Kolkata: Nearly three quarters (78 pc) of India CEOs believe global economic growth will decline over the next 12 months, according to PwC’s 26th Annual Global CEO Survey, which polled 4,410 CEOs in 105 countries and territories, including 68 from India between October and November 2022.
This is the most pessimistic CEOs have been regarding global economic growth since we began asking this question 12 years ago, and is a significant departure from the optimistic outlooks of 2021 and 2022.
However, almost six in ten India CEOs (57%) express optimism about India’s economy over the next 12 months. In comparison, only 37% of Asia Pacific CEOs and 29% of global CEOs expect economic growth to improve in their countries or regions over the next 12 months.
41% of India CEOs think their organisations will not be economically viable in a decade.
In addition to a challenging environment, 41 per cent of CEOs think their organisations will not be economically viable in a decade if they continue on their current path. 62 per cent of India CEOs, in particular, believe that changing customer demand will impact profitability in their industry over the next ten years to a large or very large extent, while 54 per cent are concerned about changes in regulations.
Globally, business confidence around economic growth varies starkly, with G7 economies – all weighed down by an ongoing energy crisis – more pessimistic about their domestic growth prospects than they are about global growth: France (70 per cent vs 63 per cent), Germany (94 per cent vs 82 per cent) and the UK (84 per cent vs 71 per cent).
Inflation, macroeconomic volatility, climate change and geopolitical conflict top CEOs’ concerns.
While cyber and health risks were the top concerns a year ago, the impact of the economic downturn is top of mind for India CEOs this year, with inflation (35 per cent) and macroeconomic volatility (28 per cent) leading the risks weighing on CEOs’ minds in the short term – the next 12 months – and over the next five years. Climate change is close behind (24 per cent), followed by financial exposure to geopolitical conflict risks (22 per cent) and cyber risks (18 per cent).
While cost cuts are high on the priority list globally, 85 per cent of India CEOs do not plan to reduce headcount, and 96 per cent do not plan to reduce compensation – demonstrating their resolve to retain talent.
Sanjeev Krishan, Chairperson, PwC in India, said, “Despite signs of a global economic slowdown, continuing high inflation and the ripple effects of the conflict in Europe, there is optimism among India CEOs about the country’s economic growth. To survive over the next few years, CEOs will need to manage external risks and drive profitability. In the long term they will also need to reimagine, reinvent and reconfigure their businesses and work culture to thrive. Importantly, they need to act on both now, and simultaneously.”
He added, “If organisations are to remain viable in the near and long-term, they must also invest in their people and technological transformation agendas to empower their workforces.”
Managing climate risk a growing priority for businesses.
Climate change gains prominence as a cause of concern for India CEOs over the next five years, with 31 per cent voicing that they believe their companies will be extremely/highly exposed to it. They also see climate risk impacting their cost profiles and supply chains over the next 12 months. Indian companies are therefore trying to innovate, decarbonise and craft their climate strategy.
Many companies are embarking on the journey to address climate risks and decarbonisation without the information provided by an internal pricing mechanism for carbon. In India, 34% of companies (more than 50% globally, which includes 38% of the biggest companies globally) say that they have no plans to apply an internal carbon price to decision making. This could be a strong lever to account for considerations such as taxes and incentives, and leverage strategic trade-offs. 72% (60% global) have implemented or are implementing initiatives to reduce their company’s emissions and 60% (61% global) are innovating new, climate-friendly products and processes.
The continued importance of trust and transformation in generating long-term value.
Indian CEOs noted the need to collaborate with a wide range of stakeholders to build trust and deliver sustained outcomes if they are to generate long-term societal value. 73% (54% global) of India CEOs collaborate with non-business entities to address sustainable development. while 57% (49% global) of CEOs collaborate on education. 31% of India companies are more likely to collaborate with industry consortia to create new sources of value, while only 22% work with industry consortia to address societal issues.
However, many CEOs question whether critical preconditions for organisational empowerment and entrepreneurship – such as alignment to company values and leaders’ encouragement of dissent and debate – are present in their companies to tackle the increasingly complex risks organisations face. 22% (23% global) of India CEOs say leaders in their company often/usually make strategic decisions for their function without consulting the CEO. Only 51% (46% global) of India CEOs say leaders in their company tolerate small-scale failures often/usually. However, more optimistically, nearly 93% (85% global) of respondents say the behaviours of employees are often or usually aligned with their companies’ values and direction.
The survey highlights the need for CEOs and their leadership teams to drive change and business
reinvention from top to down in the years ahead.
Sanjeev Krishan, Chairperson, PwC in India concludes,“The diversity and complexity of today’s business challenges are placing a premium on the need to collaborate across the boundaries of the corporation. It is critical for CEOs to extend their use of collaborative ecosystems beyond creating business value to generating societal value.”