Lack of global investments in India
Businesses in India see more opportunities but are frustrated by lack of investment, global survey shows
Indian finance professionals are more pessimistic about the economic recovery than most of their counterparts around the world, a global survey has shown.
The latest global economic conditions survey (GECS), the largest regular economic survey of accountants in the world, undertaken by ACCA (the Association of Chartered Certified Accountants) and the Institute of Management Accountants (IMA) shows that in the third quarter of 2013 while, collectively, businesses around the world appeared to be more optimistic about prospects, respondents in India were among the very few to report a loss of faith in the economic recovery.
A surge in optimism among Indian accountants at the beginning of the year has now passed, with 46% of respondents in the six months to September expecting economic conditions to improve and 51% expecting deterioration or stagnation, the survey shows.
Business confidence, on the other hand, is clearly down year on year, with 49% reporting a loss of confidence in the prospects of their organisations in the last six quarters, up from 24% over the six months to March.
This lack of confidence and optimism reveals increased levels of frustration among respondents, who have pointed to a substantial increase in business opportunities over the last six months, but are unable to exploit them. In fact, business investment in both capital and staff has been falling steadily since its peak in Q3 2012.
This is due partly to a domestic downturn and partly to a loss of foreign investment, which the Indian government has sought to address in the third quarter. Pressures on cashflow and demand rose in the third quarter of 2013 after easing earlier in the year, while the supply of growth capital tightened significantly in the six months to September. Meanwhile, foreign exchange rates have been growing increasingly volatile over the last two years, leading to increased input inflation for India’s businesses.
Against this backdrop, respondents from India have been calling for greater fiscal stimulus since the beginning of 2013 - with these attitudes intensifying over the last quarter.
Aziz Tayyebi, Head of International Development with ACCA said: “ A greater number of business opportunities are arising, but finance professionals share the frustrations of business owners, that a lack of finance and investment is hampering their efforts. Economic recovery is a crucial time for businesses who have survived the downturn, since they need access to finance to enable them to recruit more staff and buy new machinery or equipment to enable them to meet increased demands. Without that they will fail and it’s good to see the Indian government is working to encourage greater investment. “
Globally, the threat of the Federal Reserve and other Central Banks halting or reversing their extraordinary stimulus has led to a dramatic withdrawal of investment from riskier assets, as well as most emerging markets. The survey findings suggest that the fallout has fed through to the real economy, sending many of the world’s most promising economies into a credit crunch of their own. This timing is particularly unfortunate as it coincides with the arrival of a deep credit crunch in China, resulting from concerns about the health of the country’s banking sector and the viability of its public finances.
The survey revealed that respondents in China reported the tightest supply of growth capital in at least two years, suggesting that the country’s official and shadow banking sectors are taking a significant hit. In response, business investment in capital and staff has fallen sharply throughout China.
- About GECS: This is the 19th edition of GECS. It had 2,021 responses in the third quarter of 2013, with more than 50 respondents from India.
- About ACCA
ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants with 162,000 members and 426,000 students in 170 countries worldwide. We aim to offer business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.
We work through a network of 89 offices and centres and more than 8,400 Approved Employers worldwide, who provide high standards of employee learning and development.
- About IMA® (Institute of Management Accountants)
IMA®, the association of accountants and financial professionals in business, is one of the largest and most respected associations focused exclusively on advancing the management accounting profession. Globally, IMA supports the profession through research, the CMA® (Certified Management Accountant) program, continuing education, networking, and advocacy of the highest ethical business practices.
IMA has a global network of more than 65,000 members in 120 countries and 200 local chapter communities. IMA provides localized services through its offices in Montvale, N.J., USA; Zurich, Switzerland; Dubai, UAE; and Beijing, China. For more information about IMA, please visit www.imanet.org