This post is about two professional cartels in India, and why one is better than the other. The “better” cartel is the Institute of Chartered Accountants of India (ICAI). The “worse” is the Medical Council of India (MCI). As the names suggest, they regulate the profession of chartered accountants and doctors respectively. And the way the former works is better than the latter.
First of all, let me convince you that these two are cartels. The basic concept is that in order to practice as a Chartered Accountant in India, you need certification from the ICAI. And who does the ICAI consist of? Other CAs. So it is nothing but a trade guild, which tries to control who gets to join the guild. It is a similar case with the MCI and doctors. Doctors trying to control who else can be doctors. As the more perceptive of you might have figured out, it is in the interest of both these guilds to not admit too many new members, since that would lead to supply of their profession to a level that significantly affects profit margins for the incumbents.
Now that we have established why these two are cartels, and that they both have an interest in restricting membership, let us see how they go about the process.
The ICAI follows what can be described as “exit level testing”. There are no restrictions on anyone wanting to be a CA – all you need is a high school (12th standard) degree with mathematics as one of your subjects. They have three levels of examination – “basic”, “intermediate” and “final”, and one needs to clear all of these in order to become a member of the guild. And how does the guild control membership? By making these examinations super-tough, so that only a select few pass these exams every year. There are several “CA institutes” who train students for these examinations. And there is no restriction (AFAIK) on anyone opening one such institute.
The MCI does it differently. Anyone with a recognized degree in medicine is automatically a member of the MCI. They regulate the numbers instead by controlling the number of medical colleges, so that only a select few can even aspire to get into the MCI. More importantly, the entry to medical colleges is not strictly on “merit” – colleges are free to allocate a certain portion of the seats on discretion, and they do so based on recommendations, donations, etc. I’m not really saying any of this is wrong. Just describing the situation as it is. However, when you combine this with the fact that an entry into a medical college guarantees membership of the MCI (provided you pass your college exams, which shouldn’t be too hard), it effectively means that you can buy your way into the MCI.
Actually, thinking about it, this option of creating additional membership of the MCI “upon payment” is a masterstroke by that guild. The concept is that when people pay large sums of money to gain entry, they are not going to be in a hurry to look to slash profit margins (key here is the fact that the amount of work a doctor can do is constrained by his/her time, so doctors cannot play the “volume game”). So the pricing of these seats ensure additional revenue for the MCI and their constituent colleges, while not compromising on the members’ margins.
Note, however, that it is not possible to buy your way into the ICAI. Yes, aspiring members who seeks to buy their way in might buy “training” and “apprenticeship” under the best CAs who are members of the cartel, but still, to get a membership they need to pass the examination, which is not easy at all. Contrast this with the MCI where either money or the right connections get you straight in.
I’m not saying that the ICAI is a wonderful guild. Cases such as the Price Waterhouse – Satyam case or the Deloitte-FTIL case have shown that the profession is deeply flawed, and doesn’t regulate itself adequately. All I’m saying that the entry criteria it uses, as opposed to the one used by the MCI, ensures a higher quality in terms of the ability of its members.
As for me, I’m happy that I’m involved in a profession (or professions) that don’t need any certification or guild membership.