Growth remains and resilient to bounce back
The KPMG 2022 CEO Outlook surveyed CEOs globally as well as in India on their three-year outlook on the business and economic landscapes. Despite geopolitical and economic challenges, the confidence of CEOs in India in the global economy has marginally increased to 57 per cent higher from February 2022 (52 per cent). As companies in India navigate the post-pandemic landscape, 82 per cent of CEOs in India are confident in the resilience of the global economy in the short term, while the long-term growth outlook is yet to bounce back.
Even though CEOs in India see a decline in growth prospects when it comes to company and country, they seem resilient enough to bounce back in the short term.
Confidence levels in growth prospects
Confidence levels in resilience
CEOs in India anticipate a recession — but they are prepared
About 66 per cent CEOs in India, a much lower proportion as compared to 86 per cent CEOs globally, anticipate a recession in the next 12 months. At the same time, 58 per cent CEOs in India same as their global counterparts feel that the recession will be mild and short.
When asked about their confidence in the resilience of the global economy over the next six months, 82 per cent CEOs in India were positive – up 42 percentage points from February 2022.
In alignment with CEOs globally, the long-term factors impacting CEOs in India include digital transformation, interconnectedness of issues and post pandemic resilience. While CEOs in India may be resilient, they are also realistic about the challenges ahead. 62 per cent CEOs in India compared to 73 per cent CEOs globally believe a recession will upend anticipated growth over the next three years.
Compared to 2019 and 2020, CEOs in India as well as globally are better prepared to weather short-term challenges with resiliency measures in place to manage impacts while still anticipating long-term growth. The top three steps include: reducing profit margins and managing costs (40 per cent), boosting productivity and diversifying their supply chain (34 per cent) and implementing a hiring freeze (33 per cent).
It is interesting to note that CEOs in India are comparatively less worried, when it comes to concerns around recession and its various aspects that could impact their business.
Top risks looking forward
Pandemic fatigue, economic factors, including the threat of rising interest rates, inflation and anticipated recession and reputational risk, top the list of most pressing concerns for CEOs in India today. As we look to the next three years, risks are more interconnected than ever. Emerging/disruptive technology (not seen in the top five in August 2021) rises in rank as the top risk and the greatest threat to organisational growth.
Risks to growth over the next three years for CEOs in India
Managing geopolitical risk
Organic growth, strategic alliances and managing geopolitical risks top the list of the most important strategies for achieving organisational growth objectives over the next three years.
CEOs in India indicate that geopolitical uncertainties will continue to impact their strategies and supply chains over the next three years. In fact, 75 per cent CEOs in India compared to 81 per cent CEOs globally have adjusted or plan to adjust their risk management procedures considering geopolitical risk, and 21 per cent of CEOs in (India and global) will be increasing measures to adapt to geopolitical issues to achieve their growth objectives.
With geopolitics being a key agenda item in 2022, CEOs in India need to be knowledgeable on the subject and how to navigate the risks. It’s important to make a geopolitical risk assessment part of their overall strategy.
Strategies important for achieving growth objectives over the next three years
One of the key learnings from the last year for TV Narendran, CEO and Managing Director of Tata Steel, has been the importance of building supply chain resilience, brought to the forefront of the business agenda following the pandemic and geopolitical uncertainties. “The pandemic and the events in Europe have shown us how interconnected we are as a world,” he says. “To me, geopolitical issues are the number one risk. I think we all need to build optimised and resilient supply chains.” Although a resilient supply chain may not be the most cost efficient, he believes disruption and change can bring opportunity. “There are opportunities to rethink business models and operating models, as well as build the necessary green infrastructure.”
Increasing M&A appetite
Over the next three years, M&A appetite of CEOs in India remains high, despite economic concerns. 42 per cent of CEOs in India have high appetite compared to 47 per cent CEOs globally, although the percentage for India has dipped from 55 per cent in August 2021. 43 per cent CEOs in India compared to 38 per cent CEOs globally have a moderate appetite for M&As. Here again, we see a significant shift from 34 per cent in February 2022 for India. With higher interest rates and borrowing costs, rapid innovation will be key to stay competitive. Deal makers may be taking a much sharper pencil to the numbers and focus on value creation to unlock and track deal value, every step of the way.