🧟‍♂️ The Attack of Zombie Firms — And Why India Must Let Businesses Die

In India, starting a business is tough. But shutting it down? Even tougher. 📉 Only 3.1% of Indian manufacturers exit each year, compared to 9% in the US and nearly 18% in Vietnam. 📉 Closing a business in India can take over 4 years — while in Singapore it’s less than a year. 📉 To exit, firms pay up to 140% of annual sales and firing costs as high as 284% of a worker’s salary. The result? Many companies never truly die. They just linger — turning into “zombie firms”: alive on paper, but unproductive in reality. These zombies trap capital, land, and labour that could have powered new, innovative businesses. Think of Air India before its takeover — draining resources, blocking healthier airlines, and turning competitors into zombies too. Why does this matter to investors? Because when exit barriers fall, stronger businesses thrive. Resources get reallocated, efficiency rises, and productivity drives long-term growth. The 2016 Insolvency and Bankruptcy Code (IBC) was a big step, but delays (650+ days for resolution vs. 330 promised) still weaken its impact. Add to this the complexity of labour laws, and India’s manufacturing firms often get stuck in limbo. But here’s the hope: Ongoing IBC amendments aim to speed up exits. New labour codes could simplify compliance. If executed well, India could unlock 14-19% more value creation and even increase jobs by 8%. 🔍 Stocks quietly benefiting from such reforms in India: Banking & Asset Reconstruction Firms (

, Edelweiss ARC , IARC): faster resolutions mean quicker recovery of bad loans. Specialty Steel & Cement (JSW Steel , Ultratech Cement ): as idle assets like land and plants get recycled, demand for expansion inputs rises. Logistics & Warehousing ( , Gati): freed-up industrial spaces find new life in supply chains. For India’s economy to rise, we must accept a tough truth: sometimes the best way to create is to destroy. Without death, there is no life.