CFO optimism in India declines in the first half of 2012

Indian CFOs have grown deeply worried about the effects their country’s macroeconomic trends will have on their companies.

Amongst 136 CFOs polled by Deloitte, 31% were optimistic about their company’s future performance. That was down from 47% at the end of 2011.

CFO sentiment shifted after the year started with promise but then became very challenging for the Indian economy, according to the Deloitte India 2012 CFO Survey, which was released last month.

In early 2012, inflation was still high but declining. Consumer demand and industrial output were rising. Sixty-seven per cent of Indian CFOs expected their businesses to do better than in 2011.
By the summer, the situation had deteriorated considerably. Inflation had crept up to 7.25%. The deepening euro-zone crisis hampered exports, and demand from Indian consumers weakened. Low levels of monsoon rainfalls threatened crop shortages. Presidential elections and a change in the finance ministry caused political uncertainty. And India’s economic growth slowed to a projected 5.3%, down from 6.8% in 2011 and 10.1% in 2010.

The results of the survey, which was conducted in July, reflected CFOs’ changing optimism due to factors such as domestic market conditions and the domestic political environment. The survey also found that:

  • Forty-six per cent of CFOs, or about twice as many as a year earlier, expected GDP growth to slow further. The International Monetary Fund estimates GDP growth of only 4.9% for all of 2012, India’s lowest economic growth rate in a decade.

  • Forty-six per cent of CFOs feared inflation would worsen, and 59% worried that industrial growth would slow.

  • Forty-three per cent of CFOs said the lack of political direction toward economic reform was their top concern. Low consumer demand, the top concern a year earlier, came in second with 15%.

  • Slightly more than 20% of CFOs were worried about industry regulations, up from about 15% a year ago. CFOs in the consumer business, energy and financial services sectors were the most worried.

  • Indian CFOs from small and medium companies had a more positive outlook than CFOs from large companies. Eighty-one per cent of the more optimistic CFOs represented small and midsize entities.

Sabine Vollmer ( is a CGMA Magazine senior editor.