Internal rules of ICAI, bar councils restrict emergence of India’s Big 7: Sanjeev Sanyal

PM-EAC member Sanjeev Sanyal

Despite Indian talent being the backbone of the global Big Seven — the world’s largest audit and consultancy firms — India has failed to produce its own multidisciplinary giants, said Sanjeev Sanyal, member of the Prime Minister’s Economic Advisory Council (PM-EAC), pointing to restrictive internal rules of professional bodies like ICAI and Bar Councils as the core reason. These bodies, he says, regulate in isolation, discourage brand-building, and prevent firms from offering multidisciplinary services under one umbrella.

In an interview to Moneycontrol, Sanyal speaks on regulatory roadblocks, crypto, inflation, need for coordinated reforms, and how India can pave the way for home-grown Big Seven-style consultancies.

You speak of reforms to help Indian multidisciplinary consultancies emerge. What is holding back Indian firms from competing with the Big Four audit firms and the leading global consultancies?

It is not a big four, it has to be a big 4 plus three, because it is a big four of audit firms plus three global consultancies. So, take it as Big Seven. It is ironic that all these big seven companies are heavily dependent on Indian talent, but there are no Indian big seven multidisciplinary consultancies. Note that the consultancy industry is a factor of magnitude larger than the audit industry. So, this is an area where we should see Indian companies. There are many issues that need to be looked into in this. Most of the changes actually need to be made by the professional bodies, but nevertheless, the government can also encourage the changes.

Can there be incentives in this area? Like a PLI for services?

First of all, we need to remove impediments for these multidisciplinary consultancies to emerge. So, you can only begin giving incentives after you remove the impediments. The first step is to remove impediments and the biggest impediment to this are the internal regulations of each of these professional bodies which do not allow multidisciplinary consultancies to emerge in India.

When the government or PSUs hire these consultancies, there is a threshold of Rs 500 crore. Does that contribute to the problem?

That is one small part of the problem. Tendering rules are an issue, but the biggest issues are not the tendering rules. The real problems are the internal rules of these professional bodies such as the ICAI, Bar Councils etc. All of them are basically trying to regulate their professions in isolation whereas the game is of multidisciplinary consultancies. After all, PWC does not only do audits. McKinsey does not only do management consultancy.

They give multidisciplinary services worldwide. So, how do you create a multidisciplinary Indian equivalent? You cannot do so in India because each one of the  professional bodies does not allow multidisciplinary consultancies to emerge. Furthermore, they discourage brand-building.

Each professional body wants to protect its little turf. Therefore, you cannot have these multidisciplinary firms. So, we need to change these rules to allow multidisciplinary consultancies to emerge. Foreign companies operate in India by essentially creating proxies of various kinds.

In each field, they create a separate proxy in India while they can create a branding abroad. Meanwhile an Indian company cannot create a brand in its home market. There needs to be more interaction between the professional bodies themselves. They have to begin to think about this issue in a holistic way rather than in a narrow perspective of their little turf. Government can support but ultimately, these bodies have to build a national consensus on this.

Any reforms that we need urgently?

Domestically we are doing a very large number of process reforms. These are the nuts and bolts reforms that very often don't reach the headlines. We are  looking into what are the rule changes that we need in order to allow Indian multidisciplinary consultancies to be built on a global scale and so on.

You recently flagged an instance where Nike featured a Bangladeshi individual in a brand campaign aimed at Indian consumers. What happened and why you believe this reflects a gap in how global brands understand Indian market sensitivities?

My simple point is that when a multinational company wants to do something targeted at India, it is strange that they do not do the basic research. MNCs entering into India do need to be aware that if they are doing a targeted campaign towards an Indian consumer, that there are certain Indian sensitivities and they should be aware of them.

Now the US has come out with legislation on some parts of stable coins on the crypto. The Indian government is yet to make up its mind on crypto. The RBI is against it. What is the way forward for crypto in India?

I have stated for quite some time that there are two parts to a cryptocurrency. One of them is the blockchain technology, which is a distributed ledger, and the other is the algorithmic issuance of tokens. These are separate things. A cryptocurrency basically combines these two. The algorithmic issuance of tokens is not an innovation at all. This could have been done years ago. It is the blockchain, which is a distributed ledger, that is the innovation. But that innovation, while it is useful, does not mean that we have to be excited about algorithmic issuance of tokens. After all, we do not allow anybody to issue currency in India. So, why should we allow an algorithm? This is my personal view, that the algorithmic issuance of tokens should not be allowed.

The central bank must have a monopoly on issuance. The state has a monopoly on issuance of currency and that should not be disturbed.

However, blockchain can be utilised as a ledger. After all, the Indian rupee exists in many formats. It exists as a coin, it exists as a note, it exists in electronic form. So, it can also exist in a blockchain compatible form which is basically what a stable coin is. I am not in favour of algorithmic issuance of currencies. It has to remain in the control of the central bank.

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Inflation has been quite controlled for some time. Do you think the period of high inflation is over or are there some risks?

Inflation has come off very significantly despite the recent spike in oil prices. So, as things stand, it looks like there is no real pressure on inflation and the Reserve Bank is quite right in having taken the space to both reduce interest rates and reduce the CRR to improve liquidity. I think the Reserve Bank's actions are in line with the reduction in inflation and they are absolutely correct in their assessment.

Do you think there is still a need for revising inflation framework targeting? There were some views that it should be raised upwards.

I think the 2 to 6 percent range has worked well for us and this should be fine. What needs to be done perhaps is to revise the CPI basket and base-year. We need a more modern basket which reflects today's consumption basket. That will be a better reflection of actual inflation in the system.