July 1 is an important date in India's financial and economic landscape. It marks the foundation of the Institute of Chartered Accountants of India (ICAI) and is celebrated as the Chartered Accountants' (CAs) Day. It was also when the Goods and Services Tax came into effect in 2017, marking its seventh year this year. Prime Minister Modi, while addressing the CAs in 2017, had said that just like saints and monks cross our minds when we talk about Dharma and Moksha, it is the chartered accountants who cross our minds when we talk about Artha, accounts, finance and are the sages of the economic world.
Sethurathnam Ravi, founder, promoter and managing partner of Ravirajan & Co. and the former Chairman of the Bombay Stock Exchange (BSE), spoke to BW Businessworld's Arjun Yadav on the role of CAs in driving the Indian economy, the profession's evolution and the reforms needed at large. Excerpts:
How do you see the role of CAs in shaping the Indian economy?
Chartered accountants are the heart of the economy. They drive financial planning, ensure compliance, file returns, and oversee books. They are the conscience keepers of the financial system. Many CAs have gone on to head banks, participate in politics, work in the film industry, and are big industrialists. Despite being a small community in a vast population, their impact is immense. They have a privileged position with a significant role in shaping the Indian economy.
How has the role of CAs evolved especially with respect to mergers, acquisitions, forensics and guiding startups?
When the profession started, it focused on audits and filing income tax returns. Now, it encompasses multiple disciplines, including forensic audits, insolvency, GST consulting, and policy making. Chartered accountants develop business models, lead companies, and play an integral role in the startup space, from inception to profitability. Many CAs specialise in startups, which often can't pay much, yet require significant support. Thus, CAs help create substantial value for startups.
What are your thoughts on how the industry is navigating regulatory and compliance challenges?
When I started in the profession, we had a specific set of acts, rules, and regulations. Now, chartered accountants must navigate numerous regulatory and statutory changes, especially with GST. There are interpretation issues and divided opinions that complicate compliance. Ensuring the department agrees with our compliance efforts is a significant task. Since GST's implementation in 2017, both the CAs and the GST council are still learning and evolving. The council is proactive, regularly adding new provisions and rules. Staying updated on these fast-changing regulations is crucial, making it a very fast-paced environment for CAs.
Maintaining high ethical standards amidst pressure to meet demands and competition is a persistent challenge. What is your word of advice on this?
There's been a lot of talk about ethics, and ethics are only as strong as the society's standards. Currently, due to strict rules and regulations in India, there's little room for discretion. Twenty years ago, gaps in standards left room for unethical practices, but now these gaps are closed, promoting higher ethical standards. While there are always exceptions, most chartered accountants are ethical. When they sign a balance sheet, they take responsibility for it, though there can be interpretation issues and divided opinions. Ultimately, ethical standards must be upheld by all stakeholders, including promoters, businessmen, rating agencies, boards, management, and key personnel. Chartered accountants play a major role in maintaining ethical integrity of the ecosystem.
How do you see the trajectory of talent development in this profession?
First, let me say that becoming a chartered accountant is challenging. The examination percentile is low, which can discourage many aspiring candidates. This challenge requires courage and conviction, and seeing past failures can deter the younger generation. Many avoid the audit line due to other opportunities in business, startups, compliance, and insolvency. As a result, the number of auditors are decreasing, with 92,000 firms and only a few earning significantly. We need to encourage more professionals to enter this field. The institute is taking measures, but the perception that failing to qualify will harm one's career remains a significant challenge.
While the younger generation is embracing technology well, how are the incumbents coping?
The younger generation has a natural advantage with technology, growing up with tech-laden devices from a young age. For older and middle-aged professionals, adapting to technology requires training, but it's essential. Rapid developments in artificial intelligence, data mining, and system audits necessitate technological proficiency. Initiatives like DISA certification by the Institute help professionals stay current. Technology is revolutionising audits with apps and new banks, although tools for forensic audits are costly. Integrating technology with human expertise is crucial for capacity building in chartered accountancy firms.
Any views on the networking arrangements of some firms with international networks in light of some of them coming under the ICAI lens recently?
My view is very simple. There will be people who will be pro to an issue or against it but I am agnostic to it. Why am I agnostic? Because the Institute and the government and all the stakeholders will have to do their work and think of resolution. We are driven by the Companies Act but are we integrating the laws with the international laws? What I am trying to say is, if there is a stipulation that is put to Indian firms and Indian chartered accountants, similar stipulation should be there for everybody. So that there is a level playing field. There will be equality of thought and governance.
What are the areas of reforms at large that you keenly look forward to?
There are several reforms that could be implemented. For instance, improving the efficiency of RERA courts and expediting the resolution process under IBC are crucial. I advocate for more administrative measures to accelerate case resolutions and shift towards dispute resolution over arbitration to reduce costs. Additionally, I support the implementation of a unified accounting system across all sectors to enhance transparency and efficiency. These reforms, especially in RERA and IBC, would lead to faster decisions, quicker resolutions, and benefit all stakeholders, including banks.
Lot of expectations from the upcoming budget with regards to personal income tax? Any wish list that you have?
I expect that the relief on personal income tax will likely be raised upto Rs 10 lakhs, aiming to broaden the tax base while reducing the tax burden on specific groups. I also anticipate a significant focus on infrastructure, electric vehicles (EVs). I hope to see measures supporting affordable housing, particularly providing interest benefits for housing below Rs 25 lakhs. Additionally, I look forward to initiatives promoting manufacturing to generate more employment opportunities. Encouraging self-employment should also be prioritised.
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