India CFO Survey 2016: CFO Signals

Indian CFOs optimistic on revenue growth but still divided on taking risks

Based on responses from more than 300 CFOs, the 'India CFO Survey 2016' conducted by Deloitte points to a general confidence in the Indian economy and government programs, with the CFOs exhibiting optimism on revenue growth.

  • 90 percent of the CFOs have expressed confidence in the economy over the mid-term and long term
  • 60 percent of the CFOs have shown confidence in government programs
  • 45 percent of the CFOs are expecting companies to increase their headcount

Even though 74 percent of CFOs are optimistic about increase in revenues in the next one year, given the uncertain global economy and growth being concentrated in certain sectors of the domestic economy, the CFOs were almost equally divided on whether it was the right time to take risks. The ‘India CFO Survey 2016’ conducted by Deloitte, points out that the outlook on operating margins looks uncertain wherein 48 percent of the CFOs expect increase in margins while 52 percent expect reduction or no change in margins.

Encouragingly, 58 percent of the CFOs believe their capital expenditure will increase over the next one year giving credence to the fact that there were some green shoots of recovery in the investment cycle. More than 60 percent of the participants believe that they have seen an improvement in the investment climate over the past one year. Another silver lining in the Deloitte report is that almost 45 percent of the CFOs are expecting companies to increase their headcount.

“A key element in the current economic recovery is the pace of investments and the belief that taking risks would be productive and, as such, we have not seen that sentiment being expressed by CFOs in our latest survey,” said Deloitte Spokesperson from India. “The percentage of CFOs who are positive about the current developments have, however, increased from last year. These findings show that the CFOs are willing to support the government with more time to bring about the structural change that would give growth a more sustainable and meaningful boost.”

Both working capital requirements and cash holdings are expected to increase for companies over the next one year, which probably implies that they expect a higher inflation in both goods and services. On the availability of credit the responses were mixed with a majority of CFOs saying that credit was available at a higher cost. This seems to be counterintuitive in a year when the borrowing cost for banks have come down. However, this could possibly be based on the belief that banks would find it hard to lend due to the impending structural constraints and increasing risk aversion in the face of the ensuing slowdown in a number of sectors.

CFOs continue to remain optimistic about the Indian economy and the ease of doing business in India

About 90 percent of the CFOs in their response to Deloitte were optimistic about the mid-term outlook, and 94 percent of them have expressed their confidence on the economy even in the long term. Factors such as lower commodity prices including oil prices, and lower inflation bode well in the short term. Around 60 percent of the executives reported a marginal improvement in ease of doing business in India, while 35 percent of them have seen no change. However, a lot needs to be done to improve India’s ranking further in the World Bank’s “Doing Business” report.

Close to 60 percent of the survey participants have expressed satisfaction on the timeline and effectiveness of the government initiatives. Various programs and schemes such as ‘Make in India,’ ‘Digital India,’ ‘Smart cities mission,’ ‘Start up India’ and ‘Skill India’ were launched with the intention to improve manufacturing ability of the country, promote innovation and entrepreneurship, create job opportunities, and improve infrastructure and skills.


About the India CFO Survey 2016 report

The report is based on responses from over 300 CFOs comprising small to large scale companies, with revenues spanning less than INR 500 crores to more than INR 2500 crores, and a varying employee base from less than 500 to more than 20,000 employees. The respondents include listed and unlisted companies from both government and private sectors, Indian companies, and MNCs headquartered in India as well as overseas, encompassing industries across the sectors.

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