The smaller cities of India are becoming home to international accounting firms

Major accounting firms are increasing their investments in new locations outside of major cities in India as demand for more affordable back office operations increases and smaller communities advance along the economic value chain.

Large multinational firms have been rushing to India’s largest cities, primarily Mumbai, Delhi, and Bengaluru, to establish gigantic operations centers that employ millions of people, drawn by the country’s abundant, reasonably priced talent pools, notably in IT.

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Business service exports have grown to be a crucial component of India’s economy, but the industry has been negatively impacted by a slowdown in the demand for software globally and issues in major urban centers like growing expenses, high turnover, and the difficulty in rehiring personnel following the pandemic.

In a June report, Ernst & Young stated that it anticipates multinational corporations to establish “global capability centers” for every industry in tier-2 cities including Jaipur, Vadodara, Kochi, and Chandigarh. By 2030, there may be 2,400 such centers, up from 1,600 today, creating 2.6 million new employment and injecting more than $100 billion into the economy.

In places far from more globally connected business centers, this means more career opportunities and possibly greater compensation.

Diksha Mehta, 27, a math graduate from Patiala in northern India, is one of thousands of recent hires who have joined Deloitte’s cyber security unit and are currently delivering consulting services to an Australian bank and retail clients in Europe.

She added at the Deloitte office in Gurugram, on the outskirts of New Delhi, where hundreds have recently joined, “I was preparing for a career in academia but was delighted when I got a job offer along with four classmates.”

India has become a global powerhouse for corporate services including taxes, data analytics, cybersecurity, and customer management due to rising salaries, a decline in accounting graduates in Western nations following the epidemic, and visa limitations.

According to WTO estimates, India is one of the top exporters of services in the world, with a part of the global services trade that has increased from 2% in 2005 to over 4%.

According to Debasish Mishra, chief growth officer of Deloitte South Asia, “global giants are finding it easier and more competitive to shift work to small locations in India,” highlighting the sizable pool of English-speaking accounting, engineering, and scientific graduates.

With more than 100,000 employees in India, Deloitte wants to increase its personnel by 50,000 over the next three years and grow into new cities, while KPMG expects to add more than 20,000 employees during that time.

According to Padmaja Alaganandan, the company’s India chief people officer, PwC hired close to 12,500 individuals in the fiscal year that ended in March and anticipates doing the same this year.

All of that could help the labor market in light of the slowing hiring in the manufacturing and IT sectors brought on by fears about global growth.

For the current fiscal year, Prime Minister Narendra Modi has set a target for service exports of $400 billion, which is nearly 25% higher than the previous year.

In the next five years, total services exports might reach $750 billion, overtaking goods exports, according to Sunil Talati, president of the government-sponsored Services Export Promotion Council.

RISE IN PAY

Deloitte, PwC, and IBM (NYSE:IBM) have opened offices in Bhubaneswar, the capital of the eastern state of Odisha, to service Indian and international clients.

The 25-year-old Swagatika Parmanik quit her position as a software expert to work as a consultant for Deloitte in Bhubaneswar, a city of approximately a million people centered on mining and agriculture.

She now has a pay raise of more than 50% and flexible working hours that let her stay at her parents’ house, which is 40 kilometers away from the workplace.

She remarked, “The raise in pay made it easier for me to invest and purchase health insurance for my parents.”

The opening of the new offices has also prompted building projects to be started by developers and new courses to be offered by educational institutions.

According to a report released last week by the Knight Frank consultancy, the need for office space has increased significantly in smaller cities as a result of the expansion of global accounting and international operations, which has caused rents to rise by up to 10%.

Additionally, local accounting companies are expanding into smaller cities and increasing salaries.

A dearth of licensed accounting specialists, according to Talati of the Services Export Promotion Council, was a problem for many businesses. His audit firm in Gujarat employed about 400 auditors and consultants.

“Retaining good employees is not an easy task as big companies are doubling the salaries,” said Kshitij Patel of Ahmedabad-based accounting firm Manubhai & Shah LLP, which serves both domestic and international clients.

“We are going even further to open offices in smaller cities now that the Big Four and other international firms are coming to our cities.”