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BOMBAY STOCK EXCHANGE BROKERS' FORUM (BBF) | MUMBAI, INDIA MARCH 2019 | VOLUME: 7 • ISSUE NO. 12 • `15/-
R.N.I. No. MAHENG/2012/47145
Postal Registration No. MCS/153/2019-21 • MR/Tech/WPP-355/South/2019
Published on 1st (Day) of every month • Posted at Patrika Channel Sorting Office, Mumbai - 400001 • Posting date: 3rd & 4th of every month
FORUM VIEWS
BBF GLOBAL CONNECTS' SOUTH KOREA | JAPAN
INSIDE 28th January - 1st February 2019
In support with
56
Tokyo, Japan
BOMBAY STOCK EXCHANGE BROKERS’
GOVERNING BOARD 201
FORUM (BBF) GOVERNING BOARD 2018 - 19
EXECUTIVE COMMITTEE
Uttam Bagri Anurag Bansal Purav Fozdar Harin Mehta Kamlesh D Shroff Lalit Mundra
Chairman Vice-Chairman Secretary Jt. Secretary Treasurer Jt. Treasurer
GOVERNING BOARD MEMBERS
Anjana Anup Arpit Ashok Hemant Hemant
Vijay Shah Gupta Agarwal Ajmera Desai Majethia
Jay Jitendra Kumar Ketan Kishor Kushal Madhavi
Toshniwal Panda Marwadi Kansagra A. Shah Vora
Mahavir Mehul Naresh Nirav
Lunawat Patel Rana Gandhi
BOMBAY STOCK EXCHANGE
Nithin Parth Rajiv Virender BROKERS' FORUM (BBF)
Kamath Nyati Choksey Mansukhani OFFICIAL MASCOT
2 3 FORUM VIEWS - MARCH 2019
MARCH 2019
MARCH 2019 CONTE
CONTENTS
06 CEO & COO DESK
40 UNIFIED REGULATORY AUTHORITY
FOR IFSC - INTERNATIONAL FINANCIAL
SERVICES CENTRES AUTHORITY
07 BBF GLOBAL CONNECTS -
ONE BBF ONE WORLD
42 BUDGET- ARE WE GETTING
RICH OR POOR?
14 BULLS & BEARS: NFRA - THE NEW
WATCHDOG FOR ACCOUNTANCY
AND AUDIT PRACTICES
43 ARTICLE ON: EMPLOYEES
PROVIDENT FUND
20 THE UNDERPINNINGS OF
EMPLOYMENT CREATION
IN INDIA: AN OVERVIEW
46 CEO 4.0 EMPATHY : KEY TO
FULFILLING RELATIONSHIPS -
PERSONAL OR PROFESSIONAL
22 S&P BSE SENSEX DURING
THE MODI ADMINISTRATION’S
BUDGET SESSIONS
48 SEMINARS & EVENTS CONDUCTED
BY BBF FOR THE PROGRESS OF
JANUARY - FEBRUARY 2019
24 ENTERPRISE SOFTWARE OPTIONS:
LEGACY VS. CLOUD PART 2
26 ASIA-PACIFIC MARKETS
MONTHLY HIGHLIGHTS
50 PHILOSOPHY & SELF MANAGEMENT:
SCULPT YOUR FUTURE
AND INSIGHTS
30 COMPLIANCE CALENDAR
MARCH 2019
51 WELLNESS Q&A:
OSTEOPOROSIS
32 REGULATORY
PULSE
52 HEALING INSTITUTE:
CILANTRO: THE 'SUPER HERB’
34 CIRCULARS
54 FITNESS CLINIC: TOBACCO & DIABETES:
AN UNDERCOVER RELATIONSHIP?
BSE Brokers’ Forum Steering Committee Printed, Published and Edited by Dr. VISPI RUSI BHATHENA, PhD (h.c.)
Uttam Bagri (Chairman) & Dr. V. ADITYA SRINIVAS on behalf of BSE BROKERS' FORUM,
printed at KSHITIJ PRINTERS, 49, Parsi Panchayat Road,
Anurag Bansal (Vice - Chairman)
Ashok Ind. Estate, 1st, Floor, Andheri (East) Mumbai - 400 069.
Purav Fozdar (Secretary) and published from BSE BROKERS' FORUM, 808 A,
Harin Mehta (Jt. Secretary) P. J. TOWERS, DALAL STREET, FORT, MUMBAI - 400 001.
Kamlesh D Shroff (Treasurer) Editor: Dr. V. ADITYA SRINIVAS
Lalit Mundra (Jt. Treasurer) Design by: Harshad Gajera | Photographer: Sanjeev Dubey
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Disclaimer: This magazine is meant for information purposes only and does not constitute any opinion or guidelines or recommendation on any course of action to be followed by the reader(s). It is not intended to be used
as trading or investment advice by anybody and should not in any way be treated as a recommendation. The information contained in this magazine does not constitute or form part of and should not be construed as, any
offer for purchase or sale of any product or service. While the information in the magazine has been compiled from sources believed to be reliable and in good faith, readers may note that the contents thereof including
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4 FORUM VIEWS - MARCH 2019 5
ceo & coo message BOMBAY STOCK EXCHANGE BROKERS' FORUM (BBF)
CONNECTS'
SOUTH KOREA
The US Federal Reserve in its meeting held on 31st
January 2019 also indicated that they are not in any
hurry to increase interest rates in the USA. This will give
Dr. Vispi Rusi a new life line to the global
Bhathena, capital markets; the FII's in
PhD (h.c.)
Indian markets have invested
Welcome
Rs. 6000 crores in the first
JAPAN
week of February and thus they
have turned net buyers. The
year 2018 saw that despite FII's
AND
being net sellers to the tune of
Rs. 32000 crores, the BSE
to Forum Views magazine. SENSEX gave 5.6% return as
INTERIM BUDGET - tried to place money into Dr. Aditya Srinivas
the Indian Mutual Funds
common man’s hand! invested Rs. 1,20,000 crores. This shows that the Indian
stock markets have become independent as retail
The Interim Budget 2019 tried to touch various segments investors are putting money through SIP (Systematic
of the economy especially the common man. The key Investment Plan) and thus contributing into the growth
features which attracted the attention were the increased of the Indian stock markets.
income tax exemption limit from current Rs. 2.5 lakhs to
Rs. 5 lakhs. This would put more money into the hands of
the common man for demand and consumption and thus On the BBF Front:
contribute to the GDP growth of the country.
BBF - Representations
The other features like SME having GST number would Date Topic Represented To
be getting 2% interest subvention loan till Rs. 1 crore, it 14 Jan Reporting of auction and SEBI
will also help SME segment to get credit and thus create pay-in/payout shortages data
jobs at the grass root level. Further suggestions and
request for a review meeting
The SME companies have also been given the preference
in all the Government projects where the 25% of the BBF - Seminars and Events
procurement will have to be done from the SME
companies. This will give lots of business opportunity for Date Topic
the SME companies and thus add to their business and 13 Feb Seminar on Surveillance Measures including
help the economy grow. SME's contribute around 40% of GSM/ASM (With BSE Ltd.) | Mumbai
the total exports and around 45% of the total production
22 Feb Investment Outlook 2019 | Ahmedabad
is done by the SME segment.
15 & 18 Feb CAMP for Single Registration (With BSE Ltd.)
The Interim Budget 2019 BBF - Investor Education & Awareness Initiatives
Institutions
tried to touch various Date
15 Jan South Indians' Welfare Society College
segments of the economy 16 Jan South Indians' Welfare Society College
(Batch 1-2)
especially the common man. 16 Jan Lala Lajpat Rai College of Commerce
and Economics
The defense budget has been extended to Rs. 3 lakh 21 Jan Laxmichand Golwala College of Commerce &
crores which will also give lots of impetus to "MAKE IN Economics (Batch 1-2)
INDIA" and thus create lakhs of jobs in the 22 Jan P. P. Savani University (Batch 1-3)
manufacturing segment. This will also save precious 23 Jan SDJ International College (Batch 1-4)
foreign exchange of the country and thus contribute to 28 Jan M. L. Dahanukar College of Commerce
making the Balance of Payment very strong. The (Batch 1-4)
"BRAND INDIA" will also get boost from this and thus Lala Lajpat Rai Institute of Management
29 Jan
create many jobs at the grass root level.
(Batch 1-2)
30 Jan A. E. Kalsekar Degree College of Arts
RBI has reduced the Repo Rate from 6.5% to 6.25%
which will reduce the cost of capital and thus contribute Science and Commerce
on the consumption side and also on the credit off-take 4 Feb Oriental College of Education (Batch 1-4)
side. The reduced cost of borrowing would also include 5 Feb Vivek College of Commerce (Batch 1-3)
corporates to expand and thus create jobs in the 6 Feb K. J. Somaiya College of Arts and Commerce
economy. The CPI data has still reduced from 2.19% to (Batch 1-4)
2.05% and rise in Index of Industrial Production (IIP)
data from 0.5% to 2.4% as the manufacturing expanded
11 Feb Jashbhai Maganbhai Patel College of
Commerce (Batch 1-4)
28th - 30th January 2019, South Korea | 31st January - 1st February 2019, Japan
to 2.7% thus raising hopes that the demand in the 12 Feb SVKM's Narsee Monjee Institute of
manufacturing segment is rising. The reduced CPI and
the increased IIP index will further give room to RBI to
Management Studies - NMIMS In support with
13 Feb South Indians' Welfare Society College
reduce the interest rates in the coming months and thus
13 Feb PU's Education Services (Batch1-2)
stimulate the economy.
Tokyo, Japan
6 FORUM VIEWS - MARCH 2019
7
BBF GLOBAL CONNECT
BBF GLOBAL CONNECTS’ BBF GLOBAL CONNECT
BBF GLOBAL CONNECTS’
Bombay Stock Exchange Brokers’ Forum (BBF) Connects Tour HIGHLIGHTS
South Korea and Japan - January 2019 • Program was supported by both the Indian Embassy in Seoul and the Indian Embassy in Tokyo. The Indian
ambassadors at both places took personal interest in the outreach program.
BACKGROUND
The growth of the Indian economy requires Capital infusion at all levels, from smaller businesses to larger • The Seoul seminar saw around 125 attendees, while the Tokyo seminar had around 80 attendees. The
infrastructural projects. Foreign Portfolio Investors (FPI) and Foreign Direct Investors (FDI) are an important interest was more than envisaged by the local support partners themselves.
source of inflow for this capital.
Various Indian entities including government, businesses and intermediaries approach potential investors
throughout the world. However, the list of such potential investors is not readily available and this leads to lots of hits
and misses.
The Bombay Stock Exchange Brokers Forum (BBF) is one of the apex trade bodies of the securities firms in India.
BBF is also a member of various international forums like Asia Securities Forum (ASF), International Council of
Securities Associations (ICSA) and International Forum for Investor Education (IFIE). At these forums, we are in
touch with local financial market bodies of various jurisdictions around the world.
Using the rapport and relations built with these members, BBF has embarked upon a mission to target potential
investors of various jurisdictions who would be interested in investing in Indian assets. We began our journey with
South Korea and Japan. KEY OBSERVATIONS
In case of South Korea, we partnered with Korea Financial Investment Association (KOFIA), the Self-Regulatory • Securities firms in South Korea and Japan follow an omnibus structure where the client’s funds and
Organization (SRO) of securities firms and asset management companiesof South Korea.In case of Japan, we securities are held by the securities firms and they invest in dozens of other jurisdictions in the name of the
partnered with Japan Securities Dealers Association (JSDA), the SRO of securities firms in Japan. securities firm without needing to register their final clients.
FORMAT OF THE BBF CONNECTS TOUR • Among the High Net-worth Individual (HNI)’s of foreign jurisdictions, there is a significant resistance in
The tour was conducted in the last week of January 2019. The format followed in both the countries was: registering with the income tax authority of any other country and therefore they find taking Indian
Permanent Account Number (PAN) extremely challenging.
Day 1 - Public seminar
Day 2 - One to one meetings of the attendees with the delegates • There is a general perception that Indian Markets are very complex and most attendees had opinions of
Indian Markets which were dated. Most were not aware of the latest structures and regulations and
The venues were the KOFIA conference room at Seoul, South Korea and JSDA conference room at Tokyo, Japan.
some queries were very basic.
All attendees were invited by our local partners viz. KOFIA and JSDA, since their understanding of the home market
would be deeper than any other agency.
• There were many tax related queries. The attendees were happy to be made aware of the Indian Double Tax
Avoidance Treaty (DTAA) with South Korea and Japan and the benefits under the same.
INDIAN DELEGATION
• The ageing population and very low interest rates in both the countries lead to most attendees being highly
The Indian delegation consisted of office bearers of BBF, an Indian Custodian, an Indian Tax expert, an Indian Mutual
Fund representative and a Stock Exchange representative. Attempt was made to have a composition that covered curious of the higher interest rates in India combined with a young population.
the entire gamut of investing in India with a particular emphasis on Indian Capital and Financial Markets. • The option of coming in the International Financial Services Centre (IFSC) at Gujarat International Finance
Tec-City (GIFT) was very much appreciated. However, the interest towards investing in Indian Equities
INDIAN Delegation along with KOFIA representatives at Seoul (28-Jan-2019)
rather than Derivative instruments was more.
• There was repeated interest shown in investing in Indian Fixed Income Securities starting with Indian
Government Securities and queries on the how were commonplace. There were also queries on style and
manner of hedging the currency risks.
• Some foreign entities who had ventured into India in the past have not had a good experience primarily
because of lack of local domain knowledge. However, they are still open to consider India once more.
• Interest was shown by entities in setting up their Indian operations either in form of 100% owned
subsidiaries or taking strategic (open to both majority or minority) stakes in Indian financial firms.
Indian delegation - left to right (Mr. Myungsoo Sim -KOFIA, Mr. Vinay Purohit -SHCIL, Mr. Ujwal Damani -BBF, Mr. V. Bala-India INX, • Both the countries are happy to promote listing of Indian Securities on their market with special interest
Mr. R. Anand -SHCIL, Mr. Uttam Bagri -Chairman BBF, Mr. Young Won Kwon -Chairman KOFIA, Mr. GaurabParija -IDFC AMC, Mr. Anurag shown for Japanese Securities Receipts (JDR)
Bansal -Vice Chairman BBF, Mr. Vineet Potnis -SHCIL, Mr. Sangchul Park -KOFIA, Mr. Manoj Purohit -Deloitte, Ms. Hanni Kang -KOFIA)
8 FORUM VIEWS - MARCH 2019 9 FORUM VIEWS - MARCH 2019
BBF GLOBAL CONNECT
BBF GLOBAL CONNECTS’ BBF GLOBAL CONNECT
BBF GLOBAL CONNECTS’
SUGGESTIONS SOME LIGHT MOMENTS
- The omnibus account structure is used by many participants for many jurisdictions. India must consider creating 28th January | Korea | Seminar & Dinner with Ambassador at Republic Day Function
some midway to take care of (KYC) requirements and at the same time not disrupt the existing style of operations
of the foreign entities, esp. for well regulated entities in countries like South Korea and Japan.
- The level of understanding and knowledge of the Indian Capital Markets is woefully inadequate. More frequent
knowledge sessions and reach outs are essential for potential investors to get excited about India and consider
India as a serious Investment option.
OUR MESSAGE TO POTENTIAL FORIEGN INVESTORS
At all levels of interactions, the delegation stressed upon the need for all global firms to setup dedicated Indian
investment teams with local talent to the extent possible for higher chances of success.
SPECIFIC DEALS UNDER DISCUSSION
- One large Asset Management Company in South Korea is contemplating setting up Mutual Fund Operations in
India.
- A medium size securities firm in Japan is contemplating taking a minority stake in an Indian securities firm and
using the same as a vehicle to route Japanese Investments into India
- Some Korean & Japanese firms are looking at investing into Indian Government Securities
- One Korean firm is looking at Real estate opportunities in India on a buy and rent model
The indicative size of above deals is in the range of USD 10 - 30 million
Going Ahead
We believe the above is a trickle which can become a flood if dealt well. It is critical that Foreign Investors in India get
right advice and earn reasonable returns since their experiences create a significant word of mouth message in their
rather tight-knit financial community.
BBF will continue its endeavors to improve awareness of Investment Opportunities in India in general and
Indian Capital Markets in particular in the above jurisdictions and more.
Indian Delegation with H.E. Smt. Sripriya Ranganathan, Ambassador of India to South Korea
Indian Delegation with H.E. Shri Sanjay Kumar Verma, Ambassador of India to Japan
10 FORUM VIEWS - MARCH 2019 11 FORUM VIEWS - MARCH 2019
BBF GLOBAL CONNECT
BBF GLOBAL CONNECTS’ BBF GLOBAL CONNECT
BBF GLOBAL CONNECTS’
29th January | Korea | Visit to KSD & Networking Dinner 31st January | Japan | Stock Exchanges visit, Seminar Networking Dinner
12 FORUM VIEWS - MARCH 2019 13 FORUM VIEWS - MARCH 2019
BULLS &&
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Bears BULLS
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auditing practices by auditors as well as bodies corporate were clarifications / reply in order to support its proposal of constituting
NFRA - THE NEW WATCHDOG FOR made, according to the 37th report4 of the Standing Committee on
Finance dated December, 2016 several representations were
NFRA, taking into consideration the practices followed by
developed economies world over:
ACCOUNTANCY AND AUDIT PRACTICES made by the ICAI flagging of inter - aliathe following points of
a) The enforcement of the auditing standards and ensuring the
concerns:
quality of audits moved from self-regulating bodies, in the
a) Multiple Regulatory Bodies: Creating NFRA would result in wake of the accounting scams worldwide, to independent
By Prachi Jain two regulatory bodies (ICAI and NFRA) governing the same regulators like the Public Company Accounting Oversight
audit profession. This would result in duplication of efforts, Board (PCAOB) and Financial Reporting Council (FRC) in the
Advocate, RegStreet Law Advisors and add huge costs with no significant incremental benefits. US and UK respectively. Other major countries have also
This would also change the self-regulated profession to an followed suit. It was recognised in these jurisdictions that
basis. Other than Satyam matter, only in 6 of these cases have externally regulated body. establishing regulators, independent ofthose it regulates,
In the wake of several high profile the Members been found guilty and they have been would strengthen the independence of audit firms, quality of
b) The ICAI Context: A major objective for constitution of NFRA
accounting scams, establishing reprimanded or cautioned.
is to ensure that the functions of setting accounting and
audits, and enhance investor and public confidence in
• 137 of 746 cases taken up for considered beyond the prima financial disclosures of companies.
NFRA is necessary for facie stage by the Disciplinary Committee/Board of Discipline auditing standards as well as enforcement of the same are not
enforcement of auditing were based on complaints by government/regulatory carried out by the same body. It is important to note that like b) World over, the number of independent audit regulators have
increasedover a period as one could see from the membership
the Securities and Exchange Board of India (“SEBI”) which is
standards and ensuring the agencies. The Committee found members guilty in 54 of these
cases, of which in 5 cases, the Committee imposed a penalty a body constituted by an act of the Parliament, performing of International Forum of Independent Audit Regulators
quality of audits to strengthen the of name removal for one year or more and/or fine. dual functions of laying down its own regulations and (IFIAR) which was established in 2006 by independent audit
regulators from 18 jurisdictions and now covers 51
independence of audit firms, Accordingly, it may be noticed that in various cases, ICAI failed
overseeing the enforcement of the same, similarly ICAI has
also been constituted by an act of the Parliament. jurisdictions (including PCAOB and FRC). IFIAR, inter alia,
among others. miserably in fulfilling its responsibility to even investigate into the promotes international collaboration between the regulators.
acts and affairs of the auditors and at a later stage to even punish Accordingly, the constitution of NFRA needs to be re- The oversight structure of auditors within ICAI has not been
and proceed against such defaulting auditors. Further, cases examined in the mentioned contexts where relevant recognized as independent by IFIAR and India is not
T
1
he Ministry of Corporate Affairs (“MCA”) videnotification mechanisms and units have been enabled by and/or within
involving investigation by ICAI took long to conclude, due to which represented on this body.
dated October 01, 2018 notified sub-section (1) and (12) of the ICAI organisation to deliver the twin objectives of robust
the purpose behind the auditor(s) being investigated was
section 132 of the Companies Act, 2013 (“Companies Act” policy making and unbiased enforcement in a timely manner. c) SEBI had engaged M/s Oliver Wyman (OW), an international
defeated altogether.
or the “Act”) with immediate effect. These sections empower the consultant to revisit the structural and organisational issues,
Central Government to constitute a National Financial Reporting In various other cases, ICAI even failed to take preliminary action c) Relevance of NFRA in the context of the Companies Act, re-prioritize areas of focus and to look at the technological and
Authority (“NFRA”) for making recommendations on accounting on cases, which were referred by MCA, for examining the role of 2013: The objective of NFRA is to regulate audit quality and manpower needs of SEBI. OW in its report hadinter-alia stated
policies and auditing standards to the Central Government. In auditor and possible misconduct with regard to 132 listed protect public interest. These, in any case, are also the main that "Currently the Institute of Chartered Accountants of India
view thereof, the MCA notified the National Financial Reporting companies identified by SEBI for suspected abnormal price rise, objectives of ICAI which strives to be a world class regulator. (ICAI) is responsible for maintenance of accounting, auditing
Authority Rules, 2018 (“NFRA Rules”) videnotification2 dated wherein such price rise was not supported by the fundamentals of and ethical standards. However the ICAI's oversight is
November 13, 2018 effective from November 14, 2018.Former d) Auditing Standards: ICAI as a world class regulator would be passive in nature and with limited focus on active
the companies. Such was the lethargic and irresponsive behavior
IAS officer Mr. Rangachari Sridharan was appointed as the first more aligned to market needs, international practices and investigations. In addition, oversight is rendered challenging
of ICAI despite several reminders.
chairman of NFRA. risks and to be able to define and improve auditing standards given the large number of auditors in India (around 15000 vs
It is relevant here to recall the scam in the matter of United Spirits rather than NFRA. around 3000 in USA). Scope to enhance the quality of audit
WHY NFRA? Limited (USL) wherein fraud during the years 2010 to 2013 was has been recognised by multiple supervisory bodies including
e) Disciplinary Mechanism: The Disciplinary Committee of
In the wake of several high profile accounting scams, establishing detected pursuant to the forensic audit conducted by ICAI normally completes the process in a reasonable period of SEBI, RBI and Comptroller & Auditor General of India. In the
NFRA is necessary for enforcement of auditing standards and PricewaterhouseCoopers (PwC) UK with the assistance of PwC about three to four years. long term, we recommend that SEBI drive the case for
ensuring the quality of audits to strengthen the independence of India. Ironically, Price Waterhouse was the auditor for USL till establishing a separate regulator for auditors which is
audit firms, among others. 2010-11. However, till date ICAI has not taken any action against f) International benchmarks: The Public Companies independent of audit profession. This body must be set up
the errant auditors. Accounting Oversight Board (PCAOB) of the US may be with a clearly defined mandate, adequate resources for active
Statistical analyses carried out by MCA revealed as follows: regarded as a possible closely comparable body to NFRA, if monitoring and appropriate enforcement process. In the near
• Of the 1,972 cases taken up by the Disciplinary One must not forget the PNB Scam case, wherein various media notified. It is relevant to note that PCAOB has evoked mixed term it is recommended that SEBI provide inputs for the role of
Committee/Board of Discipline of the Institute of Chartered articles state that if there was a breakdown of checks and responses in its ability to improve audit quality. The PCAOB function of National Financial Reporting Authority with
Accountants of India (‘ICAI’), only in the matter relating to balances in PNB, the auditor should have been the first one to budget for 2016 is estimated at $250 million and is enabled by respect to supervision of auditors (providing services to listed
Satyam Computers have the members been permanently point it out. One of these articles goes on to further state that the 750 audit staff. The challenges of availability of trained and companies) and mechanisms for interaction with SEBI".
removed. Only in 14 of these cases, has a penalty of one year technology auditors of the bank need to be asked how come two qualified audit staff and the cost thereof may need to be
or more been imposed on the members.. In majority of the technical systems, SWIFT, and the core banking system, do not d) Accordingly, once the authority is constituted and starts
appreciated ahead of the decision to notify NFRA.
cases, the members had been found not guilty. Further, in talk to each other. It is a case of system failure3. functioning, it would be recognized in international forums
majority of the cases where members have been found guilty, g) Uniform administration: Scale based differentiation of also, and some of the difficulties being expressed viz parity in
ICAI is a body vested with limited powers of initiating disciplinary regulating authority may result in conflicting judgements on respect of legal action/liability of Indian partners/firms vis-à-
they have been merely reprimanded or cautioned.
proceedings against auditors only and not against audit firms the same issue. Seamless coordination may always not be vis global/multinational and other similar aspects would
• 1226 cases were closed at prima facie stage by the Board of which ultimately failed to deter audit firms from acting hand in possible between NFRA and ICAI due to the multiplicity of evolve to match international practices.
Discipline/Disciplinary Committee. Of these, 117 cases were glove with the management of the companies.
referred by various Government agencies/regulators. 49 of disciplinary issues that may be handled by both agencies. NFRA RULES
these cases were referred by MCA/SEBI and the professional CONSTITUTION OF NFRA 2) Clarifications by MCA As compared to the powers vested on the National Advisory
involved were found to be not guilty at the prima facie stage. In response to the reservations of the ICAI received, the Ministry Committee on Accounting Standards established as per section
The closure of these cases took from 1-4 years. 1) Reservations by ICAI of Corporate Affairs (‘MCA’) issued inter - alia the following 210A of the erstwhile Companies Act, 1956 which was mainly
• Only 4 percent of the 746 cases which proceeded beyond the While the recommendations for constitution of NFRA as a clarifications / reply in order to support its proposal of constituting constituted to advise the Central Government on the formulation
prima facie stage before the Disciplinary Committee/Board of separate and independent body for overseeing the NFRA, taking into consideration the practices followed by and laying down of accounting policies and accounting standards
Discipline of the ICAI since 2007 have been on a suo-moto implementation of widely accepted international accounting and developed economies world over: for adoption by companies or class of companies under the said
14 FORUM VIEWS - MARCH 2019 15 FORUM VIEWS - MARCH 2019BULLS
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act, the NFRA is endowed with widespread powers, ranging from 3) Functions, duties and powers of NFRA According to the SEC, E&Y’s blind acceptance of the client’s The firm agreed to settle the allegations two years later by
making recommendations to the Central Government on The NFRA has been cast with the responsibility inter - aliaof unrealistic explanations also violated the PCAOB’s principles of paying $22 million and, later that year, and in the following year,
accounting standards and auditing practices to be followed to protecting the public interest and the interests of investors, professional skepticism that warn that “an auditor should not the SEC announced settlements with the five partners that
taking actions, imposing penalties on auditors, audit firms and / or creditors and others associated with the companies or bodies be satisfied with less than persuasive evidence because of a included penalties and suspensions from practice before the
bodies corporate for any violations or negligence. corporate governed under rule 3, as discussed above, by belief that management is honest.” 9
SEC of varying lengths for four of the partners .
establishing high quality standards of accounting and auditing and
NFRA has been constituted as a quasi-judicial body with larger exercising effective oversight of accounting functions performed 2 Lack of Independence: Too Close for Comfort
powers than National Advisory Committee on Accounting by the companies and bodies corporate and auditing functions JURISDICTION OF SEBI ON AUDITORS
About a month before the E&Y audit failure settlement related to
Standards. In a nutshell NFRA shall be responsible for performed by auditors. While the NFRA Rules have clearly addressed the issues relating
Weatherford, E&Y also settled the first ever enforcement
recommending auditing and accounting standards, to monitor to the jurisdiction of NFRA vis-à-visICAI with respect to the action
actions for auditor independence violations stemming from
and enforce compliances with the said standards and oversee the NFRA is also responsible for recommending accounting or against auditors for professional misconduct, an ambiguity which
partner-client relationships. The SEC charged that the auditor-
quality of service and suggest measures for improvement unlike auditing standards for the approval of the Central Government, still persists is with respect to the jurisdiction of SEBI on the said
client relationships of two partners-one romantic-ultimately
National Advisory Committee on Accounting Standards which after taking into consideration the recommendations and misconduct.
affected their independence. The SEC not only faulted the
only advised on accounting standards. additional information received from ICAI for new accounting partners involved in the improperly close relationships but also
standards or auditing standards or amendment of the existing the firm itself for failing to perform a reasonable inquiry or raise In order to protect the interest of the issuers, intermediaries, pool
1) Applicability of the NFRA Rules standards. concerns about the relationships despite awareness of facts investment vehicles, investors in the securities market, etc. who
The categories of entities to which the NFRA Rules are applicable, suggesting impropriety .
6 avail the services of the auditors inter - alia relating to issueof
4) Jurisdiction of NFRA
has been provided in Rule 3 (1) of the NFRA Rules, as follows: certificates or reports as required under the respective SEBI
NFRA has also been empowered to investigate into any matter of Two separate actions were filed against two separate regulations, SEBI has released a consultation paper dated July 13,
1) Companies whose securities are listed on any stock exchange professional or other misconduct under section 132 (4) of the Act, engagement teams-both involving independence impeding 2018 10 regarding SEBI (Fiduciaries in the Securities
in India or outside India; either suomotu (after recording reasons in writing), or after conduct stemming from too-close client-auditor relations. The Market)(Amendment)Regulations. The recommendations made
2) Unlisted public companies fulfilling any of the following receiving reference from the Central Government or on the basis first action involved a romantic relationship between the
in the said consultation paper are yet to come into effect.
criteria as on the 31st March of immediately preceding of its compliance or oversight activities. engagement partner and the Chief Accounting Officer of the
Financial Year: client. The SEC noted that their relationship was “marked by a
The said consultation paper is based on the recommendation of
a) having paid-up capital of not less than Rs. 500 crores or; Further, actions in respect of professional or other misconduct high level of personal intimacy, affection and friendship, near-
against auditors of companies referred to in Rule 3 above, shall be the Committee on Corporate Governance headed by Mr.
b) having annual turnover of not less than Rs. 1000 crores or; daily communications about personal and romantic matters (as
initiated by NFRA only and no other institute or body shall initiate UdayKotak, which is of the view that given SEBI’s mandate to
c) having, in aggregate, outstanding loans, debentures and well as work-related matters), and the occasional exchange of
any proceedings against such auditors. Accordingly, on the gifts of minimal value on holidays such as Valentine’s Day and protect the interests of investors in the securities market and
deposits of not less than Rs. 500 crores.
commencement of these rules, no other institute or body can birthdays.” The second action occurred because of a client- regulating listed entities, SEBI should have clear powers to act
3) Insurance companies, banking companies, companies
initiate or continue any proceedings in such matters of auditor relationship that the SEC deemed to be excessively against auditors and other third party fiduciaries with statutory
engaged in the generation or supply of electricity, companies
misconduct where the Authority has initiated an investigation. friendly.The conduct involved the relationship partner and Chief duties under securities law, subject to appropriate safeguards.
governed by any special Act or bodies corporate incorporated
Financial Officer of the client taking frequent, overnight out-of- This power ought to extend to act against the impugned
by an Act in accordance clauses (b), (c), (d), (e) and (f) of Accordingly, the action in respect of cases of professional or other town trips, sporting events and socializing to “an excessive individual(s), aswell as against the firm in question with respect to
section 1(4) of the Act; misconduct against auditors of companies or bodies corporate degree.” their functions concerning listed entities. This power should be
4) Body Corporate/Companies/Persons or any class of them other than those referred to in rule 3 above, shall continue to be provided in case of gross negligence as well, and not just in case
referred by Central Government to the Authority in public proceeded with by the ICAI as per provisions of the Chartered In both of the independence failure actions, the SEC highlighted
of fraud/connivance.
interest; and Accountants Act, 1949 and the regulations made thereunder. the auditor’s role in protecting the public trust, and emphasized
5) Body Corporate which is: that it is the “auditor’s opinion that furnishes investors with
It may be recollected that Bombay High Court had affirmed the
a) Incorporated or registered outside India, which is a ACTIONS BY SEC AGAINST THE AUDITORS critical assurance that the financial statements have been
jurisdiction and powers of SEBI in Price Waterhouse & Co. vs.
subsidiary company or associate company of the subjected to a rigorous examination by an objective, impartial,
Sr. Summary of the matter SEBI ((2010) 103 SCL 96 (Bom.) to act against auditors in cases
company or body corporate registered in India as referred No. and skilled professional, and that investors, therefore, can rely
on them.” where they were complicit in fraud.
in point (1) to (4) above; and 1 Audit Failures: Maintaining Professional Skepticism
b) Whose income or net worth exceeds 20% of the 7
E&Y in the said case agreed to pay $9.3 million to settle charges . In several cases, SEBI as a market watchdog, responsible for
consolidated income or consolidated networth of such On October 18, 2016, Ernst & Young LLP (“E&Y”) agreed to pay
more than $11.8 million to settle charges that it failed to protecting the interest of the investors has taken actions against
company or the body corporate. 3 In 2001, the SEC charged Arthur Andersen LLP and four of its
adequately conduct an audit of its client, Weatherford then current and former partners, including a regional practice the auditor / audit firms as follows:
International (“Weatherford”), permitting Weatherford to inflate director, with fraud in connection with Andersen’s audits of the
Also, the companies and bodies corporate covered by the Rules Sr.
its earnings and issue false financial statements in violation of annual financial statements of Waste Management, Inc. for the Summary of the matter
shall continue to be governed by the Authority for a period of three 5 No.
U.S. Generally Accepted Accounting Principles (“GAAP”) . years 1992 through 1996. The Commission alleged that those
years after it ceases to be listed or its paid-up capital or turnover or 1 Ritesh Properties and Industries Limited
aggregate of loans, debentures and deposits falls below the limit The SEC alleged that E&Y did not follow audit and professional financial statements, on which Arthur Andersen LLP issued
stated therein. care standards established by the PCAOB and, as a result, failed materially false and misleading audit reports, overstated Waste On discovering that the auditor - Shri Shashi Bhushan,
to detect that Weatherford had overstated its earnings by use of Management’s pre-tax income by more than $1 billion. Proprietor of M/s. Bhushan Aggarwal & Co. made false and
2) Non-Applicability of the NFRA Rules deceptive non-GAAP intercompany tax accounting practices. misleading disclosures in the financial statements of Ritesh
To settle these allegations, Andersen agreed to entry of the first
Considering the provisions of applicability of the Rules, following Properties and Industries Limited,detrimental to the interest of
These standards required, as part of the planning and execution antifraud injunction against a major accounting firm in more
companies shall not be governed by the NFRA: the investors, SEBI vide its order dated February 17, 2016
of an audit, that auditors continually exercise professional than 20 years, and to pay the then largest-ever civil penalty
8 prohibited himfrom,directly or indirectly, issuing any certificate
1) Private Companies (unless referred by Central Government to skepticism with “a questioning mind and a critical assessment against a Big Five accounting firm - $7 million . required under securities laws and the applicable provisions of
of audit evidence”.
the NFRA in public interest); and 4 In 2003, the SEC filed a civil injunctive action against KPMG LLP the Companies Act 2013 - administered by SEBI for a period of
2) Unlisted public companies with paid-up capital or turnover or Despite these standards and regular reminders from E&Y’s own and five of the firm’s partners - including the head of the firm’s one year.
aggregate of loans, debentures and deposits below the limit National Office that expanded procedures were necessary to department of professional practice - in connection with the
stated under Rule 3(1). comply with PCAOB standards for audits of income tax 2 WhatsApp Leak Case
years 1997 to 2000 audits of Xerox Corp., alleging that they
accounting, the E&Y audit team failed to question numerous issued materially false and misleading audit reports on Xerox’s SEBI began a probe in November 2017 after a media report
Note: The NFRA Rules however require all the existing bodies corporate, other suspicious tax adjustments that were brought to its attention financial statements, which had used manipulative accounting surfaced with respect to circulation of unpublished price
than the companies governed by the NFRA Rules to inform NFRA the particulars of and instead relied completely on the client’s explanation of
its auditors as on November 14, 2018 (date of commencement of NFRA Rules)
practices to close a $3 billion “gap” between actual operating sensitive information in various private WhatsApp groups
them. results and results reported to the investing public. about certain companies before their official announcements.
within a period of 30 days from the date of commencement of the NFRA Rules.
16 FORUM VIEWS - MARCH 2019 17 FORUM VIEWS - MARCH 2019BULLS
Bulls&&
BEARS
Bears BULLS
Bulls&&
BEARS
Bears
In order to further investigate into the matter SEBI had also statutory duties and in the midst of such regulation this may give JURISDICTION OF NCLT ON AUDITORS the financial reporting process. The actions of SEBI, MCA and
called for internal investigation report from these companies, rise to certainsituations leading to conflicts of interest. The NCLT, in exercise of its powers under section 147 (3) of the NFRA bring a renewed focus on this role of auditors. This move
besides carrying out its independent investigation and Sarbanes Oxley Act therefore does not prescribe such a Companies Act, 2013.vide its order dated February 06, 2019, has the potential to strengthen the first line of defense against
conducting search and seizure operations at various places, composition but merely states that members must be: barred Mr. Mukesh Choksi, proprietor of Mukesh Choksi& violations of securities laws and allied regulations.
including on the premises of various market entities, as well as Company from being appointed as an auditor of any company for
auditors of such companies. “from among prominent individuals of integrity and a period of five years. Such order comes subsequent to the
reputation who have a demonstrated commitment statement ‘I don’t know’ made under oath by the auditor while References
3 Satyam Scam Case to the interests of investors and the public, and an replying to questions like whether he was aware when the last • http://egazette.nic.in/WriteReadData/2018/190358.pdf
SEBI, on finding Price Waterhouse guilty of making understanding of the responsibilities for and nature annual general meeting of Zen Shaving was held and where the • http://egazette.nic.in/WriteReadData/2018/192907.pdf
misstatements in the financial statements in collusion with the of the financial disclosures required of issuers under company's factory is located. Mr. Mukesh Choksi has been held • https://www.moneycontrol.com/news/business/comment-the-pnb-
scam-questions-for-the-bank-the-auditors-the-rbi-and-the-
management of the scam tainted Satyam Computer Services the securities laws and the obligations of guilty of signing off on a company’s books without inspection and
government-2512503.html
Limited, vide its order dated January 10, 2018 barred its accountants with respect to the preparation and colluding with its promoters in a fraudulent manner. This is the • http://164.100.47.193/lsscommittee/Finance/16_Finance_37.pdf
network entities from issuing audit certificates to any listed issuance of audit reports with respect to such first time the NCLT has passed an order barring an auditor in such • https://www.lexology.com/library/detail.aspx?g=c1997e6a-94d7-
company and intermediaries in India for two years. Further, disclosures” (Section 101) a fashion. 46dc-8f48-7d5353dad988
Price Waterhouse Bangalore and its two erstwhile partners-S. • http s://www. ca d wala der. com/resources/clients -friends -
Gopalakrishnan and Srinivas Talluri - had been directed to While the United States model may not sound ideal, one may CONCLUSION memos/enforcement-at-the-gates-sec-action-against-big-four-firm-
jointly and severally disgorge the wrongful gains of Rs. Over the past decade, the scope of duties and responsibilities of and-new-international-standards-highlight-the-role-of-accountants-
consider the possibility of having former members of these
13,09,01,664 with interest. auditors in listed companies and market intermediaries has as-financial-gatekeepers
institutions which shall ultimately meet the objective with which • https://www.sec.gov/news/pressrelease/2016-187.html
NFRA is constituted at the same time also avoiding situations expanded vastly. Auditors have a role to play in different spheres • https://www.sec.gov/news/headlines/andersenfraud.htm
In order to bring the auditors within the ambit of SEBI in the leading to conflicts of interest. and in each of them, the regulatory authorities attempt to regulate • https://www.sec.gov/news/speech/ceresney-enforcement-focus-on-
capacity of ‘fiduciaries’, SEBI amended the regulations relating to and monitor the actions of auditors. While such bodies are auditors-and-auditing.html#_ftn21
prevention of insider trading, which now requires such auditors in The number of members who are or have been certified public necessary to safeguard the interests of investors and public at • https://www.sebi.gov.in/reports/reports/jul-2018/consultation-paper-
the capacity of fiduciary to adopt a separate code of conduct for accounts have been limited to 2 members on the PCAOB by the large, there is an increased likelihood of jurisdictions of these on-proposed-sebi-fiduciaries-in-the-securities-market-amendment-
prevention of trading based on unpublished price sensitive authorities overlapping. regulations-_39541.html
US legislation. Such limit seems to be imposed with intent to
information which may be obtained during execution of work • https://pcaobus.org/News/Releases/Pages/auditors-report-standard-
ensure views of various experts belonging from various different adoption-6-1-17.aspx
assignments. Further, amendments have also been carried out in fields are available at the disposal of the PCAOB. The NFRA’s There have been numerous instances of auditors indulging with
the regulations relating to prevention of fraudulent and unfair objectivity is of prime concern in the given circumstances, and the management of companies to defraud the public. The RegStreet is a boutique law firm based in Mumbai.
trade practices, which now considers trades carried out by The firm’s focus areas are Capital Markets&
this limit may be prudent. intention behind stringent laws is to deter auditors and audit firms Commodities, General Corporate Commercial,
fiduciaries on behalf of their clients without such client’s from such negligence and professional misconduct. Financial Regulatory Practice, Compliance &
knowledge or instructions or misutilizing or diverting funds or 2) Enforcement Investigation, Litigation & Dispute Resolution and
securities held in fiduciary capacity as fraudulent and unfair trade The NFRA can conduct investigations suomotu upon reference by Professional accountants and auditors have always been on the Policy & Advisory Practice. More details can be seen at www.regsla.com and
practice. Such amendments have been carried out pursuant to front lines in their roles as public watchdogs and gatekeepers of they can be reached at info@regsla.com.
the Government in cases where there is suspected misconduct.
the recommendations of the Committee on Fair Market Conduct This mandate extends to imposing fines, penalties and
which was chair by Mr. T.K. Viswanathan. suspension of audit firms; powers that were never granted to the
ICAI. The PCAOB extends these powers further to debar
As stated above, though SEBI has issued amendment in the individuals’ association with registered audit firms. This acts as a
prevention of insider trading regulations and prohibition of deterrent to individuals acting in violation of regulations, and may
manipulative and unfair trade practices regulations in this regard, be considered when further legislating on the powers of the
and also seems to be in the process of notifying other NFRA.
amendments to SEBI regulations, the question which really lies
here isindealing with situations relating to overlapping of powers 3) Audit Inspections
by various regulators, judicial and quasi-judicial authorities The PCAOB enjoys complete discretion in selecting audits, and
against the defaulting auditor(s) in the times to come. often question audit firms about potential issues identified in their
LESSONS FROM THE NFRA’S AMERICAN COUNTERPART work. These firms are given an opportunity to respond and in the
case of an unsatisfactory response, the audit deficiency is
The establishment of the NFRA can benefit from a look at its US
included in the public parts of the PCAOB inspection report. This
counterpart: the Public Companies Accounting Oversight Board.
ensures that audit firms discharge their obligations with care inter
The PCAOB was established in similar circumstances, after the
- aliato protect their reputation. The NFRA may use a similar
Enron and other audit scandals. The Sarbanes Oxley Act of 2002
approach to have a significant regulatory effect, communicating
relocated the mandate of oversight of audit firms of public
audit deficiencies to all the relevant stakeholders in the market
companies from American Institute of Certified Public
place.
Accountants, in the same way as the ICAI, which no longer
enjoys that mandate in India. One may observe this shift from self-
4) Disclosures
regulation of accountants to an independent regulatory body and
As mentioned above, the PCAOB publishes portions of the audit
identify similar concerns behind such a move.
inspection reports, to underline negligent behavior on the part of
Given the similar circumstances, it could be of assistance to audit firms. Certain non-public parts of the inspection reports,
analyse certain practices of the PCAOB as a regulatory body: which contain quality control lapses, are published if the audit
firm fails to address them within a period of 12 months. The
1) Composition PCAOB has also adopted a new standard11 (effective 2019),
The NFRA Rules prescribe that the NFRA will be composed inter - requiring auditors to report critical audit matters in which the
aliaof representatives of SEBI, RBI and the ICAI. These are auditors had to confront the management. Such practices must
regulatory bodies often responsible for the discharge of various be adopted by the NFRA as well.
18 FORUM VIEWS - MARCH 2019 19 FORUM VIEWS - MARCH 2019INSIGHTS - ECO
INSIGHTS - ECONBUZZ INSIGHTSINSIGHTS
- ECONBUZZ
- ECONBUZZ
In rural India too, the proportion of spending and it was not as competitive and efficient expansion of the country ’s vast
THE UNDERPINNINGS OF on food in total expenditures has reduced as it is in current times there was at some unorganized sector. Herein we have an
EMPLOYMENT CREATION from 73 per cent over 1972-73 to 55 per
cent over 2004-05. Although the survey
stage a declining demand for manufactures
and an increasing one for the output of the
instance of compressed growth which
arises from the deficiency of purchasing
IN INDIA: AN OVERVIEW does indicate that the Engel’s law does
apply in certain income groups of the
services sector. Once again the transition
to the services sector, in terms of its 50 per
power and not from a natural decline of
expenditure allocations towards food and
country’s population, it also cites that 10 cent contribution to the GDP at this stage of related products. This accentuates the
By Professor Piya Mahtaney per cent of the India’s rural population lives the country’s per capital income growth is imperatives of achieving an expansion of
Economist / Author on just Rs 9 per day and 10 per cent of its rather unusual. income across an entire gamut of socio-
urban population subsist on a slightly economic categories in India. Given that it
Economic experience has demonstrated is likely that India will have an average
T
he importance of India’s in the global Indian economy. During the recent weeks to an industrial economy this has certainly higher Rs13 a day.
that the emergence of the services sector growth rate of 7 to 8 per cent per annum
economy becomes increasingly there has been some discussion and not meant that agriculture was relieved of
Furthermore the expenditure on food as a as the most important one occurs at when over the next few years and in this context
evident in the larger context of debate about the country’s unemployment its role as an important provider of
proportion of total consumption is lower in a country’s per capita incomes are high. the imminent question that arises is
slowing down growth particularly in rate, without delving into the numerical employment. This feature stands in
states with a higher per capita expenditure Undeniably India’s per capita incomes whether this would result in employment
advanced countries and China. According details and discrepancies of various veritable contrast to the experience of a
and vice versa. have increased significantly but it cannot or not. Even if one were to be cold
to the World Economic Outlook report by calculations made this article focuses on number of advanced countries where the
be considered high. (At this point in time bloodedly pragmatic a fundamental fact is
IMF, October 2018 s growth rates in most the crux of the matter which is that creating emergence of an industrial sector absorbed
Thus unlike in the advanced countries India is a middle- income country) that the Indian economy does cannot
advanced economies will slow down, more jobs is a challenge that confronts the the surplus labour released from the
Engel’s law does not apply to a fairly afford the option of jobless growth.
although there has been a recovery of Indian economy. According to the agricultural sector.
growth prospects and employment post economic survey, 2017-18, “The other significant proportion of the low income Expectedly in the higher income categories
crisis. The projection cited by the report is, issue is the challenge of employment. The Furthermore, as we have seen unlike in the groups in developing countries. Although it individuals would allocate a higher The next article will focus on institutional
``among advanced economies, the lack of consistent, comprehensive, and developed world the transition(in terms of would be convenient to describe a landless proportion of their incomes to services. reform.
subdued outlook for potential growth current data impedes a serious sectoral importance) made by the Indian labourer who can barely afford two square Consonant with this, an increase in the
reflects, to a large extent, slower labour assessment... Even so, it is clear that economy and some other developing meals as someone with a low elasticity of employment absorption of those who
force growth due to population aging... providing India’s young and burgeoning countries from an agricultural to an demand it would be outrageous to consider comprise the skilled and educated
industrial and then to a services sector was segments of the population by the services 1. Engel’s law: Consequent to rising incomes, the
While labour productivity growth is labour force with good, high productivity this to be the result of Engel’s law share of expenditures for food declines It must be
expected to improve in the medium term, jobs will remain a pressing medium term certainly not fuelled by a generalized sector is hardly surprising.
operating. By no means does the noted that Engel found, based on surveys of families'
the slight acceleration will only partially challenge. An effective response will increase in per capita income across all budgets and expenditure patterns, that the income
subsistence and small farmer comprise a
offset the slower increases in labour input.’’ encompass multiple levers and strategies, socio-economic categories. However what is rather unique is the elasticity of demand for food was relatively low. The
small minority of India’s agricultural resulting shift in expenditures affects demand
above all creating a climate for rapid importance that the service or the tertiary
In essence the impetus that would come economy, as a matter of fact it constitutes patterns and employment structures. Engel's Law
For three decades one of the highlights of economic growth on the strength of the sector has had in providing employment to does not suggest that the consumption of food
from a surge in demand for products of the a significant proportion of the rural
the world economy was the rapid only two truly sustainable engines-private those in the lower income groups. The products remains unchanged as income increases. It
agricultural sector and for those from the population.
expansion of the Chinese economy was the investment and exports’’ service sector has acted as a safety net of suggests that consumers increase their expenditures
manufacturing and services sector will for food products (in percentage terms) less than their
growth engine which powered a fair sorts; At the lower end this sector has
unequivocally propel an increase in For those in the primary sector that are increases in income
proportion of world economic growth. provided an avenue of livelihood to millions
Undeniably the importance of China’s This article for the employment creation. This was a
sequence that occurred in a limited way
unemployed or employed at wages that are
highly inadequate it would take sometime
(who would otherwise have been without
Piya Mahtaney completed her second Master’s in
economy will continue, in accompaniment Econ Buzz views and not as a generalized phenomenon in the for Engle’s law to operate because
any means of sustenance) and it consists
of a fairly diverse spectrum of service
Development Economics from Leicester University
in England she embarked on a career in journalism
the resonant significance of India as
possibly the world’s next growth engine is an important Indian context. incomes would have to increase by a
certain extent before the proportion of
providers that have little or no skill. As a with the Times of India. She was an assistant editor
in Metropolis on Saturday, subsequent to which she
matter of fact a sizable proportion of this
imminent. Therefore what happens in India aspect of India’s Recapitulating a commonly cited axiom -
the Engel’s law1 to understand changing
expenditure allocated to food and other segment constitutes the informal economy
joined as senior feature writer in Economic Times.
will become increasingly important for the As an economist that reported, analyzed and wrote
world economy during the ensuing years. emerging growth consumption and demand profiles as
agricultural products declines. Those who
currently live on the margins of
of the country. More often than not the on a wide range of socio-economic issues, writing a
wages that the labour force in country’s book about economic development and the
According to the world economic outlook
report by the IMF, (October 2018) global
narrative - the main incomes rise could aid analysis about the
link between sectoral transition and the
subsistence will have a higher income informal economy receives is highly emerging trends of globalisation seemed almost
inevitable
economic growth, “... growth in the trends underlying shift in employment patterns. Simply
elasticity of demand for food in the initial
stages of a rise in income. When demand
inadequate and is more often than not
The books that she has authored are as follows:
stated, the basic principle of this law is that lower than the minimum wage (for the
emerging market and developing economy
group is set to remain steady at 4.7 percent
employment as incomes rise individuals tends to for food is low as a result of a lack of same task in the organized sector). • India China and Globalization (2nd ed), Palgrave
Macmillan (England), December 2014
in 2018-19. Over the medium term, growth creation in the allocate a smaller proportion of their purchasing power it represents a potential
for growth which will obviously remain
Constrained or compressed demand for
products of the agricultural sector does
• Globalization and Sustainable Economic
Development, Palgrave Macmillan (U.S), August
expenditure towards food. Income
is projected to rise to slightly less than 5
percent. Beyond 2019, the aggregate
Indian economy. elasticity of demand for food declines when untapped until incomes among the poor place limits on the demands for 1st 2013
• Institute of South East Asian Studies (Singapore)
incomes rise. increase. manufactures.
growth rate for the group reflects offsetting published an edition (August 2010) of my book
developments as growth moderates to a At this point it would be useful to describe India China and Globalisation.
According to the latest National Sample The story of compressed demand When demand for food is low as a result of • The first edition of India China and Globalisation
sustainable pace in China, while it the main underpinnings of employment in was published by Palgrave Macmillan (England,
Survey Organization expenditure on food continues even as we view the a lack of purchasing power it represents a
improves in India (owing to structural India. India is a highly industrialized 2007)
items accounted for 43 per cent of total manufacturing* and services segment*. potential for growth which will obviously
reforms and a still-favourable demographic country, and according to the precepts of • Globalisation Con Game or Reality was published
consumption expenditures in urban India Over the last four decades the strides remain untapped until incomes among the by Alchemy Publishers, India (2004) 2004.
dividend)...’’ conventional economic thought (many of
(during 2004-05). This represents a notched by Indian manufacturing has been poor increase. Consequently employment • The first book titled Economic Con Game,
which have been validated) this should Development fact or Fiction was published by
significant decline from the share of 64 per remarkable. Even as it traversed a phase growth has been far from satisfactory and
This article for the Econ Buzz views an have meant a receding importance of the Pelanduk Publications (Malaysia) in 2002.
cent that food expenditures had in total during which its progress was dampened it is this feature that has fuelled the
important aspect of India’s emerging agricultural sector. Although for all
growth narrative- the main trends practical purposes we can say that India expenditures of urban India over the 1972-
underlying employment creation in the has made the transition from an agricultural 73.
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