'Oil prices, inflation, slowdown threats to Indian economy'

The oil price increase, rising inflation, economic slowdown and credit availability are great threats to the country's economy, according to '2012 CFO Outlook Asia', a survey of chief financial officers launched by Bank of America Merrill Lynch here.

The report said CFOs in India were moderately optimistic about the current state of the domestic economy, registering a positive score of 6.1 out of 10.

Although India CFOs are not the most concerned about global macro issues such as the European debt crisis and the state of the US economy, these issues contribute to uncertainty in this part of the world and India is not immune to global forces, Bank of America Global Corporate & Investment Banking Group Head of Client Coverage, Asit Bhatia told reporters here.

"The Asian region continues to experience strong economic fundamentals and remains a relatively bright spot within the global economy," Bhatia said.

The domestic equity market is expected to remain volatile, though it has shown some positive trend in the last few weeks, he said.

Reflecting the country's focus on the domestic economy, Indian CFOs were less concerned about the global economic factors which were deemed the greatest threat to economic growth by the CFO group as whole, namely the European debt crisis, the US budget deficit and the prospect of an economic slowdown in China, the report said.

CFOs in Asia, excluding those in Japan, are positive about the regional economy but cautious on their view of the world economy. They ranked the current state of the region's economy 6.5 out of 10 while their rating for the global economy was substantially lower at 4.7, the report said.

For all the worries about the macroeconomic picture, the majority of CFOs in Asia (58%) still forecasted revenue to increase at their companies in 2012, with Indian CFOs leading the way at 77%.

More than half (52%) expected higher profits, led by those in India (68%), Australia (60%) and Singapore (54%).

That a large number of India CFOs forecasted revenue rather than profit growth may suggest that companies are oncentrating on gaining market share in the year ahead, with the bottom line representing less of a priority, it said.

Where finance is concerned, CFOs in India are in line with the Asian average with 37% expecting their borrowing needs to increase in 2012.

India CFOs are the most likely to require financing for both domestic and international expansion as well as for capital expenditure and are also the second most likely to require financing for working capital and acquisitions.

The focus is now on domestic acquisitions. Over 50% of CFOs considering M&A in 2012 were looking to do so in their home market. The most cited reason for planned M&A is to ensure growth, and consolidation, the report said.

The report, which followed on from the 14th US CFO Outlook report, examined the responses from 465 CFOs across seven markets - Australia, China, Hong Kong, India, Japan, Korea and Singapore.