As the government is moving fast to enable formation of multi-disciplinary partnership firms of professionals in India with necessary regulatory frameworks, the Institute of Chartered Accountants of India (ICAI) is planning to make recommendations on ways to arrange finances for proliferation and growth of such entities in India.
The ICAI, which is a body supported by a law made by Parliament, will prepare a report focusing on bringing finances to such firms.
ICAI President Charanjot Singh Nanda said here on Sunday that discussions were on within the government level also on boosting the financial avenues for MDPs, so that they can grow in size and diversity with some even big enough to rival the global Big Four.
The global consulting and auditing industry is currently valued at around $240 billion, and is growing at scorching pace.
The government has stated that it wants to encourage indigenous professional service firms. The free trade agreements with the UK, EFTA and the ones on the anvil with the European Union are expected to facilitate rapid growth of Indian MDPs.
Commenting on the feasibility of Indian MDPs, Nanda said the five elements, namely regulatory benefits, technology, finance and capacity building will play a key role.
He also stressed the need to have a change in mindset when it comes to developing MDPs.
An ICAI working group on financing of homegrown MDPs will examine various aspects related to MDPs, such as getting funding for setting up offices and infrastructure, Nanda said.
On its part, the Ministry of Corporate Affairs has constituted an Inter-ministerial Group (IMG) on developing the domestic ecosystem of consulting and auditing firms.
The MDP firms will encompass areas like maintenance of cost records, accounting, auditing, assurance, secretarial, legal, valuation, and management, among others.
Experts have said for the first time, there is real momentum behind this effort. “It is not about enabling new small and medium enterprises (SMEs), it’s about creating 10-20 large firms in addition to the ones that are there today. If we don’t have the ecosystem to support local firms, then only the MNC firms will keep getting bigger. MDP is about having regulated business and unregulated business under one umbrella.”, Grant Thornton Bharat’s CEO Vishesh Chandiok recently told FE.
The regulated business is restricted to be practiced by only specific professionals – company secretaries, accountants, lawyers, etc. The unregulated businesses include consulting, M&A, etc. The idea is how do you create enterprises which are multidisciplinary.
“Despite India’s world-class talent pool, domestic firms remain marginal players, particularly in high-value audits and consulting, partly due to structural and regulatory barriers,” the ministry said in anote last month.
In the regulated services, there are various regulations that govern how entities should be structured. All these regulations have tied our hands. For a while, let’s remove all these restrictions. Over time, as MDP practices evolve, we can look at bringing back some of those restrictions.