India's CFOs troubled most about exchange rate volatility: Survey

Exposure to volatility in foreign exchange rates is the biggest threat to the growth prospects of companies, say a sizeable section of senior finance executives in India.

Forty five per cent of India-based financial executives viewed exchange-rate instability as their biggest threat, according to the fifth annual American Express/CFO Research Global Business& Spending Monitor.

Other dangers, such as changing interest rates and increased volatility in capital markets, were listed by about 21per cent of respondents. A smaller yet significant proportion – 12 per cent – chose restricted access to funding and credit as the top threat to company growth. The weakening rupee, high production costs, a sharp hike in borrowing costs, and geo-political situations leading to fluctuating oil prices and high inflation are some of the factors influencing the confidence level of Indian finance executives, said Mr Manoj Adlakha, Vice-President and Country Head, Global Corporate Payments, American Express India.

“However, we see Indian finance executives expressing far higher optimism for growth and with the overriding belief that they will see a quick recovery,” he said.

Compared to their counterparts around the world, the outlook for economic expansion in their country over the next 12 months was brightest in India – with 86 per cent expressing optimism – followed by the US (78 per cent), Germany (74 per cent), Mexico (73 per cent) and Argentina (70 per cent).

In addition, three-quarters of India-based survey respondents have set more aggressive growth targets in 2012 than those they had established in 2011, with 91per cent of senior finance executives in India saying they are confident about meeting their growth targets.

The survey covered 541 senior finance executives' at large global companies from the US, Europe, Canada, Latin America, Asia and Australia. Company revenues ranged from $500 million to more than $20 billion.

Focussing Home turf

Indian finance executives are looking inward for their company's growth, with 60 per cent saying that their growth prospects will depend more on domestic sales than on exports over the next two years. By contrast, the majority of global CFOs, (61 per cent), say they are looking at emerging markets such as India, Argentina, and Mexico for growth over the next two years.

A majority of Indian respondents (61 per cent) are also likely to increase or spend the same on business travel in 2012, as compared with the past year, a reflection of the international profile of many Indian companies' customers.

In terms of when the global economy will gain greater strength, nearly half of the world's finance executives (46 per cent) believe that “robust” economic growth will return in their countries by the end of 2012.

Indian CFOs are divided in their opinion on recovery with 31 per cent expecting the Indian economy to recover sometime after the close of the fourth quarter of 2012, and nearly half expecting a quicker recovery by the close of the second quarter (23 per cent) or third quarter (23 per cent).

hiring

In India, the hiring picture is slightly more positive compared with other participating countries, with 57 per cent of respondents planning to add jobs and just 11per cent planning to cut positions.

Companies in India (49 per cent) are likely to take a conservative approach to spending and investment over the coming year. In contrast, only 17 per cent of respondents in India and 14 per cent worldwide say they plan to spend and invest aggressively to boost top-line revenue.

> heena.k@thehindu.co.in

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