Rankings Report: India
Make in India
The Indian accounting services market is expected to grow at an impressive rate, thanks to the additional boost given to the economy by government initiatives such as Make in India, start-up hubs and Digital India. Che Golden reports
Business is booming for accountancy firms in India and with so many multinationals setting up shop on the continent, there have never been so many opportunities for professionals in the market. Pent up demand from the pandemic, as well as a jump in the amount of new business being created by government initiatives such as Make in India, are creating a gold rush. Of course, this has led to problems in recruitment and retention seen all over the world, but industry experts feel that the most tech savvy firms will find ways around this
“The accounting industry in India is broadly divided into audit, taxation, bookkeeping and compliance,” says Vikram Udupi, partner at PrimeGlobal member firm Suresh & Co. “With an increase in the number of enterprises, changes in the nature of transactions, implementation of new accounting tools and revisions in regulations, the demand for accountants and auditors has increased substantially. Digitalisation of accounts and introduction of complex financial instruments in the business, has given additional boost for the accounting industry.”
Partner at PrimeGlobal member firm Suresh & Co
Pent-up demand thanks to projects being shelved during the pandemic is also driving new business. “When it comes to customer demand, the industry faced a multitude of challenges during the pandemic,” says Mayank Lakhani senior managing director of assurance advisory, indirect tax, and GCC Region for Nexdigm. “However, from mid-2021, work has ramped up significantly. Currently, there is no dearth of customer demand. Most companies decided to work on projects that were put on hold during the pandemic. So currently, both the intensity and amount of projects have increased. We have seen a significant increase in the outsourcing services within various professional service areas. Another element is that many businesses are considering stalled projects on the transformation side as well as restructuring side and hence, there is greater need for business advisory services.”
Senior managing director of assurance advisory, indirect tax, and GCC Region for Nexdigm
However, competition for business is intense so fee pressure is still a concern, according to Lakhani. “The only solution available right now is digital transformation and process excellence,” he says. “With these two key initiatives, firms can build on current efficiencies while simultaneously managing fee levels. These solutions are tried and tested measures that have been utilised by many firms across the globe.”
Staff recruitment and retention is also a problem in such a competitive environment. Lakhani has found the demand for chartered accountants has increased significantly in India and that salary levels have also increased sharply over the past year. “Many firms are struggling to acquire the right talent at the right remuneration,” he says. “On the other hand, we are also witnessing increased attrition across the entire industry and this is a worrisome matter for all firms, regardless of size. As a result, many firms are using both monetary and non-monetary measures to retain staff. A few examples would be, better increments, better remuneration structures, greater investments in learning and development, and for the professional growth and development of associates, and the implementation of various working models.”
Firms looking to combat free pressure would do well to focus on quality, rather than trying to beat a competing firm’s quote, says Udupi. “Fees for services go hand-in-hand with the quality and value addition the recipient gets,” he says. “On a general basis, if we can split the whole work into advisory and compliance, the former gets paid higher compared with the simple compliance work. On a similar note, an accountant who is well organised with process and technology can demand better pay. At times, unhealthy competition also creates a fee pressure, where people race for the assignment quote prices which are just not on par with the amount of work that is required.”
Udupi feels the problems with staff recruitment are a both a challenge and an opportunity for service providers. “Companies need to look to their own digital infrastructure as working from home gives them tremendous opportunities for accounting firms to recruit people from various locations,” he says. “Today, with the evolution of technology, the accounting firms have added multiple tools, which allows them to manage accounts and audit virtually. This has also reduced the cost and time in providing services.”
There has never been a better time to be an accountant in India, according to Udupi. With an increase in the foreign investment in India and more and more multinationals having an office in India, accounting professionals have huge opportunities across sectors and domains and firms with multiple expertise and divisions, accompanied with technology will have advantage over the traditional accounting firms.
Lakhani feels that demand is only going to increase for accountants in the next 12 months as government initiatives to boost the economy mature, and also, as a result of further regulation changes as India strives to keep up with the new world of business. “We expect further changes in regulations in a bid to improve the ease of doing business in India,” he says. “There will also be an increased focus on the Make in India programme, which will attract further foreign direct investment. The New Labour Code, which is expected to be passed by the Indian Government in 2022, will play a big role in the functioning of all entities. We’re also witnessing an era of geo-political instability over the world. As a result, many countries may opt to change their regulations due to growing uncertainty. As accountants need to provide sound advice, they must maintain the ability to adapt to ever-changing regulations.”
Technology is going to be a huge disruptor according to Udupi and, as such, will create new and profitable business opportunities to firms who are techno savvy. “With a new addition for taxing the virtual digital asset, various requirements under accounting, tax treatment and tax structuring will become a major practice line,” he says. “A virtual digital asset includes any information, code/number/token (not being Indian currency or any foreign currency), generated through cryptographic means or otherwise. Even though the provisions have been set for taxation of VDAs, there are many concerns still facing the professionals regarding accounting, tracking and taxing of VDA. Authorities need to come up with detailed guidance on all these areas.”
Udupi also noted data analytics as another rapid growth area. He pointed out that with the rapid changes in market, technology, consumer behaviour and competition entities depend heavily on an accurate database for decision making. “Big data is the new bubble and professionals having expertise in data analysis are crucial for the business growth,” he says. “Data analysis helps entities to resolve various concerns such as customer identification, supply chain management, increase in profits and reporting.”
As a knock-on effect of all these changing business strategies, disruptive technologies, changing regulations and economic transition, Udupi also pointed out that this has caused a huge change in the scope and role of internal audit for any entity. “Risk management and mitigation forms the backbone for any successful venture and the audit professionals play a vital role in business growth,” he says.
All this change leads to more and rapidly evolving regulation as the industry struggles to keep abreast of the new business environment. The structure of regulation and the sheer amount of change accountants where having to keep abreast of was cause for concern in the last report IAB did on India and, according to Lakhani, these concerns have not gone away. Structure can be solved but the amount of new regulation will have to be lived with.
“There were concerns raised in the last report that new regulations could lead to a turf war because of jurisdictional overlaps between the NFRA, ICAI, MCA and SEBI,” he says. “This was a major concern initially with so many different authorities. However, on closer inspection, it actually appears to be a case of ICAI vs the other authorities. In particular, the rules and guidelines of ICAI vs NFRA is a major talking point. This is due to the overlapping of technical competencies, which has been a major problem for the industry. This has especially affected those who are working in statutory audit.”
Partner at C.R. Sharedalal & Co., a MGI Worldwide member firm
The ICAI and NFRA have recently been in discussions regarding reducing the auditing burden on small businesses. “The NFRA opined that most companies subjected to regulatory impacts and audits would be private, have minimal turnovers, and have insignificant indebtedness,” says Anuj Sharedalal, partner at C.R. Sharedalal & Co., an MGI Worldwide member firm. “The NFRA has recommended that ICAI reconsider accounting standards’ structure, form, and contents for such companies. ICAI, however, had a different perspective. Differing from the recommendation made by the NFRA, ICAI asserted that a detailed audit of a company, irrespective of its size and affordability, helps mitigate the risk of corporate governance lapses. Time will tell if both the bodies can meet common ground and arrive at a conclusion regarding the divergent views on this as well as other topics.
While firms last year complained about the workload created by constantly changing regulations, Lakhani does not see this letting up any time soon – the world is changing so fast and firms have no choice but to keep up with it if they want to be successful.
“As the economy continues to grow and evolve, so will the regulatory environment,” he says. “In terms of changes in regulations, these are mostly made to consider newer aspects which have gained prominence in recent times, such as cryptocurrency. Changes are also made to streamline regulatory measures and upgrade to a higher standard of compliance. It is only natural to see progression and change from within the regulatory framework. Accountants should continue to imbibe a culture of continuous learning to keep pace with these changes.”
Udupi feels the Government has improved the structure and a lot of effort has been put in to simplifying the process across all the regulations. A platform for self-certification under labour laws for start-ups has introduced an online system that allows new businesses to submit their self-certification under the applicable labour laws to avoid any inspection until five years. More than 22,000 compliances have been reduced so far, and about 13,000 compliances simplified while more than 1,200 processes have been digitised. During last few years 103 offences have been decriminalised and 327 redundant provisions/laws removed, while 46 penal provisions of the Companies Act, 2013 and 12 offences under the Limited Liability Partnership (LLP) Act, 2008 have been decriminalised.
Main image credit: EQRoy