the great questions of the age, while being analytically sound and persuasive.

Conference design

For EMC 2025, we intend to bring on board a wider research papers, panels on contemporary policy and keynotes by experts in the area of finance, economics and law. The conference this year will be completely in-person mode.

Best Discussant Award

Each year, we award the Emerging Markets Conference discussant award for the best discussant and the first runner up discussant of the papers presented on each day of the EMC. The discussants are selected by an audience poll.

Program Committee

• Adam Feibelman, Tulane University
• Ajay Shah, XKDR Forum
• Bidisha Chakraborty, Saint Louis University
• Dan J Awrey, Cornell Law School
• Harsh Vardhan, Independent
• Indradeep Ghosh, Dvara Research
• Joshua Felman, J. H. Consulting
• Kose John, NYU Stern
• Kumar V, SMU - Cox School of Business
• Marios Panayides, The University of Oklahoma
• N. Prabhala, Johns Hopkins University
• Pab Jotikasthira, SMU - Edwin L Cox School of Business
• Pradeep Yadav, The University of Oklahoma
• Rambhadran Thirumalai, ISB
• Rajeswari Sengupta, IGIDR
• Renuka Sane, TrustBridge
• Sanjay Kallapur, ISB
• Susan Thomas, XKDR Forum
• Tanika Chakraborty, IIM Calcutta
• Vimal Balasubramaniam, Queen Mary University of London
• Yesha Yadav, Vanderbilt University

Important dates

• Paper submission deadline: 25^th August 2025.
• Expected date for notification of acceptance: 30^th September 2025.
• Dates of the conference: 14^th - 17^th December 2025.

Support

Financial support for academic authors whose papers have been accepted at the conference includes travel support of up to USD 500 as well as accommodation at the conference venue for 3 nights of the conference (14^th to 17^th December).

Registration and contact details

Submissions: Please submit your papers in pdf format by following this link here
For any clarifications, please reach out to Jyoti at outreach@xkdr.org

Dealing with fraud in consumer finance

by Renuka Sane.

There is great ire among consumers about financial fraud. Fraud is the deliberate deception of one party by another for the purpose of unlawful gain, typically involving the misrepresentation or concealment of material facts. When fraud occurs, the key question is: who ends up paying for it? The answer to this is not so obvious. Consider the recent incident involving Falcon, an online bill discounting platform now defunct. This platform was promoted since 2021 as a peer-to-peer invoice finance platform. It had about 7000 investors and had raised Rs.1,700 crores by 2025. Retail investors lent money against invoices supposedly issued by reputable companies, earning high returns over short tenures. Until suddenly they didn't. Consumers realised one day that Falcon had closed its offices and cut off all communication. The ensuing cascade of chargebacks for services not rendered, their denial by financial firms, a subsequent Bombay High Court interim order which continued the freeze on chargeback requests illustrates how the existing system leaves consumers in a precarious position. There is no easy answer when it comes to dealing with fraud, but understanding the options is a good place to start.

The case

Falcon operated an online platform for short-term invoice/bill discounting. Payments to Falcon were routed through a payment aggregator called Worldline ePayments India Pvt. Ltd. Worldline had pooling accounts with various banks and cards, including the State Bank of India through which such transactions would be facilitated.

Falcon ceased its operations owing to allegations of fraud. Once customers figured that Falcon was no longer operational, they started asking for reversals of their transactions, or chargebacks, on the basis of services not rendered. As a result Worldline's pooling account with SBI started to get debited. Worldline requested SBI not to debit their pooling account, and SBI initially agreed for a limited period. This essentially meant that SBI would not be able to honour customer requests on chargeback. Once the limited period got over, SBI began to debit Worldline's account again. A Vacation Court order on May 19, 2025, temporarily stopped SBI from continuing to debit Worldline's pooling account to cover chargeback requests related to Falcon's transactions.

The dispute continued. SBI didn't want to be the only bank which was temporarily stopped from debiting Worldline's pooling account and to risk its funds getting debited. Other banks (or card companies) wanted a simpler life by not having to deal with chargeback requests. Worldline didn't want any debiting from any account - according to them if the customer was defrauded by Falcon, they had nothing to do with it.

All of these parties were given relief by the interim order of the Bombay High Court which ordered that no bank or credit card company will now debit Worldline's account on chargeback requests. The Court appears more sympathetic to shareholders of the intermediaries and banks relative to customers, as they have lost their money, at least until there is a final order in this case.

Who should the burden be on?

While the Bombay high court seems to have bought into the argument that the intermediary is just a pass-through, the critical question in markets remains, "who bears the burden?" A standard response in India is to increase licensing and networth requirements to carry out financial activity, but that often makes the informal market bigger, and fails to address the problem of fraud. We have three choices - leave it to the customer, hold the firm committing fraud to account, or place liability on the intermediary. The choice we make will shape the structure of markets, the roles of intermediaries, and incentives for honesty and risk.

Option 1: The customer

In a caveat emptor or "let the buyer beware" world, the burden of due diligence rests solely on the customer. If Falcon ceased operations, and consumers money was held up, then it is the consumers loss.

On the one hand, a caveat emptor world incetivises caution by consumers. Consumers may learn to discern good firms from bad with experience and this may eventually drive out the bad firms. However, it also leads to enormous wariness in every transaction. Anonymous transactions, where the buyer and seller do not know nor have long-term interactions with each other - become impossible or extremely risky. This is an implicit entry barrier for new firms trying out innovative products - they will have to take significant efforts to signal credibility. Modern capitalism becomes less viable if fraud risk sits squarely with the consumer.

A private certification agency could mediate the "credibility" signal, offering a seal-of-approval as a safeguard against the risk of fraud. However, such private certification agencies are notably absent in India. The reasons for this lack of emergence remain unclear -- perhaps it is difficult to design viable business models within a price-sensitive and fragmented market. In the absence of a credit certification agency, a caveat emptor world means retail customers have no ex-post recourse, only their ex-ante judgment.

Option 2: The firm

Here, the company providing the goods or services is made directly and strictly liable for any fraud. Under Indian law, if a seller's fraudulent actions prevent or frustrate a buyer's due diligence, the seller cannot then turn around and claim that the buyer should have been more careful under the caveat emptor principle. This runs into trouble when customers are dealing with a fly-by-night operator. If the company commits fraud and vanishes, it becomes the domain of the police to pursue, locate, and prosecute the company's proprietors and courts to impose sanctions. If the company's resources are exhausted, there is no meaningful restitution to the consumer; sanctions may deter future fraud but do not compensate customer's losses. If the justice system doesn't work well or is not designed to deal with class action suits by a group of consumers, then this outcome is not too different from the burden being solely on the customer.

Option 3: The intermediary

In this set up, the intermediary, such as the payment aggregator, would act as a trusted third party. The burden of scrutinising legitimacy - of both buyer and seller - would rest on the intermediary. The intermediary may provide insurance to buyers (and sellers) against fraud, restoring lost funds where possible. The liability (at least in part) would lay on Worldline. We see an example of this in the credit card industry where the Fair Credit Billing Act in the United States requires credit card companies to investigate unauthorised transactions (or billing errors in the case of fraud) and transfer money back to customers if they report misuse of the card (or evidence of fraud) within a specified period of time.

In India, RBI requires payment aggregators to do due diligence of merchants it onboards. In the Falcon case, Worldline as the payment aggregator would have conducted due diligence of Falcon. A liability framework exists under the RBI as well, but only for unauthorised transactions. The applicability to instance of fraud remains unclear. If the RBI were to extend the liability framework to deal with fraud, similar responsibilities may get placed on payment aggregators, and other intermediaries.

At first glance, this is a better outcome for consumers. They are assured of the credentials of an anonymous provider of services and getting their money back in the event of fraud. This may increase the number of transactions that take place and the size of the market. However, protection comes at a cost. The intermediary firm will have to incur additional expenses and significantly change its business model. The firms may pass on the burden of anti-fraud compliance to customers in the form of higher platform fees, or stricter participation standards. But firms will also be incentivised to invest in measures to detect and block fraudulent transactions. We may see a consolidation in the intermediaries market with a few, large providers able to offer risk management at cost.

Conclusion

Instances of fraud create pressure upon the government to create an ex-ante regulatory system that makes many kinds of fraud infeasible through licensing conditions, price restrictions, and other regulatory barriers. But these conditions also make many kinds of products and transactions infeasible, which is not in the best interest of consumers and markets.

A well-designed regulatory system should first confirm that a complaint involves fraud, as not all losses are caused by fraud. It should then allocate this burden wisely. The Falcon case suggests that we are operating under the Option 1 scenario. The desirability of shifting to Option 3, with a significantly higher liability burden on the intermediaries, is an issue that merits immediate attention. A system that harnesses the interests of profit-seeking financial firms in blocking fraud is the one that has the best chance of success.

The author is a researcher at the TrustBridge Rule of Law Foundation.