- Big News in the Indian Accounting Industry!
- An Economic Times article has sparked buzz around the Government and ICAI’s push to create “Desi Big4s.”
- After Prime Minister’s 2017 call for Indian CA firms to build global giants, we’re finally seeing regulatory changes to make this vision a reality.
Backstory
Currently, Deloitte, EY, KPMG, and PwC are known globally as the Big Four in the accounting world.
In May 2024 Nirmala Sitharaman The Finance Minister of India asked this question at the Bihar Chapter of the Institute of Chartered Accountants of India (ICAI),
“Why is it that despite the large number of high-quality CAs in India respected worldwide—our CAs often become leaders and Partners in Big 4 firms rather than forming a Big 4 in India?”
This sparked a conversation and Sitharaman challenged the ICAI to include this ambitious goal in their 100-day agenda as part of the Viksit Bharat 2047 vision.
She is not the only one to raise this important question – In 2017, Prime Minister Narendra Modi called on CAs to establish four large, homegrown firms that could rival the global giants.
But wait before that let us give you some statistics.
The current landscape of CA Firms in India
The CA firm landscape in India is a dynamic and evolving one, with approximately 96,000 firms dotting the financial landscape of the country. Here’s a closer look at the numbers:
- Proprietary Firms: 66,265
- Partnership Firms: 26,834
- Sole Practitioners: 3,845
Although there are around 26,834 partnership firms, only about 400 have 10 or more partners!
Big question…
What is stopping Indian CA firms from growing?
Early this year ICAI President Ranjeet Kumar Agarwal told Business Today, “India has no dearth of talent. A large number of Indian CAs are also working abroad.”
Then what is the challenge? The challenge lies in scaling up these firms within India.
The goal is to help these firms grow bigger through mergers, incentivized by new policies and tools that the ICAI is developing.
To solve this…Government & ICAI is stepping up
The Indian government is stepping up to the plate, recognizing the need for domestic CA firms to not just survive but thrive on a larger scale.
To make this happen, they are:
- Tweaks in the LLP Act: Considering amendments to the Limited Liability Partnership (LLP) Act and the Companies Act to enable domestic accounting firms to merge and scale up. (As reported by Economic Times, likely to be amended in the Winter session of the Parliament to be held in December 2024)
- Regulatory Easing: The Ministry of Corporate Affairs (MCA) is in discussions with the ICAI to relax key provisions in its regulatory framework, making it easier for CA firms to aggregate and compete with the Big Four.
ICAI’s strategic steps to facilitate mergers
To encourage mergers, the ICAI has made two significant changes to its guidelines.
ICAI President Ranjeet Kumar Agarwal revealed that a Committee for Aggregation of CA firms has been formed to create guidelines for:
- Networking
- Multidisciplinary Partnerships
- International Networking
- Mergers and Demergers
- Advertising
Firms will have up to 10 years to separate if a merger doesn’t work out, instead of 5 years, allowing them to retain their original names and firm registration numbers.
An LLP can now become a member of another LLP, allowing both to pool their resources and bid for large-scale projects while maintaining their individual identities.
The ICAI’s recent changes will allow firms to adapt to this increasing demand by joining forces, leveraging shared resources, and eventually, perhaps, becoming global players.
Why the push for Desi Big 4s?
This initiative isn’t just about growing larger firms, it’s about creating a new era for Indian Chartered Accountants.
Currently, the Big Four dominate the Indian audit market, but with these new initiatives, Indian firms are being set on a path to change that dynamic.
As India’s economy continues to expand, the demand for robust accountancy and audit services is growing rapidly.
Wrapping up…
The challenge is clear, and the groundwork is being laid.
The next decade could see the rise of an Indian auditing giant that not only competes with the Big 4 but also sets a new standard for global accountancy.
