Modi’s Decade: How India’s Accounting Industry Transformed and What’s Next

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In the early 2000s, the Indian accounting industry was largely fragmented, characterized by traditional practices, limited technological adoption, and a workforce that was skilled but not globally competitive. The industry, while significant in size, lacked the dynamism needed to compete on the international stage. However, over the past decade, a lot has changed – and for the good.

India’s benchmark stock indices reached record highs as Prime Minister Narendra Modi looks set for a potential third term, a sign of market optimism driven by confidence in his leadership. Likewise, the accounting industry too has witnessed similar growth and optimism.

Over the past decade, a series of strategic initiatives have not only transformed the domestic landscape but also positioned India as the world’s back-office for accounting services. In fact, the Indian accountancy market reached $15.9 billion in revenue in 2023, with a CAGR of 4.4% from 2018 to 2023 [1].

This article explores four key growth areas driven by Modi’s policies, supported by key figures and projected trends for the next five years.

Upskilled Workforce

One of the most significant transformations in the Indian accounting sector is the upskilling of the workforce. Initiatives like the Skill India Mission and the National Skill Development Corporation (NSDC) have been instrumental. Launched in 2015, the Skill India Mission aims to train over 40,00,00,000 crore people in various skills by 2022 [2]. The accounting industry has directly benefited from this with specialized programs in financial management, auditing, and compliance.

According to the NSDC, over 10 million individuals have been trained in financial skills since 2015 [3], significantly enhancing the talent pool available to the accounting sector. Training programs under the Skill India Mission are designed to align with global accounting standards such as the International Financial Reporting Standards (IFRS). This alignment has ensured that Indian accountants are well-versed in the requirements and expectations of international clients, making India a preferred destination for outsourcing accounting services.

Click here to read our blog on 5 Reasons Why India’s Workforce is Specialised for Outsourced Accounting

Increased Foreign Investment

The Modi government’s policies have also spurred increased foreign investment in the accounting industry. Total Foreign Direct Investment inflows in India from April 2000 to December 2023 are $971.52 billion, with $448.90 billion received in the last nine years (April 2014 to December 2023), accounting for nearly 67% of the total [4]. On top of that, the introduction of the Goods and Services Tax (GST) in 2017 simplified the tax structure, making it easier for foreign firms to operate in India. Additionally, the relaxation of Foreign Direct Investment (FDI) norms has encouraged global accounting firms to establish and expand their operations in India.

Data from the Department for Promotion of Industry and Internal Trade (DPIIT) shows that the FDI inflow in the services sector, which includes accounting and financial services, increased by 25% from 2018 to 2023 [4]. This influx of capital has facilitated the growth of state-of-the-art infrastructure, advanced technology adoption, and the creation of numerous job opportunities within the sector.

In the accounting industry, increased FDI has led to the entry of numerous multinational corporations (MNCs) into the Indian market. This competitive environment has driven innovation and enhancement in offering financial reporting, auditing, compliance, and tax advisory services. Firms are now more focused on providing value-added services, maintaining high-quality standards, and ensuring client satisfaction. 

Technological Advancements

Technological innovation has been at the forefront of Modi’s vision for a Digital India. The push towards digitalization has had a cascading effect on the financial services sector. The implementation of the Digital India campaign and the introduction of the Unified Payments Interface (UPI) have revolutionized financial transactions and record-keeping.

The accounting industry has adopted cutting-edge technologies such as artificial intelligence (AI), machine learning (ML), and blockchain for enhanced accuracy and efficiency. According to a report by NASSCOM, the adoption of AI/ML and Blockchain in accounting processes has reduced processing times by up to 30% [5], leading to faster and more reliable financial reporting.

The practical impact of these technological advancements is evident in various sectors. Many firms in India are reporting significant efficiency gains and cost reductions after implementing AI and blockchain technologies. Moreover, global firms outsourcing their accounting services to India benefit from these technological advancements. 

The ability to leverage AI, ML, and blockchain means that Indian accounting service providers can offer high-quality, efficient, and secure services at a lower cost. With India’s technological edge sharpening, it is no surprise that India has established itself as the accounting back-office of the world.

Click here to read our blog on 4 Trends Shaping the Accounting Industry in 2024

Regulatory Reforms

Regulatory reforms under Modi’s administration have streamlined accounting practices, ensuring greater transparency and compliance. The Insolvency and Bankruptcy Code (IBC), introduced in 2016, has strengthened the framework for debt resolution, directly impacting accounting standards and practices.

Another positive indicator driving the growing interest of international accounting firms in India has been India’s ranking in the World Bank Group’s ease of doing business index surging from 142 to 63 in just seven years [6]. Moreover, the implementation of the Indian Accounting Standards (Ind AS), aligned with the International Financial Reporting Standards (IFRS), has made Indian financial reporting more transparent and globally acceptable. This alignment has bolstered the confidence of international clients in outsourcing their accounting needs to India. 

Future Outlooks

India’s accounting industry is now among the largest globally, boasting over 400,000 chartered accountants and a comparable number of cost and management accountants [7].

Looking ahead, the Indian accounting industry is poised for significant growth over the next five years. Continued investments in digital infrastructure, further regulatory easing, and a focus on advanced skill development will be key drivers. The industry is expected to grow at a compound annual growth rate (CAGR) of over 5% between 2024 and 2029, with India solidifying its position as the global back-office for accounting services [8].

All in all, the Modi government’s policies have catalyzed the transformation of the Indian accounting industry. The trajectory set by recent reforms suggests a promising outlook, but it also invites us to wonder what the next phase of transformation in this industry would look like. As Modi embarks on his potential third term, the accounting industry can anticipate sustained growth and increased global integration, reinforcing India’s stature as a hub for accounting excellence.

Click here to read our blog on 5 Ways Accountants Can Achieve Effective Client Engagement

Reviewed By:

Arun Mehra

Arun Mehra

Samera CEO

Arun, CEO of Samera, is an experienced accountant and dental practice owner. He specialises in accountancy, financial directorship, squat practices and practice management.

Bibliography

  1. https://www.researchandmarkets.com/report/india-accounting-market
  2. https://msde.gov.in/sites/default/files/2020-01/Skill-India-Brochure.pdf
  3. https://www.ibef.org/blogs/unlocking-the-potential-of-skill-financing-in-india
  4. https://www.investindia.gov.in/foreign-direct-investment
  5. https://nasscom.in/knowledge-center/publications/nasscom-ai-adoption-index
  6. https://www.bdo.in/en-gb/insights/publications/doing-business-in-india-2023
  7. https://www.theceo.in/blogs/the-accounting-industry-in-india-a-comprehensive-overview

Rajat Kumar

Rajat is a finance and marketing professional with years of proven experience working in finance and investment KPOs. As Samera's in-house content guy, Rajat crafts compelling narratives and insightful content for accounting leaders and firms. With a keen eye for detail and a passion for effective communication, Rajat brings a unique blend of financial expertise and writing prowess to every piece.

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