CFO optimism on business environment hits 6-quarter low: Report

Optimism among India's chief financial officers on overall financial and macro-economic conditions for the January-March quarter suffered significant decline, the most in the last six quarters, says a report.

The survey which was conducted in December 2016 in the midst of demonetisation drive, revealed that the slump in optimism level was led by deteriorating confidence on the overall macroeconomic scenario.

"The shock of demonetisation that had macroeconomic and supply chain effects, which policy-makers even struggled to foresee, led to heightened business uncertainty, impacted adversely the balance sheet of MSMEs and dented the growth prospects for India," said Arvind Raghav, director, Dun & Bradstreet India.

In the Dun & Bradstreet Composite Optimism Index for January-March 2017, only 45% of CFOs expressed optimism for domestic macroeconomic scenario - lowest in 12 quarters.

"Depreciation in rupee, firming up of global commodity prices including crude oil, rising risks to the banking sector primarily on account of deteriorating asset quality have also played a major role in weighing down the optimism levels among the CFOs," Raghav said.

Compared to 60% of CFOs in October-December 2016, only 43% of CFOs expect liquidity position to improve in January-March 2017.

Moreover, only 28% of CFOs surveyed stated the need for raising short-term funds and 25% for long-term funds.

"Going ahead, the announcements in the Union Budget for 2017-18 will set the tone and the direction for corporates to frame their expectations for the upcoming year," Raghav added.

The survey reveals how optimistic the CFOs are with respect to the overall financial health of their respective companies, the business risk environment and the macroeconomic scenario in the country.