Reforms amongst professionals in India!!! Must read article

Aisha (Finance Professional) (8104 Points)

31 May 2008  
Illustration by Sorit
PROFESSIONS: REGULATIONS
A Gag For Sale
A glimmer of reform eases the tight grip on professions in India
Pragya Singh
 
 
Call For Reforms

CAs

    • Use of trade names by CAs is restricted
    • Number of partners in a firm limited to 20
    • Foreign degrees not recognised Lawyers
    • Services by foreign lawyer or entity restricted
    • Lawyers, legal firms cannot solicit clients
    • Foreign degrees not recognised
Doctors
    • Foreign degrees not recognised

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It borders on the farcical. Indian chartered accountants cannot disclose where they work during a job interview. They cannot even say they work for a 'large' or a 'leading' company. A complex set of rules prohibits a CA from disclosing any professional attainment or designation other than 'CA'. Even on a visiting card or a nameplate.

That's why the 1,45,000 CAs in India must have been relieved two weeks ago, when the Institute of Chartered Accountants of India (ICAI) allowed them to advertise, albeit with conditions. Apart from that, a CA can't hand over his visiting card unless he is asked for it—much like a lawyer who finds new clients only by word of mouth, or a doctor who isn't allowed to solicit patients.

Though international legal and accountancy firms have thousands of partners, the law prohibits Indian partnerships from having more than 20 partners. But even here, the CAs are not alone: many professions—including lawyers and doctors—are stuck with archaic rules on how to engage with prospective clients, advertise skills, or set up partnerships, though economic changes have altered their very basis.

"Our move to allow CAs to advertise should be seen in the context of national and international developments," admits ICAI secretary Ashok Haldea. "New technologies such as the Internet are altering the industry," he says. For many, the relaxation for CAs—loosely defined as permission to list basic information on a website, or release occasional mentions in the Yellow Pages—is only a step towards liberalising professions that increasingly face competitive stress, both from within India and abroad.

Trouble is, professionals want less strict regulations on advertising to solicit clients, but are also less than keen to allow reciprocal access to foreign professionals. At the global services trade negotiations, India has already decided to not accept any requests for commercial presence of foreign accounting firms. India is also not in favour of allowing foreign lawyers to practise here in the face of widespread opposition from the domestic legal fraternity. Foreign doctors are also not permitted to set up shop, and the profession guards this right zealously. This stance has its critics. "In our view, (international practitioners) would deepen the market for professional services, bring best practices, and generally benefit clients and professionals," says Bobby Parikh, managing partner with BMR Advisors, a business advisory firm.

Knowledge process outsourcing (KPO) firms, which employ hundreds of doctors, engineers, lawyers and CAs to assist overseas legal and accounting firms and hospitals, too are challenging such controls. Indian KPOs are currently valued at over $600 million; and legal process outsourcing firms (LPOs) are said to be growing at over 200 per cent a year. The traditional CA, doctor or lawyer is out of fashion in the world run by people like Lokendra Tomar, a senior vice-president with Integreon, a KPO firm whose clients include Clifford Chance LLP, a leading UK law firm. Tomar's firm employs over 500 lawyers and 1,500 other professionals, including CAs and engineers.

But while Tomar can step up hiring for his growing business, an Indian legal partnership firm has limits on growth.
"The abilities of Indian firms will be restricted if their size is limited," says Sanjay Aggarwal, the national industry director, financial services, with consulting firm KPMG. He says there is a shortage of CAs in the country and that top foreign firms with over 1,000 partners are defter with complex financial deals such as a merger or acquisition, than a much smaller Indian firm.

The counter-view is that Indian CAs and lawyers assist a growing number of companies strike big cross-border deals. "It is a misconception that Indian lawyers cannot handle complex financial transactions," says Delhi-based lawyer Lalit Bhasin, opposing the demand for permission to foreign law firms or lawyers to set up practice within India.
 
  "Letting CAs advertise is logical. Technologies like the Internet have changed the industry." Ashok Haldea Secretary, ICAI  
 
"The success of LPOs establishes that Indians can deal with complex transactions. In fact, law firms in India have tremendous untapped potential," he says.

Also, the ban on foreign law firms has not stopped Indian legal firms from seeking foreign partners. For instance, Delhi-based law firm Trilegal has an affiliation with UK law firm Allen & Overy. "We expect training and knowhow from
the association," says Trilegal's Anand Prasad. "Otherwise, Indian firms often end up groping in the dark or dealing with the new business environment through trial and error," he adds.

Then there is the issue of soliciting clients. With 8,00,000 lawyers, India has the second-largest bar in the world after the US, but the rules don't permit soliciting. "We want rules on ads to be rationalised," says Bhasin. "Having a website is so important today—how else will anyone abroad know about an Indian law firm?" he asks.

The concerns for doctors, however, are very different. Noted surgeon with Sir Ganga Ram Hospital in Delhi, Dr Samiran Nundy, says it is "absolutely unethical" for doctors to advertise—"People should only come to a doctor if he is good." However, the US, UK, Canada, and Australia permit advertising by physicians, with controls that guard against false or deceptive information.
On their part, many doctors say there should be some way for them to use, say, the Internet as a tool to disseminate information.

On the other hand, says Nundy, India could admit international doctors to help improve the profession. But he cautions that not all such doctors may come from Britain or the US. "Opening up will help Indian patients, but will we want doctors
 
  "Indian lawyers can handle complex legal problems; the firms have great potential." Lalit Bhasin Delhi lawyer  
 
from nations with standards that don't match India's? The rules will need to be clear," Nundy says. Experts such as N.C. Saxena, former secretary of the Planning Commission, add that allowing foreign doctors is not a priority area for India. "The international doctors will only go to hotel-like hospitals," he says.

The future direction of these professions now hinges on pending legislative action. The government has enacted a Limited Liability Partnership (LLP) Bill, 2006, to assist professionals across sectors to team up as firms. The bill, pending in Parliament since December 2006, is an attempt to give the professions an alternative to the Indian Partnership Act, which fixes "unlimited liability" on a firm and its members. The LLP Bill, if passed, will allow such partnerships to affix limits to their own liability. This will change how professions work in India, and could lay the foundation for further—and much-needed—reforms.