Table of Contents
India’s Path to Economic Credibility
The global economic landscape is constantly changing, with new policies and adherence at the helm. As a result, India’s corporate ecosystem is gearing up for significant reforms in transparency and disclosure. Today, a company or organisation’s credibility depends on the transparency it offers regarding its internal policies, work processes and employees. This is where Sunshine Laws come in. The increasing adoption of Sunshine Laws, which require public disclosure of financial and operational data, reflects a growing global emphasis on combating corruption, tax evasion, and financial malpractices. For India, a country with burgeoning global economic influence, these laws signal a transformative shift toward accountability and trust in business operations.
Global Influence on India’s Regulatory Landscape
Globally, transparency laws have taken centre stage. The US is one country that has taken the first steps towards a more transparent future. The country introduced the Corporate Transparency Act of 2024, which took effect in January 2024. The act mandates detailed beneficial ownership reporting, affecting over 32 million existing entities and around 5 million new entities yearly. With this act, congress aims to crack down on illicit activities like money laundering and tax evasion, which cost the global economy almost $1.6 trillion annually, as per the U.S. Treasury. Such acts resonate with India’s own governance goals to stop money laundering, tax evasion and other corruption within the system.
India, too, is aligning itself with global standards. The country’s Ministry of Corporate Affairs (MCA) has emphasised transparency by strengthening disclosure requirements under the Companies Act 2013. Recent amendments require companies to maintain registers of significant beneficial owners (SBOs), making operating harder for opaque entities. These measures are critical in addressing India’s unique challenges, including shell companies and financial crimes.
Challenges Faced and the Role of Technology
India’s push for transparency faces significant challenges despite regulatory reforms. Identifying beneficial owners remains complex due to intricate corporate structures and interwoven ownership patterns. Efforts like the MCA’s online reporting portal, MCA21, are still evolving. Compliance costs, rising annually by 8%-10%, heavily burden MSMEs, deterring them from formalising operations. While digital tools like MCA21 aim to streamline compliance, low adoption rates persist due to limited digital literacy and infrastructure in rural areas. Bridging these gaps demands public-private partnerships and policy synergy, including integrating KYC norms with corporate transparency initiatives and fostering collaboration between regulatory bodies like SEBI and MCA.
Working Towards a Transparent Future
Sunshine Laws represent a watershed moment for India’s corporate governance. By addressing challenges and leveraging technology, India can set a global benchmark for transparency. As the country navigates this transformative journey, its commitment to accountability will enhance its economic resilience and reinforce its reputation as a trustworthy global partner. Moreover, it will help India get more foreign investment. India’s FDI (Foreign Direct Investment) inflows reached $84 billion in 2023, poised to increase further if India maintains transparency and creates a trustworthy environment.
