One solution could be increased size, and companies have been busy consolidating their activities, spinning off businesses and restructuring themselves in order to improve their risk profile. Banks can be active promoters of such consolidation, which is one way of keeping their non-performing assets in check. But size alone is no guarantee of survival, especially in an environment where even the largest domestic giant is a pygmy by international standards.

And mergers are not a solution when it takes years to reduce staff or even shift manufacturing locations. Inan open environment, adding value is the only way to survive. With competition forcing realisations down, organisations have to focus on costs. And how is one to do that when there is no exit policy, no bankruptcy laws, no laws for foreclosure, and where an inefficient and massive public sector pre-empts huge amounts of resources? Add to that high transaction costs, high transport costs and a high cost of capital. In effect, Indian companies are expected to go into battle with their hands tied firmly behind their backs. Unless conditions for facilitating the restructuring of the industry are created urgently, the sickness affecting companies will rapidly spread to banks and financial institutions.