Tuesday, August 14, 2012


CA profession has been rendering highly valuable services to the national economy and the society. The integrity, independence, capability, credibility, competence and a complete devoted professionalism for growth of their clients and employers have brought in a new sense of confidence in the government about the profession. There could be some minor exceptions but largely Indian chartered accountants are highly respected and valued for their professionalism. 97th Amendment in the Constitution of India made in the month of November, 2011 (effective from February, 2012) by inserting Article 43B has made formation of cooperative as fundamental right of the citizens of India. Detailed provisions have been made for formation, administration and dissolution of cooperatives. Para 2432M of newly inserted Part IXB provides for mandatory audit of accounts of cooperative societies. States are required to maintain a panel of auditors for cooperatives to select auditor for them and get their accounts audited. Consequent to constitutional amendment, all the State Governments are required to amend their co-operative Societies Acts on or before February, 2013 to incorporate provisions in line with the matters provided in the Constitution including mandatory audit by chartered accountants. On the one hand it is going to be a big professional opportunity and on the other hand it shall strengthen the cooperative movement in the country with the professional help and
support by the CA fraternity. Practicing chartered accountants have to rise to the occasion and prove to the Government that faith imposed by it on the profession was a correct move. There are many more new professional opportunities knocking our door and we will bring the same to your knowledge on an ongoing basis.

The Indian economy is today suffering from a negative sentiment arising out of several developments in the past few months, including:-

  • The taxation wing of the government has generated a lot of unnecessary heat by bringing in General Anti Avoidance Rule (GAAR), direct tax code, retrospective amendment in tax legislation, a complete denial of Double Taxation Avoidance Treaty, continuance of threats to review all international transactions, investments and various kinds of business transactions with a special negative approach. This has severely impacted genuine business activities including foreign direct investment, Indian investment outside India, most importantly even the local investments and new business decisions and actions.
  • A large agitation against corruption in the politics and bureaucracy has diverted their guns on Indian businessman. The Indian businessman is not only feeling harassed by corruption but also by unending investigation, questioning, arrest, prosecution and similar other emotional, psychological and legal pressure.
  • The decision of the top judiciary to even question  policy decisions being taken by the politicians and officials of the government have resulted into delays, either no decisions or too safe decisions resulting into very poor growth of the concerned sector. e.g. hefty spectrum fee for 2G Telecom, lack of coal mines and coal linkages for power sector, poor new initiatives in the infrastructure sector have severally impacted growth of business.
  • The capital market is suffering from lack of positive initiative to build confidence among the investors and only cosmetic changes are being  brought in.

A threat of Central Vigilance Commission, CBI, search, raid, arrest and prosecutions have created a lack of directions of the policy in the government, bankers, bureaucrats, businessman and various sectors of the economy. A policy decision by parliament/cabinet supporting transparent policy decisions and amnesty to committee and group decisions is a must.

Pricing of public issue: SEBI need to bring out a major policy shift and ensure that the public issues are priced on the basis of independent valuation by Valuers appointed by SEBI and also there should be a mandatory provision for compulsory bonus issues in favour of the public subscribers, in case the shares issued at a hefty premium and the share price rules substantially below their issue price. For example, in case public is issued shares at Rs. 500 and its market price is below Rs. 400 for more than 3 months in the 1st year of the issue, then the new public shareholders should be issued additional shares on the basis of 52
week average price. In the above example in case the average price is Rs. 100 the new shareholder should get additional 5 times shares as bonus shares so that the real issue price of the share is determined by the average market price. SEBI also need to mandate  special Audit of all large listed companies by ICAI /SEBI committee appointed CAs.

Funds and economic policy: It is important to provide support to the Indian businesses by providing adequate risk capital from Government sponsored PE funds, loans at reasonable rates, stable and visionary economic policy. Banks need to play a developmental role and insistences on collaterals need to be done  away with. The power sector need hand holding for fuel linkage and financial closure. Housing, real Estate and infrastructure sector is suffering from high cost debt.

Agriculture: The state governments need to withdraw all Mandi taxes and charges. There cannot
be restriction on free movement, storage and sales of agro produce. Equity support by FI for storage and capacity to hold stocks by farmers need policy initiatives. New crops development should take a front seat.

The tax laws need to be business friendly and survey, searches and raids by tax officials need to be barred; responsibility should be fixed for high pitch assessments. Requiring all large tax payers to be
subjected to 100 % scrutiny is a negative mindset. Foreign countries pressure to dilute FDI guidelines
against national interest cannot and should not be accepted.

We sincerely hope from the government to give positive signals to the Indian economy by taking
major steps which are business friendly and are growth oriented. The developmental role of the 
government need to be supreme and the regulatory role should remain more as a balancing exercise and not a threat to the continuing growth of businesses.


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