Breaking Out of the ‘Peanut Fees’ Cycle: Strategic Growth Playbook for Indian CA Firms
1. Context: Why the ‘Peanut Earnings’ Debate Matters
An interview of CA Madhukar N. Hiregange in The Finance Story (February 2026) triggered a nationwide conversation by describing Indian chartered accountancy firms as trapped in “peanut earnings” – high responsibility, low-fee work, increasingly commoditised and automated, with limited scalability.
The interview highlighted:
- Excessive dependence on compliance and attest engagements
- Fragmented, proprietor-centric firm models
- Under-capitalised practices with weak reinvestment
- Regulatory limits on ownership and multidisciplinary participation
- The competitive strength of multinational accounting networks
- A controversial suggestion: ambitious professionals who want to build very large advisory organisations may need to surrender their Certificate of Practice (COP) or separate attest and consulting through different entities
This article revisits those themes, introduces legal and commercial nuance, and lays out a practical transition roadmap for sole proprietors and small and medium practices (SMPs) without discarding compliance as a low-status activity.
Central Proposition
Compliance is not a second-class professional function. The crisis arises when complex statutory responsibility is sold as a bare filing service, underpriced, under-systematised and disconnected from higher-value advisory and implementation work.
2. Is the CA Qualification Being Reduced to Routine Compliance?
India arguably has one of the largest pools of professional accountants globally. Yet, the domestic firm ecosystem remains highly fragmented. The The Finance Story piece, quoting CA Madhukar N. Hiregange, noted that as of October 2025, India had over one lakh CA firms, with 72,696 functioning as proprietorships.
The concern was not merely small size. The deeper issue was that:
- Highly trained professionals are doing repetitive, deadline-driven, low-fee work
- The same professionals bear personal exposure to:
- Disciplinary proceedings
- Civil and tax liability
- In some situations, criminal consequences
- They must keep pace with rapidly changing statutes, rules, portals and technology
- Despite this, fee realisation is often disconnected from the magnitude of risk and expertise involved
The real imbalance is between:
- Responsibility assumed
- Perceived value of the work
- Actual remuneration
However, dismissing compliance as a “waste” of a CA qualification is misleading. Many compliance tasks involve nuanced judgement: classification, recognition, disclosure, reconciliations, controls evaluation and certification. It is not the label “compliance” that devalues professional capability but how the service is engineered, automated, reviewed and priced.
3. Structural Weaknesses in the Current CA Firm Model
3.1 Proprietor-Centric Fragmentation
Most first-generation practices are:
- Built on the founder’s personal credibility
- Driven by individual technical work, contacts and reputation
- Dependent on the proprietor for:
- Client acceptance and retention
- Critical technical decisions
- Billing and recovery
- Escalation handling and crisis response
While such practices can provide a dignified income, they rarely evolve into independent institutions. There is:
- Little organisational memory beyond the proprietor
- Limited scale, tied directly to the founder’s time and energy
- Inconsistent quality when workload spikes
Big-ticket tenders often demand:
- High minimum turnover
- Multi-location presence
- Sectoral experience
- Technology backbone and robust systems
- Bench strength of specialists
Individually, thousands of firms may be competent. Collectively, they are formidable. But separately, they often fail to meet threshold criteria for larger mandates.
3.2 The Survival Trap and Comfort-Zone Trap
Smaller practices largely survive on predictable work:
- Income-tax return filing
- GST return and related compliance
- Company law and regulatory filings
- Bank audits, cooperative audits
- Certifications and routine attest engagements
Remaining in these domains is not always a sign of lack of ambition. Many assessee-facing CAs carry:
- Family obligations, EMIs, and limited reserves
- Uncertain cash flows and delayed recoveries
- No institutional safety net if experimentation fails
Yet, this survival focus can easily turn into a comfort trap:
- Once a stable monthly inflow is reached, serious investments in:
- Specialisation
- Technology
- Successor leadership
- Managerial talent
are often postponed indefinitely.
The result:
- Continuous busyness mistaken for growth
- Annual turnover mistaken for firm “value”
- No deliberate strategy to move up the value chain
3.3 Chronic Capital Shortage
Many professional firms follow an implicit rule:
“Whatever surplus is left at year-end belongs to the partners.”
This leads to:
- Negligible accumulation of institutional capital
- Underinvestment in:
- Technology platforms and cybersecurity
- Research and thought leadership
- Staff training and certification
- Brand-building and communication
- Senior non-partner professionals in operations, HR, IT
Without long-term capital planning, firms struggle to create the infrastructure that big clients and complex assignments now demand as a baseline.
3.4 Process and Quality Systems Lag
Large clients buy more than technical know-how; they buy predictability and risk control:
They expect:
- Documented methodologies and manuals
- Structured engagement acceptance and conflict checks
- Hierarchical review frameworks
- Standardised work papers
- Robust data-security and confidentiality controls
- Centralised knowledge repositories
Many SMPs have excellent technical minds but operate with:
- Informal processes
- Limited documentation
- Inconsistent workflow discipline
This makes it difficult to demonstrate quality maturity, even where professional competence is unquestionable.
3.5 Talent Mix and Multidisciplinary Needs
Client problems are no longer neatly segmented. They cut across:
- Direct tax, indirect tax and accounting
- Company law, sectoral regulations, FEMA
- Technology, data analytics, cybersecurity
- Strategy, operations, risk and governance
- Valuation and transactions
Regulations do permit multidisciplinary partnerships with specific categories of professionals under the relevant ICAI framework. Thus, it is not accurate to say that no non-CA can ever be a partner.
However, a practising CA firm cannot freely offer equity or partnership to:
- Technologists
- Engineers
- MBAs and business strategists
- Pure financial investors
simply because these resources are commercially valuable. This restriction directly affects the ability to:
- Bring in domain specialists as equity partners
- Raise growth capital within the firm itself
4. Understanding the ‘Peanut Earnings’ Business Model
The “peanut earnings” label is not just an insult to low fees. It reflects a structural model with four distortions:
High personal and regulatory risk vs. low or uniform pricing
- Assessee-specific responsibility is broad, but fees are often flat and minimal.
Time consumed in data clean-up instead of judgment
- CAs spend long hours sorting, validating and completing client data rather than using their core analytical skills.
Chronic deadline stress subsidised by the professional
- Statutory due dates, unstable portals and client delays combine to shift operational burden on the firm, with little room in the fee for these contingencies.
Price-driven competition eroding quality investment
- Undercutting fees becomes the primary differentiator, shrinking the space to fund quality, technology and capacity-building.
With digitisation and AI, basic mechanical activities—data extraction, matching, form population and simple variance checks—will keep getting cheaper and faster.
However, automation cannot replace:
- Professional scepticism
- Risk evaluation
- Interpretation of law and facts
- Representation before authorities
- Strategic decision support