The Institute of Cost Accountants of India’s (ICAI) Global Summit 2020 was held in New Delhi recently. The summit focussed on the role of Cost and Management Accountants (CMAs) in achieving high economic growth for India. India’s high growth has been a topic for many observers, particularly, after Prime Minister Narendra Modi’s declaration of an ambitious target of making India a $5 trillion economy by 2024-25. This would make India the world’s third largest economy after the US and China.
In FY 2018-19, India achieved little over $ 2.7 trillion. Therefore, India has to achieve double digit GDP growth continually for five to six years to achieve this target. But the country has been passing through a phase of economic slowdown and it has struggled to achieve a 5% growth of GDP in the current financial year (FY). The recent IMF prediction on India’s GDP for the current fiscal has been 4.8%. Another prediction regarding India’s GDP is that it has to wait for another two fiscal years to attain 6% growth.
Cost minimisation for competitiveness
Cost minimisation with quality products is the key to competitiveness of a production unit. CMAs have a big role to play in achieving this. Unlike chartered accountants who are specialised in financial accounting, CMAs are trained to be efficient in turning around a weak company and advising them on how to be more competitive. For example, in the last FY, the Indian Railways (IR) had an Operating Ratio (OR) of about 103%, which was historically one of the highest. Here, CMAs had a role to advise on how to turn around the IR. Balwinder Singh, President, ICAI, mentioned, “CMAs are playing a vital role in achieving the national goal and supporting the government, policy makers and business entities in devising cost effective business models with life cycle advantages for all sectors of the economy to improve their performance, ensure sustainability and enhance effective utilisation of resources developed by them.”
Can India match China?
In the summit, quite a number of speakers pointed out different steps that can be taken to achieve high GDP and most of them cited examples from China. China has been a country that exports the highest percentage of its industrial GDP. It is widely assumed that Chinese success in the industrial field including its high exports is a unique phenomenon. Some also believe that it is not possible for any country to achieve the level of Chinese success in the industrial sector in near future. China’s unique political structure - with a single party rule - is often cited as a major reason behind China’s industrial success.
It is true that the political structure has a role in governing a country and its economic growth. But Chinese success is almost entirely the result of a special economic structure.
The universal literacy and health facilities were almost complete before implementing the New Economic Policy (NEP) in the late 1970s. School education system facilitated the supply of trained labour. The old Towns and Village Industry (TVI) system was modernised. The modernised TVI system is the key to Chinese industrial success.
The small TVI units are the basic units. In most of the countries including in India, the small scale industry faces different problems like inadequate cheap finance, sustained market, product quality and recovery of revenue. Most of the small units cannot survive due to its scale disadvantages.
The uniqueness of Chinese success can be traced and linked to the efficiency of its TVIs. The small Chinese TVI units can reap the advantage of the large scale sector by purchasing raw materials, using logistics, global marketing of the product and use of high level designing and through attaining latest technology. Each member of a TVI in a local production centre is informed of what to produce, where to sell and at what time. They are completely updated about the product design and specifications. They do not have to spend on attaining this information and that is why the cost of production of Chinese goods is extremely competitive in the world market.
Views of prominent speakers
Som Prakash, Minister of State, Department of Commerce and Industry, Government of India was present at the inauguration of the summit. He explained how the Indian government has been preparing for achieving high growth. In this regard, he pointed out that CMAs have a definite role in achieving high growth for India. Later he told BE that the new Industrial Policy was going to be released very soon.
Some important points about the Indian economy were raised by Anurag Singh Thakur, Minister of State, Department of Finance and Corporate Affairs, Government of India. He pointed out that increasing efficiency through proper utilisation of resources and protecting the environment was important. He also said that India had been able to save a huge amount of financial resources by lowering corruption.
Piyush Goyal, the Union Minister for Commerce and Railways, at the very beginning of his speech, remembered Lal Bahadur Shastri, commemorating his death anniversary (Shashtriji died on January 11, 1966) and spoke of his honesty and efficiency. In his speech, Goyal pointed out that India has to do better in business. He said such items should not be imported which can be manufactured in
India. According to Goyal, India should to import only those items which were not available in the country. In the conference a book - “A guidance note on Internal Audit of Insurance Companies” was published.
A large number of topics including education, agriculture, MSME, banking and finance, digitisation were discussed at length. Quite a large number of participants were satisfied with ICAI and appreciated the programme.