India Inc is short on number crunchers

TRENDS: The scarcity is being felt just as regulatory compliance initiatives have placed a major burden on the finance function.

Rahul Roy, director, Ernst & Young, likes to cite a set of statistics that is indicative of the shortage of chartered accountants in India: "India has only one CA per 10,000 of population, whereas Australia has more than one per 140 people, Canada and UK have more than one per 500 persons and the US has one for 870 people." This, he says, has triggered high attrition levels within the CA fraternity and CAs are able to dictate their own terms in the job market.

Roy, a past president of the Institute of Chartered Accountants of India (ICAI), notes that though the system is producing more CAs than ever before, "the sheer galloping growth in the internal and external market" has led to a situation where the demand for CAs is "at least double" the number that qualifies.

As a result, campus interviews, "which used to receive lukewarm responses in the past, are completely sold out now and average placement salaries are showing growth," he adds.

Between 7,000 and 8,000 students qualify as CAs every year in India, according to the ICAI. It says the bulk of new members joining the profession are being absorbed by the corporate sector (and particularly service sector segments such as banking, telecom, financial services and securities market intermediaries), rather than setting up their own practice.

In 2005, 7,455 freshly minted CAs joined the profession, of whom only 17 per cent obtained a certificate of practice and as many as 83 per cent opted for employment.

ICAI president T A Manoharan points out that during campus interviews held in 11 centres in August-September 2006, the highest pay package for domestic placement was Rs 12 lakh a year, and three others exceeded Rs 9 lakh, while the highest pay package for foreign placement was Rs 27 lakh.

"The average package for domestic placement was in the range of Rs 4.5 -7.5 lakh, while four or five years back it was Rs 1.8 - 2.4 lakh," says Manoharan. A total of 1,334 candidates were hired by 92 companies. The top five recruiters were ICICI Bank (100), Reliance Industries (98), Tata Sons (74), Ernst & Young (69), and TCS (64).

Given the supply shortfall, businesses have started looking at second-tier cities to recruit finance professionals. Companies and accounting firms, Roy notes, are creating in-house training arrangements to enhance internal capabilities.

Mohinish Sinha, associate director at PwC, adds that three trends are contributing to the increased demand for finance professionals and the consequent shortage of CAs: "First, CFOs are now being asked to take charge of strategic activities that drive value, which they were not asked to do earlier. Second, back office functions in BPOs, KPOs and offshoring outfits use CAs, finance and tax professionals, as do equity research organisations. Finally, they are also in demand in SE Asia and the Middle East."

Pradip Kanakia, head of Risk Advisory Services at KPMG India, says the shortage of finance professionals comes just when regulatory compliance and corporate governance initiatives (Clause 49, Basel II, US GAAP) have placed a major burden on the finance function, requiring it to devote significant resources to improving controls, procedures and processes.

Moreover, as a result of Indian companies' ambitious growth plans, says Kanakia, CFOs are becoming trusted partners of CEOs, providing a financial perspective for every strategic decision"" M&As, raising of finance, treasury and hedging, contract structuring, and providing MIS to support business decisions.

Finance now lacks many of the skills needed to fulfil the demands of its new role, but is working hard to acquire them, says Kanakia. Clearly, how the shortage issue is resolved could have a bearing on the health of corporate India.