Role of CA in achieving $5 Trillion Economy | India
Author:- HITESH GUPTA
Keywords:- Audit, accounting, trillion, economy, Chartered Accountant, ICAI, Nation-building, dynamic
INTRODUCTION
“A $5 Trillion economy needs a robust audit ecosystem. The audit market has to be open, dynamic, and competitive for achieving this target” – says IFAC Deputy President Mr. Alan Johnson
The Prime Minister of India, Mr. Narendra Modi had announced an ambitious target of a $5 trillion economy for India by 2024. If it is achieved, then India will become the third-largest economy in the world.
The Economic Survey of 2018-19 highlighted that such growth can only be sustained by a virtuous cycle of savings, investment, and exports catalyzed and supported by a favorable demographic phase. Investment, especially private investment, is the key driver that drives demand, creates capacity, increases labor productivity, introduces new technology, allows creative destruction, and generates jobs.
CAs are considered partners in growth and nation-building. Hence, India cannot achieve the target economy without the contribution of CA professionals. Since the time $5 trillion economy target has been announced, it has become a hot topic. As to what and how the CA profession, can contribute and work together to make this target a reality. Many discussions have been held across the country as to what opportunities and new work areas are/will be present which will significantly impact the Indian economy.
Before we enter into the phase to understand the role of a Chartered Accountant in achieving this target economy. Let’s have an overview of the $5 trillion economy.
WHAT IS A $5 TRILLION ECONOMY?
The GDP of an economy is the total monetary (rupee) value of all goods and services produced in an economy within a year. GDP is the deciding factor among economies (countries) as to who is the largest and so on. In 2014, India’s GDP was $1.85 trillion. 2019, it was $2.80 Trillion. In this way, a target has been set that India’s GDP should hit the mark of $5 trillion by 2024.
The $ 5 trillion economy is the size of national economy as measured by the annual Gross Domestic Product (GDP). Apart from the monetary definition, a $ 5 Trillion Economy calls for pulling all the economic growth levers. Investment, consumption, exports, and across all the three sectors of agriculture, manufacturing, and services.
ROLE OF A CA IN ACHIEVING A $5 TRILLION ECONOMY
A CA’s contribution towards achieving the target of a $5 trillion economy can be through the following 3 sectors:
1. PRIMARY SECTOR
Investment is the key to the flourishment of areas like agro-processing, and exports, Agri startups, and Agri-tourism, where the potential for job creation and capacity utilization is far less.
However, an Investment needs to be driven to strengthen both public and private extension advisory systems. Hence a CA possesses the requisite knowledge and skills to educate the farmers about technology, investment perspective, and management practices.
Also, linking the organizations with commodity exchanges would provide agriculture commodities more space on international trading platforms and reduce the burden of markets in a glut season.
All such reforms in the primary sector require the technical skill, know-how, and wisdom a CA has to guide the people of the country toward the most beneficial path.
2. MANUFACTURING SECTOR
For this sector, a three-pillar strategy has been suggested to achieve the required expansion of output. To focus on existing high-impact and emerging sectors as well as MSMEs.
For Micro, Small, and Medium Enterprises (MSME), the working group said there is a need to improve access to funding by way of the development of SME credit risk databases, SME credit rating, and the creation of community-based funds.
Hereby, a CA can bridge the gap between the MSMEs and the financial institutions (granting these benefits). A CA can prepare the necessary documents required to be prepared by the lenders to avail these benefits. In this way, the MSME sector can improve their investment plans and help contribute towards the GDP of the country.
3. SERVICE SECTOR
This sector contributes significantly to India’s GDP, and a goal of around 60% contribution of the services sector has been envisaged for 2024.
To promote the growth of accounting and financial services, there is a need to introduce FDI in the domestic accounting and auditing sector, a transparent regulatory framework, and ease restrictions on the client base in the accounting and auditing sector.
This is the sector in which a CA can contribute the maximum. A CA should not only provide his services domestically but also export his services and also become a part of the Services Export Promotion Council (SEPC) and help in bringing foreign exchange to the country.
Now the field of a CA is not restricted to Audit, Income Tax, and Indirect Taxes. Rather it has expanded into other areas like FEMA, IBC, Foreign Country Registrations, etc. Hence, how a $5 trillion economy can be achieved has rather expanded and a CA can explore work in other established areas as well.
OPPORTUNITIES FOR CAs IN THE FUTURE
The Government is working hard to realize Prime Minister Narendra Modi’s dream of making the country a five trillion-dollar economy by 2024. It has taken steps to overcome the phase of economic slowdown. The nation is witnessing a new sense of dynamism and several initiatives are being taken in line with Modi’s vision of ‘New India’.
While several fundamental and path-breaking reforms have been undertaken in the form of the Insolvency and Bankruptcy Code and GST. The continuous opening up and liberalization of FDI have resulted in unprecedented inflows of FDI into the country. In this way, rather there lies an unprecedented burden on the shoulders of the CA fraternity. To contribute as much as it can to make this dream of a $5 trillion economy into a reality.
Also, ICAI is very much active in developing such policies and frameworks which shall enable a CA to impart his duties in a professional way towards society. There lies a vast sea of opportunities for CAs in the coming times which can be exploited to serve the country in a much better way.
Investment is one such segment in which the expertise of a CA is required owing to his analytical skills and skeptical approach toward a company. Investment advisory services can be one of the domains in which a CA can hold up his market and help in the circulation of money in the economy. It is considered one of the most important factors for the circulation of money from people to corporates. Thus, a CA’s role in this factor will only enhance the flow of money in the economy.
The following opportunities can also be explored by CAs for work areas:
1. INCREASE IN EASE OF BUSINESS TO PROMOTE PRIVATE INVESTMENTS
Over the last four years, the government has scrapped over 1,300 antiquated laws! It has done away with a lot of archaic procedures, rules, and regulations.
Through a series of reforms, India has jumped up 65 positions in The World Bank Ease of Doing Business. Hence, the efforts being made by the government require equal support from the CA profession. A CA can help in creating awareness about investment plans/schemes for big corporates. Which will help in promoting ease of doing business in India.
Also, it can be used to influence foreign investors and foreign corporates to make investments in India. So that the flow of money in the economy can be enhanced in the form of foreign exchange and jobs, and other related opportunities.
2. WOMEN’s PARTICIPATION IS KEY
India cannot grow at high rates over 3 decades without gender parity. In India, only 26% of women work. If a major chunk of the population is not working. And consciously not putting women into positions of power, it will be very difficult for India to grow.
Similarly, our CA profession cannot grow without equal contributions from Women. The strengthening of policies to promote Women CAs in both practice and job areas. It will encourage and inspire many young girls in the country to become a part of this reputed CA profession. Working shoulder to shoulder with men to help in achieving a $5 trillion economy.
When both men and women in our professional work collectively to serve the country. Then the target economy will be achieved.
3. WORK OUTSIDE TRADITIONAL AREA
A layman has an understanding that a CA does only traditional work like audits, income tax, and indirect taxes. However, in the present era, there have been many developments in terms of work outside traditional areas. Like IBC, FEMA, International Taxation, Financial services to NRIs and corporates, etc.
Such development has opened floodgates of work and expertise required in the market that CAs are now adopting to the need of the market and providing their services to various types of clients. If our CA profession and the people connected with it continue to strive forward in these fields. Then definitely it will help in contributing to the GDP of the country.
STEPS REQUIRED TO BE TAKEN BY A CA AND ICAI
ICAI needs to help the CAs in achieving a $5 trillion economy for India by 2024. The policies and frameworks set up by ICAI shall be followed by every CA diligently and in a rightful manner. It is important to highlight that ICAI has been working day and night in making the auditing and the accounting profession as per the International requirements. Along with helping the CAs in adapting to the latest and ever-changing technological advancements in the profession of CA for carrying out their duties.
Since businesses around the world are getting more complex, India will benefit from the technical competence and skills that Indian CAs possess with them while performing their duties. To meet such high complexity in businesses, a CA’s role becomes all the more important to decipher such complexity to the general public.
Also, considering the present time, ICAI and the government of India should encourage the formation of multidisciplinary firms. That is audit, tax, and legal services coming from a professional firm under the same roof. The idea behind such a concept is that one CA not perform the audit of a complex business organization without having multidisciplinary skills in the audit team. Such a firm is important to deliver high-quality services to its client through its variety of skills and competence. However, the only concern that such a multidisciplinary firm should have been that the independence of the auditor should not be hampered in any way.
Presently, there’s a need for CAs to drive sustainable growth in the services and industrial sectors and throughout the economy. Hence, ICAI can issue such auditing and accounting framework in India. Which can help CAs to promote corporate governance and reduce the risk of failures of business in the economy.
CONCLUSION
The services sector’s significance in the Indian economy has continued to increase over the past years. It has given a major contribution to the country’s GDP. Since CAs are considered partners in growth and nation-building. Hence it goes without saying that CAs are going to play a major role. If India has to achieve a $5 trillion economy by 2024.
Through their transparent work and commitment to the welfare of the country. CAs have been one of the backbones for the country’s economy to shine in the coming years. However, care must be taken that the pressure to contribute to the economy should not end up punishing the audit firms under the burden of excessive workload.
When the audit and accounting system will be technologically well equipped. Then it will help CAs in performing their duties more creatively and finding new ways of doing the work more effectively and efficiently.
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