The MSME Growth Engine: Navigating Opportunities, Challenges, and the Role of CA in the Era of AI and Viksit Bharat 2047
CA. Mukul Lamba Member of the Institute
The Strategic Paradigm of India’s MSME Sector in 2026
Consider a manufacturer of hosiery based out of Ludhiana, Punjab, a skilled fabric knitter from Coimbatore, and a small-batch tea estate in Upper Assam. During the times of the old economy, these businesses were home-grown players striving to survive against exorbitant costs and intermediaries.
In the era of Viksit Bharat 2047, the concept of “small” businesses no longer exists; they are now referred to as Micro-Multinationals. Any business with a revenue of ₹100 crore in a Tier-2 city now boasts of international reach and data insights, driven by Artificial Intelligence (AI) and steered by strategic CA advisory.
The path traversed by the Indian economy in 2026 is principally defined by the strength of the MSME sector. As India advances toward its 100th year of independence, the sector has transformed into the buttress of industrial propulsion. In FY 2025-26, the sector contributes approximately 31.1% of national GDP and 35.4% of manufacturing yield. With over 7.47 crore enterprises employing nearly 38.82 crore individuals, it is the second-largest employer after agriculture. India’s real GDP is projected to grow at 7.4% in FY26, with manufacturing GVA surging 9.13% in recent quarters.
Viksit Bharat 2047: Ideological Pillars and the MSME Mandate
The mission to transform India into a developed, self-reliant nation is built on four fundamental pillars:
- Youth (Yuva): MSMEs serve as laboratories for entrepreneurship, absorbing the demographic dividend into high-tech manufacturing.
- Poor (Garib): The sector offers social mobility through localized employment at low capital cost.
- Women (Mahilayen): The 2025-26 budget targets 70% participation of women in economic activities, with credit guarantee covers for women-led units enhanced to 90%.
- Farmers (Annadata): Food processing MSMEs (supported by a ₹10,900 crore PLI outlay) facilitate value addition to make India the “food basket of the world”.
With India aiming to become a $30 trillion to $35 trillion economy by 2047, MSME contribution is expected to surge to 50% of GDP and 60% of exports.
Understanding the Economic Magnitude
- Current GDP Contribution (2026): MSMEs contribute roughly ₹100 lakh crore to a ₹320 lakh crore ($4 trillion) economy.
- The Funding Gap: Despite formalization, a credit gap of approximately ₹30 lakh crore remains.
- Government Allocation: The Union Budget 2026-27 earmarked over ₹22,000 crore for the Ministry of MSME, including a ₹10,000 crore SME Growth Fund.
- The 2047 Vision: By 2047, MSMEs are expected to manage an economic value exceeding ₹1,200 lakh crore.
The Roadmap to Viksit Bharat 2047
| Pillar | Objective | Financial Target (Estimated) |
|---|---|---|
| Formalization | Move more micro-units to the Udyam portal. | Unlock higher opportunities in formal credit. |
| Technology Hubs | Establish AI-Common Facility Centers. | Reduce tech-adoption costs by 60%. |
| Export Scaling | Link MSMEs to global e-commerce. | Boost opportunities for MSME exports. |
| Skill Transformation | Reskill 10 million workers in AI-collaboration. | Increase labor productivity by 3x. |
The Regional Powerhouses in INR Terms
The roadmap to $30 trillion is paved by regional clusters:
- Punjab’s Manufacturing: In Ludhiana, AI-driven predictive maintenance is saving units over ₹50 lakh annually in repair costs.
- Coimbatore’s Textile Tech: Modern looms using AI reduce fabric wastage by 12%, adding ₹1.5 crore to the annual bottom line of exporters.
- Assam’s Tea Renaissance: AI-powered soil analysis and forecasting are increasing yields by 20%, keeping the ₹20,000 crore industry competitive.
The Role of CA in the Era of AI and Viksit Bharat 2047
The CA has shifted from a conventional auditor to an “engineers of progress,” acting as the “General Surgeon” of an MSME's financial health.
A. From Compliance to Strategic Advisory: CAs now perform Data-Driven Business Modeling. Using AI, they provide “What-If” analyses regarding production increases and debt-service coverage. B. The ESG Sentinel: CAs are now authorized to certify carbon footprints and labor practices, ensuring MSMEs access the ₹80 lakh crore global green market. C. AI Governance and Ethical Audit: The mandate includes auditing AI models to ensure financial data security and compliance with the Digital Personal Data Protection (DPDP) Act.
Additional roles include:
- The Valuation Expert: Furnishing real-time valuations via AI.
- The ESG Auditor: Auditing emissions to allow "Carbon Neutral" branding at a 40% premium.
- Financial Shield: Conducting digital audits to safeguard against online frauds costing ~₹25 lakh per incident.
Audit Automation and Initiatives
CAs are encouraged to use agentic workflows to automate auditing labor, moving toward reporting automation and tracking ROI.
- ICAI MSME Clinic: Launched across 183 branches, these clinics provide weekly pro-bono advisory on finance, GST, and technology, acting as credit matchmakers.
- Addressing Liquidity: Approximately ₹10.7 lakh crore is locked in delayed payments annually. Section 43B(h) of the Income Tax Act (effective April 1, 2024) enforces payment discipline.
- Transition to MSME ODR: Since October 15, 2025, all delayed payment applications are filed on the Online Dispute Resolution (ODR) Portal for resolution within 90 to 180 days.
AI: The Catalyst for “Non-Linear” Growth
AI is now a fundamental factor of production.
- Hyper-Efficiency: IoT sensors and predictive maintenance avoid breakdowns costing ₹5–10 lakh annually.
- Democratized Marketing: AI enables rural MSMEs to sell directly to global markets via ONDC, handling localization and logistics.
- Intelligent Credit: AI-enabled Cash Flow Lending uses GST returns and digital data to grant collateral-free loans within minutes. By 2035, AI is estimated to contribute $135.6 billion to $149.9 billion to MSME value creation.
The IMPACT AI Framework for Adoption
This World Economic Forum framework organizes actions into three pillars:
- Awareness: Utilizing AI Experience Centres and Sandboxes.
- Action: Using the AI Maturity Index and AI Solutions Marketplace.
- Recognition: Celebrating AI Pioneers to create blueprints for others.
Challenges: Navigating the Storm
- Digital Divide: 40% of rural units still struggle with high-speed internet and basic digital bookkeeping.
- Cost of Transition: Infrastructure upgrades are daunting for micro-enterprises.
- Cybersecurity: A single breach can cost a small unit ₹50 lakh, often leading to permanent closure.
- Reskilling: The need to train 10 million workers to work alongside AI.
Conclusion: The Lion Awakens
By 2047, the contrast between “small” and “large” business will be blurred by technology. A minor unit in a Tier-3 city, powered by AI and a technologically adept CA, will have the competencies of a multinational. The MSME Growth Engine is no longer just about survival; it is about dominance, transforming the Indian spirit of “Jugaad” into a global standard of “Innovation and Excellence”.
Author may be reached at mukullamba62@gmail.com and eboard@icai.in.
MSMEs in India: Engines of Innovation and Economic Transformation
Contributed by MSME and Start-up Committee of ICAI
Introduction
The adage perfectly describes Indian businesses: A skilled sailor doesn’t wait for the wind; he creates his own course. Small dreams that turn into businesses have navigated global uncertainties and difficult situations to strengthen the nation’s economy over decades. The businesses have also received measured governmental support. Entrepreneurial resilience and these things have further propelled businesses and contributed to the country’s economic stability.
MSMEs stands as the acronym for Micro, Small and Medium Enterprises which form the backbone of the Indian economy, a term which evolved from the early industrial regulatory framework under the Industries (Development and Regulation) Act and was later crystallised through the MSME Development Act, 2006. Recently, the government redefined MSMEs by updating investment and turnover thresholds, reflecting the sector’s transformation and its growing integration with digital markets.
Today, the numbers speak compellingly for Indian enterprise. MSMEs contribute roughly 30% of India’s GDP, account for nearly 45% of manufacturing output, contribute close to 46–48% of India’s total exports, and employ over 37.50 crore people, making them the largest employment generator in the country after agriculture. As of 27th May 2026, 8.47 Cr enterprises have registered on the Udyam Registration Portal (URP) and the initiative of Udyam Assist Platform (UAP) launched by the government is a testament to the ease of doing business and the formalisation of India’s informal economy. Parallel to this, India’s startup ecosystem has surged to approximately 230,000 DPIIT-recognised startups with 23.36 lacs approx. job creation as of May 2026, with over 130 unicorns, third globally, demonstrating world-class innovation and attracting substantial foreign investment.
Indian businesses are increasingly adopting best trading practices, accounting standards compliance, e-invoicing, GST-driven transparency, and supply-chain digitisation, making the ecosystem investor-ready. Indeed, investors are choosing India for its macro-stability, large domestic market, policy predictability, and a startup culture that blends frugality with ambition. Moreover, the sector is pivoting toward green practices: solar-powered units, energy-efficient production, and circular-economy models are becoming the norm.
Digitalisation under initiatives like Digital India, TReDS, the Udyam Assist Platform, and the Open Network for Digital Commerce (ONDC) has democratised market access, enabling even the smallest enterprises to trade nationally and globally. Through the Make in India initiative launched in 2014 and the “Vocal for Local” movement, India is manufacturing everything from smartphones and electronics to defence equipment and renewable-energy components, reducing import dependence while boosting exports. Complementing this, the Production Linked Incentive Scheme (PLI) provides performance-based incentives to boost large-scale manufacturing, enhance exports, and strengthen India’s competitiveness in global supply chains. The renaissance of modernity, rooted in civilisational commerce and propelled by technology and sustainability, affirms India’s position as a global manufacturing and trading powerhouse.
With its vast demographic dividend, India is harnessing its population, particularly its youth and skilled professionals, at peak efficiency. The nation has emerged as a premier outsourcing hub, driven by IT and IT-enabled services, business process management, accounting services, engineering R&D, knowledge process outsourcing, and increasingly, cloud services, digital marketing, and back-office operations. What sets India apart are the practices it has adopted: globally standardised service delivery models, ISO-certified quality processes, strong data security frameworks, seamless digital infrastructure, and a talent pool fluent in multiple languages and global business norms. These practices, combined with cost competitiveness, 24/7 service delivery, and a strong IP protection regime, have made India the preferred destination for foreign multinationals seeking reliable, high-quality services.
Fortune favours the bold, but it would not be wrong to admit that the sweet fruit which is favouring India’s economic ecosystem is the relentless effort by both the government and entrepreneurs who are burning the midnight oil in making it achievable. These schemes are proof that the challenges in India shall be faced with a more power-backed approach. Recognising MSMEs as the backbone of India’s economic fabric, the government has rolled out a comprehensive ecosystem of schemes designed to fuel entrepreneurship. The Credit Guarantee Scheme for Micro and Small Enterprises (CGS) now offers guarantee coverage up to 90% for loans up to ₹10 crore, enabling an additional credit of ₹2 lakh crore at reduced cost. This would not only provide financial help to budding entrepreneurs but would also give them the confidence to boost their businesses.
Schemes Favouring the Entrepreneur Ecosystem in India
Key government initiatives to support MSMEs and startups include:
- Startup India Initiative
- Raising and Accelerating MSME Performance (RAMP): Launched in June 2022 with a total outlay of ₹6,062.45 crore (2022–27), targeting approximately 5.55 lakh beneficiaries by expanding access to finance, markets, technology, and green practices.
- Digital Interventions: Including the SAMADHAAN Portal and the newly launched Online Dispute Resolution (ODR) Portal to ensure timely payment settlements.
- MSME Champions Scheme: Drives technology upgradation and common facility centres.
- Self-Reliant India (SRI) Fund: Infuses ₹50,000 crore equity into MSMEs.
- PM Vishwakarma: Offers holistic support to 18 traditional artisanal trades, including formal recognition, skill upgradation with stipends, ₹15,000 toolkit e-vouchers, and collateral-free loans up to ₹3 lakh at 5%.
- Prime Minister's Employment Generation Programme (PMEGP): Provides credit-linked subsidies (up to 35%) for setting up new micro-enterprises in the non-farm sector.
- Trade Receivables Discounting System (TReDS): Facilitates electronic financing of trade receivables.
- Startup-specific funds: Including the Fund of Funds for Startups (FFS) (₹10,000 crore) and the Startup India Seed Fund Scheme (SISFS).
This confluence of policy support, financial access, and institutional guidance is nurturing a pool of skilled professionals and ambitiously positioning India to generate its own "Big 4," making the dream of globally competitive Indian multinationals not so distant.
Legal and Policy Framework Strengthening Indian Business
The government's strategy is backed by laws and regulations that make it firmer and investor-ready.
- MSME Development Act, 2006: Provides priority sector lending mandates and delayed payment protection.
- Goods and Services Tax (GST) regime: Simplified compliance via composition schemes and threshold exemptions.
- Startup India Recognition Framework: Grants legal identity through DPIIT recognition, enabling tax exemptions and holidays.
- SME Listing Platforms: NSE EMERGE and BSE SME have seen over 1,400 SMEs listed, raising thousands of crores.
- Regulatory Reforms: The Companies (Amendment) Act, 2020, and SEBI (ICDR) Regulations, 2021, have eased exit norms and enabled easier listing.
- ESG and Data Governance: SEBI’s Business Responsibility and Sustainability Reporting (BRSR) framework (2021) and the Digital Personal Data Protection Act, 2023, establish transparency and data protection norms.
Role of Chartered Accountants in Nurturing MSMEs and Startups
Chartered Accountants act as the bridge between policies, laws, and people, serving as the best advisors for business growth. Their role has evolved from being primarily financial-focused to acting as strategic partners who:
- Drive AI adoption in business processes.
- Guide ESG integration and advise on BRSR frameworks.
- Facilitate SME IPO listings and promote green practices.
- Prepare investor-ready financials and conduct due diligence for structured deals.
- Ensure international accounting standards compliance for global scaling.
ICAI: Partner in Nation-Building
Through its dedicated MSME & Startup Committee, ICAI has strengthened the landscape via progressive initiatives.
A. MSME and Startup Yatras The ICAI MSME Yatra 2022 and the 2024 edition (covering 20,000 km across 100 cities in 100 days) facilitated thousands of Udyam and DPIIT registrations and provided expert guidance on business setup, compliance, and finance.
B. Pan-India MSME Empowerment Drive (2025)
- ICAI MSME Mahotsav: Held on 27 June 2025 across nearly 140 branches, providing grassroots support to 20,000 MSMEs through 400 helpdesks.
- ICAI MSME Startup Conclave: Mumbai event bringing together 3,000 delegates and resulting in funding for several startups.
- ICAI MSME Connect: Strategic meet in New Delhi focusing on digital transformation and policy.
- ICAI MSME Clinic: Launched in December 2025, providing weekly pro-bono advisory on finance, technology, and compliance across ICAI branches.
- Strategic Partnerships: MoUs with NPCI Bharat BillPay, IIT Delhi (FITT), and various state governments to promote digitisation and mentorship.
C. ICAI’s 2026 Roadmap
- All India MSME Associations Meet (April 2026): Focused on financial inclusion and access to credit.
- SME Fund Raising Conclave (Indore): Explored funding alternatives like SME IPOs and venture capital.
- MSME Manthan Meet 2026 (Shimla): A residential meet with Ministry officials to address grassroots hurdles and utilize government incentives.
Conclusion
As Dr. A.P.J. Abdul Kalam stated, “Dream is not that which you see while sleeping, it is something that does not let you sleep.” Today, India epitomises this vision. The nation is progressively surfacing as a global champion shaping the future economy. The profession remains steadfast in reinforcing businesses through professional acumen and prudent guidance, as India moves toward emerging as a Vishwaguru.
The Importance of the Foreign Exchange Management Act [FEMA], 1999 in India
CA. Shweta Choraria Member of the Institute
Introduction
In today’s era of rapid globalization, digital payments, and high-volume cross-border transactions, FEMA plays a very important role in facilitating international trade, managing foreign exchange reserves and maintaining the stability of the Indian currency. From the perspective of Chartered Accountants (CAs) in Practice in India, developing expertise in this field and providing consultancy services to clients engaged in multinational businesses is a welcoming and rewarding opportunity. Recognizing the growing importance of this domain, ICAI has been continuously encouraging its members by organizing Certificate Courses on FEMA and regularly updating them on recent changes and their impact on the Indian economy.
What is FEMA, 1999?
FEMA, 1999, is an Indian law enacted to regulate the flow of foreign currency, manage foreign exchange, and ensure monetary stability in the Indian economy. It covers all transactions, including capital account and current account transactions, as well as the scope of Foreign Direct Investments (FDI) and External Commercial Borrowings (ECB). The Act empowers the Central Government to frame rules and the Reserve Bank of India (RBI) to issue regulations for managing foreign exchange to facilitate external trade and maintain a stable forex market. Essentially, the Central Government sets the policy framework, while the RBI regulates authorized dealers and oversees foreign exchange transactions.
Top 10 Positive Impacts of FEMA, 1999, on the Indian Economy
- Focus on Economic Stability & Forex Management: FEMA focuses on maintaining economic stability by regulating capital flows and ensuring that cross-border transactions do not negatively impact the balance of payments. It promotes the orderly development and maintenance of the forex market.
- Welcoming Foreign Investment: FEMA is designed to facilitate external trade and actively encourage foreign direct investment (FDI) to boost growth. By providing clear, transparent guidelines for FDI and Foreign Portfolio Investment (FPI), it attracts foreign investors, boosting India’s GDP and capital reserves.
- Positive Response to Businesses and Start-Ups: By reducing constraints on foreign exchange, it makes it easier to do business internationally. FEMA Valuation guidelines prevent startups from giving away equity below fair value, protecting stakeholders. Adherence also helps businesses maintain a positive legal reputation essential for attracting investors.
- Liberalization in Trade Practices: FEMA generally allows transactions unless they are expressly prohibited, reversing the restrictive principle of its predecessor, FERA. It classifies most violations as civil offenses rather than criminal acts, significantly liberalizing trade.
- Shifting from Regulation to Management: The shift from the Foreign Exchange Regulation Act (FERA), 1973, to FEMA represents a foundational transformation from a regime of strict control and conservation to one of management and facilitation. Under FEMA, foreign exchange is treated as an economic asset to be managed for development rather than a scarce resource to be controlled.
- More than Law, it works like an Eco-System: FEMA forms the foundation of India’s foreign exchange ecosystem, balancing national interests with the need to attract investment and comply with global standards. It continues to evolve to meet changing economic needs and global trends.
- Boost Foreign Investment: By liberalizing transactions and creating a conducive regulatory environment, FEMA encourages trade and investment that directly or indirectly contributes to economic growth.
- Enhancing Investor Confidence: A transparent and predictable regulatory framework enhances investor confidence, attracting more foreign capital into India.
- Sector-Specific Regulations: FEMA prescribes FDI caps and approval routes (automatic or government) based on industry type to regulate inflows and maintain stability. It also specializes in regulations for E-commerce regarding cybersecurity to protect digital assets.
- Shifting from Criminal to Civil Penalties: Markedly different from the restrictive criminal-based regime of FERA, FEMA's civil-based facilitative framework promotes trade and investment by managing foreign exchange as an economic asset.
Compliances and Documentations under FEMA, 1999
Main compliances include mandatory reporting of foreign investments and transactions to the RBI through AD Category-I banks. Key requirements include:
- Filing the Annual Return on Foreign Liabilities and Assets (FLA).
- Reporting FDI via Form FC-GPR/FC-TRS.
- Filling the Entity Master Form.
- Monthly ECB-2 filings.
- Adhering to LRS limits for outward remittances.
- Complying with downstream investment rules for subsidiaries.
- Filing the Annual Performance Report (APR) for Overseas Direct Investment (ODI).
- Reporting investments in Foreign Joint Ventures (JV) or Wholly Owned Subsidiaries (WOS).
- Reporting individual foreign exchange withdrawals daily via CIMS for AD banks.
- Ensuring export proceeds are realized and returned within specific timeframes.
- Maintaining records like the Foreign Inward Remittance Certificate (FIRC) and ensuring KYC compliance.
- Filing Form 15CA/15CB with authorized banks.
- Registering for an Import Export Code (IEC).
Basic Points to be Considered under FEMA, 1999
- Retaining Resident Accounts: NRI status (staying outside India for >182 days) requires immediate conversion of Resident Savings Accounts to Non-Resident Ordinary (NRO) accounts. Maintaining a resident account as an NRI is a common violation.
- Using NRE Account after Returning: Continuing to operate a Non-Resident External (NRE) account for Indian income after returning to India permanently is a violation.
- Crypto/Prohibited Investments: Using Liberalised Remittance Scheme (LRS) funds for crypto-assets or prohibited items is treated as an LRS breach.
- Splitting Remittances: Exceeding the annual $250,000 limit by using multiple banks to hide the cumulative total is a violation.
- Filing Errors: Non-filing or incorrect filing constitutes a violation.
Important Monetary Limits under FEMA, 1999
- Liberalised Remittance Scheme (LRS): Residents can remit up to USD 250,000 per financial year for authorized purposes.
- Repatriation for NRIs/PIOs: Can repatriate up to USD 1 million per financial year from NRO accounts (income/sale proceeds).
- Educational Expenses: Allowed up to the institution's estimate or USD 100,000 per academic year, whichever is higher.
- Medical Treatment: Permitted up to the doctor/hospital estimate or within the LRS limit.
- Gifts and Donations: Remittances are covered under the USD 250,000 LRS limit.
FEMA and RBI Compliances: Core Reporting Requirements
| Requirement | Applicable Forms | Timeline | Regulating Authority |
|---|---|---|---|
| FDI Reporting | FC-GPR, FC-TRS | 30-60 days | RBI |
| Overseas Investment | Form FC | On or before ODI remittance | RBI |
| APR for ODI | Form APR | Annual | RBI |
| Import Payments | A2 Form, KYC | Before sending payment | AD Bank |
| Export of Goods/Services | SOFTEX Form, GR Form | Periodic (project/invoice based) | RBI/SEZ Authority |
Some Recent Actions of the Government Related to FEMA, 1999
- Export/Import Regulation: In November 2025, the RBI extended the export proceed realization and repatriation time limit from 9 months to 15 months. Travelers to Nepal and Bhutan can now carry Indian currency notes up to ₹25,000 (excluding denominations above ₹100).
- FDI & Non-Debt Instruments (2025): Companies in FDI-prohibited sectors were permitted to issue bonus shares to existing non-residents if the shareholding pattern remains unchanged. Prior government approval for FDI from border-sharing nations was strictly enforced in 2025.
- LRS & Tax (2025-2026): Budget 2025 increased the TCS threshold for LRS remittances to ₹10 lakh per year. Remittances below this generally avoid TCS, and those for education via financial institution loans also do not attract TCS.
- Compounding and Compliance Procedures (2025): Applications must now be submitted via the RBI’s PRAVAAH portal. April 2025 amendments introduced a ₹2,00,000 cap for compounding minor or technical contraventions to ease compliance.
- Enforcement Actions (2025-2026): The Enforcement Directorate (ED) has intensified investigations into “front companies” and foreign NGOs. Notable cases include provisional attachment of assets worth ₹100.44 Crore in an illegal coal mining case, searches in Goa involving recovery of ₹2.25 Crore in cash and cryptocurrencies worth over ₹90 Lakh, and the seizure of 13 bank accounts of M/s Reliance Infrastructure Ltd. related to the siphoning of NHAI funds.
- Enhanced Reporting Monitoring: RBI upgraded the Single Master Form (SMF) system for auto-reconciliation and alerts, while reducing work duplication on the iFirm portal.
Role and Initiative taken by ICAI on FEMA, 1999
ICAI plays a vital role in administration, compliance, and education. It conducts specialized Certificate Courses, publishes handbooks like the “CAs’ Handbook on Inbound & Outbound Investments under FEMA,” and organizes webinars to help members navigate documentation and RBI guidelines.
FEMA: An Open Opportunity for Chartered Accountants (CAs)
Increasing cross-border transactions and investments offer significant career opportunities. Scope exists in:
- Certifications required by AD Banks for remittances and capital transactions.
- Client representations before the RBI for compounding and approvals.
- Regulatory management roles in leading firms, particularly in Tax Advisory and Litigation.
Challenges under FEMA, 1999
- The dynamic nature and frequent RBI circulars make compliance difficult, especially for smaller firms.
- Significant delays can occur due to approval requirements and extensive documentation.
- Unintentional non-compliance (e.g., clerical errors) can lead to severe penalties or unwinding of transactions.
- Misuse of NRI bank accounts (NRE/NRO) and illegal property purchases remain common.
- Penalties under the 1999 Act are very heavy.
Conclusion
FEMA’s flexible, transparent approach has been vital in inviting foreign investment and promoting the ease of doing business in India. However, it demands strict compliance with reporting and sector-specific restrictions. Under FEMA, what you cannot do directly, you cannot do indirectly either.
Important Government Websites
Based on the "Gist of Opinions" section (pages 1595–1600) of the source, here are the summaries of the Expert Advisory Committee (EAC) opinions provided in the June 2026 edition:
1. Capitalisation of Dry Dock Expenditure (Major Inspection Costs)
Subject: Capitalisation as a separate component of dredgers and depreciation after completion of their estimated useful lives.
Company’s Response to CAG Comments:
- The Company argued that under Ind AS 16, subsequent costs can be capitalised and depreciated until the next scheduled dry-docking.
- For dredgers with expired useful lives, the Company reviewed and extended those lives based on dry dock surveys, aligning with paragraph 51 of Ind AS 16.
Committee’s Points and Opinion:
- The Committee noted that Ind AS 16 allows capitalization if it is probable that future economic benefits will flow to the entity and costs can be measured reliably.
- Routine repairs, maintenance, and day-to-day servicing must be charged to profit or loss as incurred.
- Not all dry-docking expenses meet the criteria; each item must be analyzed. However, if expenditure increases the expected utility/useful life, it meets recognition criteria.
- Ind AS 16 does not prohibit subsequent expenditure capitalization even after the original useful life has expired, but the Company should review its manner of determining useful life.
- If a component has a different useful life than the remainder of the asset, it must be depreciated separately.
2. Structured Package of Assistance for a Hardwood Pulp Plant
Subject: Whether a capital subsidy in lieu of SGST reimbursement is a ‘grant related to asset’ or a ‘grant related to income’ under Ind AS 20.
Committee’s Points and Opinion:
- Ind AS 20 defines grants related to assets as those where the primary condition is the purchase, construction, or acquisition of a long-term asset.
- Secondary conditions regarding the location or type of asset do not change this classification.
- The Committee clarified that the frequency of the grant (one-time vs. regular) is irrelevant to determining its nature.
- While the subsidy might be calculated as a percentage of investment, this is merely the basis for the amount and does not dictate the nature of the grant.
3. Payment to NHAI for Road Connectivity to Exhibition-cum-Convention Centre (ECC)
Subject: Accounting treatment of ₹354.89 crore paid to NHAI for external road connectivity to the ECC project.
Management’s Position:
- Management argued the road infrastructure is critical to the operational readiness of the ECC; without it, the main asset is unusable. Therefore, they capitalised it under Ind AS 16.
Committee’s Points and Opinion:
- The expenditure was for "connectivity" to a road, not a dedicated road for the project itself.
- Under Ind AS 16, only costs directly attributable to bringing an asset to the location and condition necessary for operation can be capitalised.
- The Committee noted the road and project development happened simultaneously, meaning the road was not strictly necessary for the construction of the ECC.
- The objective was to create additional access to increase attractiveness and visitor ease, which may increase future benefits but is not necessary for the ECC to be "capable of operating".
- Conclusion: The expenditure should not be capitalised as part of the PPE cost; instead, it should be recognized as an expense in the Statement of Profit and Loss when incurred.
Important General Notes:
- These gists are summarised versions for informational purposes and may not capture every nuance. Users should refer to the complete authoritative text at icai.org.
- The opinions represent the view of the EAC, not necessarily the Council of the Institute.
- Each opinion is based on specific facts provided by the querist and current laws at the time of finalisation.
- A Compendium of Opinions in forty-four volumes is available for purchase via the ICAI CDS Portal.
Accountant’s Browser
PROFESSIONAL NEWS & VIEWS PUBLISHED ELSEWHERE Index of some useful articles taken from Periodicals received during April – May 2026 for the reference of Faculty/Students & Members of the Institute.
1. Audit
- Auditor-Client Relationship and Abnormal Tone: A Simultaneous Equations Approach by Milad Darvishi, Mahmoud Lari Dashtbayaz, Roghayeh Mahmoudi Yekebaghi and Taqi Abdul Redha AI Abdwani. Asian Review of Accounting, V. 34, No. 2, PP. 273-297.
2. Computer
- Employees Are Relying on AI for Personal Support. That’s Risky by Constance Noonan Hadley and Sarah L. Wright. Harvard Business Review, May-June 2026, PP. 67-75.
- How Gen AI Robots are Reshaping Services by Jochen Wirtz. Harvard Business Review, May-June 2026, PP. 117-125.
- Strategic Impact of AI on Bank CRM: Applications, Benefits and Future Governance by S. Jeyakumar. Banking Finance, April 2026, PP. 37-43.
3. Economics
- Horticulture Sector in India: Trends, Performance, and Impact by Sant Kumar, Anjani Kumar, Nalini Ranjan Kumar, Kriti Sharma and Immanuelraj Kingsly. Economic & Political Weekly, April 25, 2026, PP. 42-49.
- Innovation as the Driver of Economic Growth: India’s Roadmap to 2047 by Bimlesh Kumar Singh and Saifullah Khan. University News, April 20-26, 2026, PP. 26-36.
- Mind over money: How Psychology Shapes your Financial Fate by Soumya Ranjan Sahoo and Sunil Kumar Gaud. Banking Finance, April 2026, PP. 29-32.
- West Asia War: What it Means for Exporters, Importers and Marine Insurance by Balasundaram R. Insurance Times, April 2026, PP. 35-37.
4. Taxation and Finance
- Performance Commitment, Earnings Quality and Tax Avoidance: Evidence from Chinese Listed Companies by Xiaoqing Li, Haiyu Yan and Zixing Wang. Asian Review of Accounting, V. 34, No. 2, 2026, PP. 483-509.
Note: Full texts of the above articles are available with the Central Council library, ICAI, which can be referred on all working days. For further inquiries, please contact 011-30110419 and 011-30110420 or by e-mail at library@icai.in.
Mergers and Acquisitions: Transforming the Global Business Landscape 2026-2030
CA. Neha Sedhara Member of the Institute
Overview and Strategic Necessity
Mergers and Acquisitions (M&A) have evolved from simple tools for expansion into strategic necessities in the globalized market of 2026. The period between 2026 and 2030 is set to witness transformative shifts driven by technological innovation, regulatory reforms, and sustainability. While M&A serves as a primary tool for consolidation, it is increasingly used to drive innovation and navigate the complexities of the future global business environment.
Historical Context and India’s Rise
India has recorded a massive trajectory in the M&A space, with over 28,500 deals since 1996, totaling a cumulative value exceeding $1.06 trillion. The year 2025 marked a significant rebound, with deal values reaching approximately $60.2 billion across 960+ transactions. This surge was primarily driven by high-value, billion-dollar deals and increased inbound interest in sectors like infrastructure, technology, and BFSI.
Technological Transformation
Technology, specifically Artificial Intelligence (AI), blockchain, and digital tools, has become a central driver of the M&A process. AI is used to streamline operations, automate repetitive tasks, and accelerate due diligence through advanced data analysis. Notably, Generative AI is projected to be utilized in 80% of M&A processes within the next three years, a massive jump from 16% in early 2024.
Landmark M&A Deals (2020-2025)
Several high-profile deals have reshaped the global landscape:
- Microsoft – Activision Blizzard (2022): At $68.7B, this historic deal gave Microsoft massive scale in gaming and essential access to the metaverse ecosystem.
- Reliance – Disney Merger (2024): A $8.5B consolidation creating "JioHotstar," commanding 120 TV channels and 280 million subscribers, capturing over 85% of the OTT market in India.
- AMD – Xilinx (2022): A $35B deal that elevated AMD into a full-stack semiconductor player.
- Tata Motors – Iveco (2025): A $4.4–4.5B acquisition that provides Tata Motors with strong access to Europe and Latin America while accelerating its entry into EV and hydrogen technologies.
Sectoral Spotlights: Pharma and Cement
- Pharmaceuticals: Indian trends are converging with global benchmarks. Mankind Pharma’s acquisition of Bharat Serums & Vaccines (2024) for ₹13,768 Cr mirrors the strategic rationale of global giants like Pfizer (Arena Pharma acquisition), moving from pipeline-driven bets to portfolio-driven dominance in specialty areas like women's health and fertility.
- Cement: The Adani Group is aggressively challenging market leader UltraTech Cement. By acquiring Penna Cement for ₹10,422 Crore, Adani Cement is on track to hit its target of 140 MTPA by FY2028, aiming for a 20% market share. UltraTech, however, remains the leader with a 23% share and plans to expand beyond 160 MTPA.
Hurdles, Legal Challenges, and the Role of Chartered Accountants
M&A transactions are fraught with regulatory and operational complexities where CAs play a pivotal role:
- Regulatory Compliance: CAs navigate domestic laws (Companies Act, 2013) and cross-border requirements like FEMA and multi-jurisdictional antitrust reviews.
- Taxation: Structuring deals to optimize Capital Gains Tax, managing Stamp Duty variations, and leveraging Double Taxation Avoidance Agreements (DTAAs) are essential functions.
- Emerging Risks: Integrating ESG compliance, managing GDPR and data localization laws, and ensuring robust cybersecurity during IT integration have become modern priorities.
Emerging Trends and 2030 Projections
- Sustainability: M&A in clean energy will accelerate to meet the global goal of 500 GW clean capacity by 2030.
- India as a Global Hub: Supported by regulatory stability and policy continuity, India is projected to maintain M&A transaction values in the range of $65–75 billion in 2026, becoming a hub for strategic global investments.
- Future Outlook: Key trends include a rise in cross-border collaborations, a heavy focus on ESG integration, and the expansion of private equity in early-stage firms.
Sector-wise Share of M&A (2025-26 Estimate)
| Sector | Volume Share |
|---|---|
| IT / Technology | 24% |
| Industrials / Manufacturing | 15% |
| Utilities / Power / Renewable | 13% |
| Healthcare / Pharma | 10% |
| Financial Services | 9% |
| Consumer Goods / FMCG | 8% |
| Telecom / Infrastructure | 7% |
| Others | 14% |
(Source: Author's estimate)
Conclusion: M&A will remain central to corporate growth and innovation through 2030. India’s dynamic market, bolstered by proactive policies and professional expertise, will play a pivotal role in this global transformation.
