Govt takes first steps towards a domestic firm to take on global Big Four

Industry professionals welcome move, but point to onerous regulatory hurdles, such as a block against multi-disciplinary collaboration and advertising, that need to be tackled first

Nearly eight years after Prime Minister Narendra Modi first flagged the idea of establishing a large Indian consultancy firm on a par with the global Big Four, the government has initiated a dialogue to identify regulatory hurdles and the way forward.  

A concept note issued by the Ministry of Corporate Affairs (MCA) recently on creating an Indian multidisciplinary partnership (MDP) firm has raised long-standing issues, and analysts said addressing them would give a good start to this effort. 

The Big Four — Deloitte, EY, KPMG, and PricewaterhouseCoopers (PwC) — are the world’s largest audit and accounting firms by revenue. All four are headquartered in London. In India, such consultancies are also known as multidisciplinary partnerships.

The MCA in its concept note said India needs to lessen its dependence on multinational corporations for “strategic audits and consulting” in order to strengthen its economic sovereignty and achieve the goal of an Atmanirbhar Bharat.  

Not just self-reliance, the sheer size of the business, too, is a major factor behind the move. The government has acknowledged the growing size of the consulting business, which makes up a far larger share of the revenue potential and strategic influence in the professional services industry beyond just audit. The global consulting and auditing industry is valued at nearly $240 billion, the MCA note pointed out.  

Other large non-western economies, too, are seized of this matter.  

China, for instance, announced support for its top 10 domestic firms back in 2009, and ran specific training programmes focusing on management coordination and quality assurance. As a result of its interventions, the top 10 domestic firms grabbed a 25 per cent share of the Chinese market share by revenue from audit and assurance services in 2020, leaving the Big Four with 19 per cent. 

The committee on the creation of an Indian version of the Big Four, led by MCA Secretary Deepti Gaur Mukerjee, recently held its first meeting to discuss the way forward to “enable the growth of large Indian firms capable of competing with leading international players.” Analysts said the government has identified regulatory hurdles that need to be addressed in order to achieve this goal.  

The consolidation way 

Experts feel that as businesses in India become larger, more complex, and expand globally, professional services in the country have to match the steps. To achieve the necessary scale and size, domestic firms would need to consolidate. The Big Four in India, for instance, emerged from the consolidation of local Indian firms, some of which are over 100 years old. 

A senior executive at a Big Four firm said, “The vision to establish large Indian MDPs is both timely and essential for India’s continued economic progress…The professional services need to change their mindset towards consolidation.”  

“It costs money to grow big. The Big4 Partners have funded from their own capital. In fact, each of the firms invests a significant percentage of its revenues back into the firm towards people, technology, and infrastructure,” the executive added, requesting anonymity.   

A study by executive search firm Amrop said the Big Four have been growing advisory practices at more than twice their historical growth rates. Deloitte and EY together have over 2,000 partners and drive over 60 per cent of Big four revenues in India.  

In June this year, a meeting was held by the Prime Minister’s Office to discuss policy interventions needed for having a multidisciplinary domestic advisory and audit firm that can compete with international players such as the Big Four. 

Chaired by Shaktikanta Das, principal secretary to the Prime Minister, the meeting was attended by top government officials, including then secretary, department of economic affairs, Ajay Seth; secretary, financial services, M Nagaraju; revenue secretary Arvind Shrivastava; and the MCA secretary. 

Subsequently, Das met the committee of secretaries on September 23 to review the progress made on the discussions for having an Indian MDP.   

A say in standard-setting 

Professionals and advisory firms feel that India needs to have a voice in global standard-setting, especially as standards around evolving crypto accounting and artificial intelligence accounting are being set by global bodies.  

“Accounting is the language of business. Norms on ESG (environmental, social, and governance), and financial reporting are all global, which India has had to adopt,” a top industry executive said.  

Experts point out, however, that easing regulation is just one part of the puzzle. Creation of any such firm, which brings under one roof professionals from different (though linked) services, would also require greater coordination between all professional institutes, financial backing to expand as well as an updated curriculum for training, among other things.  

“Domestic professional bodies have been averse to MDPs for fear of losing dominance or on the pretext of facing operational difficulties …Different professional bodies currently lack cohesiveness and coordination on MDPs and other matters,” said Ashok Haldia, former secretary, Institute of Chartered Accountants of India (ICAI), adding that the government has so far not given enough impetus to support the creation of MDPs in India.  

To be sure, the Big four firms have all evolved over decades, or even longer. As economies opened up, these firms followed their clients moving abroad and expanded with them. In India, the professional services have not kept pace with liberalisation. 

“The ecosystem here has not developed and so the mindset has not developed either. We are already late to the party. It will take time to evolve, but at least there is now serious discussion on this issue,” said Pavan Kumar Vijay, founder, Corporate Professionals, a legal, techno-legal, and financial consultancy. Vijay, former chairperson of the Institute of Company Secretaries, said that he had come up with a proposal for “Collaborative Commerce” (between different professional institutes) in 2003, but it could not be taken forward.  

Regulatory hurdles 

Experts suggested that regulations, such as advertising restrictions placed on professional services firms, need to be eased to let them compete with global firms. Steps also need to be taken to update the syllabus and prepare young people to work in MDPs, they said.  

The advertising restriction was placed due to concerns over ethics and the view that professional services should not be run like other businesses. Experts said this was also done keeping in mind that it would have put smaller firms at a disadvantage because they would not have the resources to advertise compared with larger ones.  

The suggestion from industry is to adopt a more liberal approach towards allowing advertising, while ensuring there are checks in place against any wrong or misleading claims.  

On the regulatory side, the government has also acknowledged that restrictions placed on firms from partnering with other professionals have put them at a disadvantage. Experts said that the government needs to enlist not just chartered accountants (CAs), cost and management accountants (CMAs), and company secretaries (CSs) as part of a MDP but also other professionals such as lawyers and management consultants. Another suggestion is to merge CA, CS, and CMA institutes into a single body with three divisions. 

Indian regulations do not allow professionals such as CAs, CSs, lawyers, and actuaries to work together under a single firm structure, limiting collaboration and the ability to offer integrated services like those provided by international firms.  

“If Indian software companies can compete with global companies, then there is no reason why we cannot compete with the Big Four,” said Dinesh Kanabar, CEO, Dhruva Advisors.  

CAs, CSs, and lawyers face stringent restrictions on advertising and branding due to regulations set by their governing bodies. A senior CA said the rules even restrict the size of signboard a professional is allowed to display outside their office. 

“We should not make too many rules as to who can partner, how to register etc, but ensure that there is accountability in things such as audit, or advertising as a professional services firm,” the senior CA added.  

Grant Thornton Bharat CEO Vishesh C Chandiok said his audit firm could serve as a case study for building an Indian global accounting and consulting firm with a workforce of over 10,000. “With proposed deregulation of Indian restrictions on multi-disciplinary firms, we are confident of creating a 100,000-people Indian Big4 by the end of the decade,” said Chandiok. 

Some experts are of the view that the government has failed to adequately support domestic firms, including those that have the competence to deliver quality services. “The government should come out with a policy to reserve or give preference in assignments, and offer tax incentives on the lines of (those granted to) MSMEs (micro, small, and medium enterprises) for Indian networks meeting the minimum technical, infrastructural, and organisational criteria,” Haldia said. 

As the consultation process gathers steam, the general consensus among stakeholders is for the government to ease regulation and boost support if India is to catch up anytime soon with the organisational strength and sway of the Big Four.