Demystifying India’s Future: Insights on Growth, AI, and Compliance
The Indian economy witnessed an expansive change after the implementation of the New Economic Policy in 1991. The route to growth and development shifted following the global market demand and supply. India’s economic performance seems encouraging for the next fiscal year. The finance ministry reported that India will continue to be the fastest-growing major economy in the world in FY24.
Aditi Nayar, Chief Economist, Head- Research & Outreach at ICRA, underscores the complexity of global economic factors, evaluates India's economic performance, and outlines concerns and observations for the future, focusing on inflation, fiscal policies, and global economic dynamics. She raises questions about the trajectory of the US economy, considering factors like monetary policy, and geopolitical conflicts.
She spelt out the reasons behind why a dip is expected in India’s growth in the second half of the year, such as uneven monsoons and concerns about crop performance affecting agricultural outcomes, and the cumulative impact of monetary tightening is expected to play a role in the second half of the year. Front-loaded government capital expenditure is noted as a positive, but there are concerns about a slowdown in the second half and the approaching election season.
Challenges and Opportunities Ahead:
Aditi provided insights into potential GDP growth, inflation, fiscal consolidation, private sector capex, global commodity cycles, and the outlook for the rupee. In the fiscal year 2024, the anticipated real GDP growth is 6%, while nominal GDP growth is expected to range between nine and nine and a half per cent. The Consumer Price Index (CPI) inflation is projected to average 5.2%, and the Wholesale Price Index (WPI) is foreseen at sub-1%. The repo rate is expected to be unchanged for the remainder of the fiscal year. The fiscal deficit is anticipated to be generally contained at the budgeted level, and the current account deficit is predicted to be at 2% of GDP. Moving into the fiscal year 2025, real GDP growth is forecasted at 6.2% of GDP, with nominal GDP growth ranging between nine and 10 per cent. Inflation is expected to remain above the RBI's target, and there are considerations about fiscal deficit management and the need for fiscal consolidation. The rupee is expected to remain stable against the US dollar, and the current account deficit is deemed comfortable. “India remains a beacon of macroeconomic stability in an uncertain and turbulent world," she added.
Ashwani Narang, Head of Spend Management at SAP India, emphasised the importance of efficient spend management in the context of economic fluctuations and global events. He suggests that finance professionals can contribute to cost savings and become profit centres by adopting dynamic discounting and supply chain financing, potentially saving substantial amounts for the organisation.
Sumedha Varma, Senior Director, SAP Concur, spoke about upcoming innovations, particularly in generative AI, speaking about features that can mimic the human mind so that travel and expenses practically manage themselves. She emphasized that generative AI helps streamline user experience while ensuring compliance with the company policy.
She presented a glimpse into the future of travel experiences, suggesting a more intuitive, generative, AI-driven, and automated process for users. She mentioned “We at SAP Concur are combining advances in generative AI with our unrivalled customer data and in-house machine learning to leverage AI in ways that no travel and expense management company can. By combining your software usage data, existing processes, and business goals, AI will be able to provide you with actionable steps toward better business processes that help achieve those goals”
Ruchika Kohli, Presales Senior Specialist, SAP Concur India provided a comprehensive overview of Concur, a 30-year-old product with a global presence and an impressive 99% customer retention rate, trusted by Fortune 500 companies. She talked about key features that include seamless integration with partner networks like Ola and Uber, ensuring accurate expense reporting, and preventing personal expenses. Concur emphasises compliance, governance, and control with a benchmark revealing potential non-compliance in 23% of expense reports. The value proposition includes faster vendor payments, increased compliance in expense reporting, and a five-month payback period. She underscores Concur as a versatile solution for corporate travel and expense management and highlights its commitment to sustainability, promoting initiatives like carbon emission alerts and recommending eco-friendly travel options.
Reshma Jayadeva Prakash, Senior Product Manager- SAP Concur Spend presented a glimpse into the Gen AI use cases, particularly focusing on its applications for finance functions and travel expense management. Notably, Gen AI seamlessly integrates with SAP Analytics Cloud, enabling CFOs to generate reports effortlessly through natural language queries. Demonstrations include AI-powered features for Cost Estimation, Automatic Hotel Itemization, Travel Insights, and Compliance checks within Travel Requests and Expenses. She emphasised the user-friendly nature of Gen AI, allowing for quick and efficient interactions without heavy dependence on IT or business analysts. The demos showcase the system's ability to control spend, provide insightful travel recommendations, and enhance compliance through a digital assistant named SAP Joule. The presentation concluded with a vision for future developments, highlighting Gen AI's commitment to evolving and simplifying the management of expenses and travel.
The Curve of Smart Finance
Businesses and people are increasingly using artificial intelligence (AI) in the ever-evolving field of financial technology to help them navigate the challenges of financial management. The integration of AI emerges as a revolutionary force to tackle the issues of modern finance as the need for efficient financial solutions rises. The role of finance has evolved from traditional accounting to becoming more involved in funding and running the company. The finance professional is now engaged in various aspects, reflecting a significant shift in the function and responsibilities.
Ashu Kansal, CFO, Addverb Technologies Ltd., addresses the question of outsourcing, emphasising that transaction processing can be effectively outsourced in India. However, outsourcing of specialised roles in direct and indirect taxation is a remote possibility due to the complexities of law in India. He highlights the need for a backup system for compliance-related roles which effectively means that the company should keep tax consultants in addition to its employees in the tax domain so that the maker checker rule can be implemented. He also shares his company's experience of successfully outsourcing transaction processing outside India in its subsidiaries, including direct and indirect taxation compliances, at a cost-effective rate through firms run by Indians who are located outside India. These firms understand Indian culture and timelines and are offering services at a cost-effective rate. He highlighted the significance of being tech-savvy, especially for those in shared service centres, emphasising the importance of being adept with smart tools and technologies.
He emphasises that as companies grow, the composition of the finance department requires specialists in treasury, taxation, legal, financial planning and reporting. Regarding upskilling, he highlights the importance of change management, training sessions, and linking automation efforts with rewards and recognition to motivate employees.
Kewal Krishan Jindal, CFO, Translumina Therapeutics, adds a nuanced perspective on outsourcing, considering factors such as efficiency, streamlining, and ROI. He suggests that certain transactional aspects can be automated and outsourced, but specialised roles within the Centre of Excellence departments are often retained in-house due to sensitivity and the need for niche skills.
He echoes the significance of change management in upskilling finance professionals, emphasising the need for a strategic approach to talent development. He discussed the role of automation in transaction processing and the importance of rewards and recognition to motivate employees during the transition.
Gen AI is No More a Buzzword
Gen AI is driving great enthusiasm around the world. Aiming for positive business outcomes without delving into this ecosystem is not avoidable. Srivatsan Santhanam, VP, of Spend Engineering, SAP Labs, India, sets the stage for discussing generative AI and shares insights on its evolution and practical applications in the finance community. He shared a recent survey that reveals that CFOs identify uncertainty as a significant pain point and seek interventions to address it. He discusses the three main interventions: monitoring, innovation, and automation, and introduces AI as a potential companion for CFOs. He distinguished between narrow AI (old models) and Gen AI, presenting Gen AI as a fast learner, emphasising the choice for finance, and viewing it as a companion. He presented the concept of democratising AI, stressing the value of upskilling and how accessible AI is to non-developers. He further talks about the next phase, which is to humanise AI, put more emphasis on people, and ask users to share their thoughts and take action.
Mandeep Mehta, Group Chief Financial Officer at PB Fintech Pvt Ltd, discussed the impact of Gen AI, whether it's a fad or already influential. Having dealt with heavy volumes and implemented extensive automation, he highlights the different layers of automation in finance, from efficiency-driven, experience-improving, to decision-making support. However, decision-support models are not refined enough. He acknowledged challenges, such as replicating past results, and mentioned the practical hurdles to achieving seamless interaction with automation. "The entire ecosystem, comprising staff, supervisors, and auditors, has to be trained in terms of boundaries, reliability, and making sure that the quality is good”, he added.
Rekha Talluri, CFO of India and South Asia, Microsoft expressed a perspective on the current state of AI, emphasising that we are at a tipping point in the era of AI, following the evolution of the internet and cloud technologies. She discussed how customers across various industries, including finance, are leveraging AI. Gen AI helps simplify and automate tasks such as tracking interactions with customers, drafting emails, providing recommended actions, and quickly summarising information for tasks like earnings releases and competitor analysis. “AI is not just a buzzword. It's just a matter of time in terms of how we continue to evolve this further in the country. We are still in the driver's seat, and AI is a copilot to assist you to be a lot more efficient, a lot more productive, and to enable things right”, she added.
Neeraj Khetan, CFO, of EY LLP, discussed their investment in AI, particularly their language model, and the comprehensive involvement of their organisation in AI initiatives in their finance function, particularly in the development and implementation of customer experience chatbots. He points out that the full potential of general AI will take time to realise, raising concerns about risk management, ethical considerations, and privacy issues.
He examines the transition from AI being seen as a black box to the transparency provided by generative AI; therefore, the inclusion of explainable AI is noteworthy. He emphasises how critical it is to be able to reflect on oneself and comprehend how AI systems make decisions to foster trust, particularly in contrast to previous ideas of AI as a mysterious black box. He is optimistic about changing things and believes that explainable AI has the potential to increase people's confidence in AI systems.
Golden Glue for Complex Compliance
The finance departments face dynamic challenges and ever-evolving regulations requiring a significant workload to ensure businesses' adherence. Dr. Sanjeev Kumar Singhal, Central Council Member, ICAI, 2019-2025, and founder, CA Parivaar, highlighted the opportunity for organizational enhancement through best practices to streamline compliance efforts. He acknowledges the growing complexities CFOs encounter with various laws and regulations. Discussing the new regulations such as ESG, reporting, digital assurance, and the EU AI act, he underscores the relevance of risk management, ethical considerations in education, and the necessity for businesses to embrace technological integration. "It is imperative that you have proactive compliance management and a lot of professionals in technology to help ease their job. But the final responsibility will lie with human beings,” he added.
Nikhil Kamat, Business Director, Accounts Payable Automation, SAP, focused on the role of technology for Accounts Payable Automation. He addressed the challenges faced in processing invoices, including compliance with GST, input tax credit, MSME vendor payment timelines, and potential cash flow impacts. The imbalance in transactional communication between the government, the business, and the vendor is highlighted. The SAP solution proposed is through the introduction of "golden glue," a technology-driven meeting point for stakeholders to validate, in real-time, GST and Input tax credit compliance. He details the components of this solution, including a vendor portal, paper invoice processing, and a GST reconciliation cockpit including a vendor rating system on GST compliance trends for a vendor.
