Ahead of Budget, chief financial officers (CFOs) of companies have expressed optimism over short-term growth, and have indicated their willingness to accelerate fresh-investment plans in tandem with the government’s promise of putting in more money towards investment.
A Deloitte India CFO survey said 71 per cent of the CFOs are keen to take up new capex plans. Fifty-three per cent expect hiring to pick up.
In the short-run, CFOs are highly optimistic with around 65 per cent being positive about economic growth prospects of the domestic economy. As the economy picks up pace, corporate profitability is also expected to show a meaningful uptick in the next one year. Seventy-eight per cent of the CFOs believe that they will experience increased revenue.
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“Rise in CFO optimism in the short-term is in line with other key developments such as inflation coming under control, current account deficit contracting to manageable levels and the likelihood of the government meeting its fiscal target,” said Deloitte spokesperson
However, the CFOs do not expect it to be a smooth ride. Even as growth has turned around and business confidence is on the rise, regulatory impediments and uncertainty in the tax environment continue to be one of the major concerns shared by the CFOs. Further, while inflation has moderated enough for the Reserve Bank of India to start the rate cutting cycle, it continues to be a concern.
“The CFOs are willing to give the government more time to bring about the structural change,” the spokesperson said.
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Increased competition due to new entrants affecting profits as well as price trends are major challenges according to a majority of the CFOs.
Another major theme that has emerged in the survey has been the proactive role that the government has played in reigniting the growth process. As such, 37.1 per cent of the CFOs are very positive, while another 58.8 per cent are positive that the new government will accelerate the pace of reforms.
Although well-directed, according to the CFOs, the ‘Make in India’ campaign faces several infrastructural and regulatory roadblocks. High investment-risk and lack of clear policy framework is one of the main roadblocks the CFOs felt.
Productivity and employability of people is bothersome. It is considered as one of the main impediments in India realising its demographic dividend; availability of skilled workforce will pose a deterrent for doing business in India and the successful implementation of the ‘Make in India’ campaign, according to the CFO survey.
The survey is based on responses of over 100 CFOs spanning across a plethora of sectors, from small scale to large scale companies with revenue spanning from less than Rs.250 crore to higher than Rs.2,500 crore. There are CFOs of Indian companies as well as MNCs.