CFOs find currency fluctuation biggest threat to growth: Survey
As far as India’s equity market is concerned, he said that the Sensex may bottom-out at the 12,000-16,000 level. “Rupee seems to be oversold in the near term. If the rupee depreciates by 10-20 per cent in the near term, it will also help the market,” he a
A substantial number of senior finance executives in the country consider currency fluctuation as the biggest threat to the company's growth prospects in the coming year, says a survey by the American Express Group.
According to the fifth annual American Express CFO Research Global Business and Spending Monitor, about 45 per cent of India-based senior finance executives viewed exchange rate instability as their biggest threat.
The rupee depreciated against the dollar by about 8 per cent since the beginning of March, closing at all time low of 53.96 against the dollar on Monday. The rupee nosedived to its historic low as a host of factors, including rising inflation numbers, contributed to the fall. On December 15, 2011, the rupee had plunged to its all-time intraday low of 54.30.
The survey said that other dangers such as changing interest rates and increased volatility in capital markets, each drew about 21 per cent of respondents. A smaller yet significant proportion 12 per cent chose restricted access to funding and credit as the top threat to the companys growth.
"Weakening rupee, high production input prices, 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," Manoj Adlakha, vice-president and country head of global corporate payments at American Express in India, said. "However, we see Indian finance executives expressing far higher optimism for growth and with the over riding belief that they will see a quick recovery," Adlakha said.
The survey said the outlook for economic growth over the next 12 months was brightest in India, with 86 per cent of India-based respondents expressing optimism, followed by the US (78 per cent), Germany (74 per cent), Mexico (73 per cent) and Argentina (70 per cent).
The survey, which covered 541 senior finance executives from leading companies across the US, Europe, Canada, Latin America, Asia and Australia, said three quarters of the CFOs surveyed in India have set more aggressive growth targets in 2012. About 91 per cent of senior finance executives surveyed in India said they were confident about meeting their growth targets.
They said their growth prospects would be more dependenton domestic sales than on exports over the next two years. Also, nearly half (47 per cent) of Indian CFOs were not keen to tap their cash reserves over the next year. The executives believe cash reserves would be mostly forfunding ongoing operations or to finance acquisitions and expand operations.