CFOs upbeat about economy, worried over inflation

A majority of senior finance executives are optimistic about the Indian economy, but consider inflation and political direction of reforms as key areas of concern, says a Deloitte survey.

Chief financial officers in the country are cautiously optimistic about the future and are neutral about their companies' performance in the short term, said the Deloitte India CFO Survey 2013.

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About 62 per cent of the CFOs expressed optimism about the future state of the Indian economy over longer term and 49 per cent of the respondents consider inflation, political direction towards economic reforms and increased commodity prices as key concerns.

On their companies' short term outlook, 34 per cent of the respondents said their organisations will perform better over the next quarter, 12 per cent were apprehensive of poor performance, while the rest expect no significant change.

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The survey that covered around 136 CFOs noted that 62 per cent of respondents are optimistic about the future state of the Indian economy over the longer term, 57 per cent of the CFOs are neutral, whereas only 18 per cent are optimistic.

"The optimism and sentiments expressed by the CFOs indicate that they are exhibiting caution regarding the present state of the Indian economy," Deloitte India Senior Director Sanjoy Sen said.

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He further noted that "their (CFOs) apprehension arises from the recent slowdown of GDP growth, consistently high rates of inflation and a widening fiscal deficit, key factors that have far-reaching implications on investor confidence."

The key drivers for a positive outlook by the senior finance executives include regulations to encourage foreign investors, subsidy cuts to reduce the fiscal deficits, and moderate interest rate cuts to fuel the economy.

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Over 45 per cent of the CFOs continue to express concern over changing cost structures, inflationary pricing trends, industry regulations, and unavailability of adequate skilled resources as key economic concerns.

The survey noted that 54 per cent of respondents believe revenue growth/preservation, cost reduction, and maintenance of talent pool are key organisation specific challenges.

Around 66 per cent indicated that Eurozone instability, slowdown in Chinese economy and increase in FDI were key global events that impact their organisational performance.