Costs, sales, profits: Top business executives see 'some early signs of optimism'

Current costs compared with this time last year: % responses

By A Representative

An Indian Institute of Management-Ahmedabad (IIM-A) survey of responses from top executives of 1,200 companies has found that that, as the country is “unlocking” itself, the percentage of firms expecting significant (over 6%) cost increase has been gradually declining, but the firms reporting moderate (in the range of 3% to 6%) cost increase has sharply increased -- from 16% in May 2020 to 22% in June 2020.
Called Business Inflation Expectations Survey (BIES), introduced by Prof Abhiman Das as a monthly exercise in May 2017, says that now “58% of the firms believe that the current cost increase is 3.1% and above, as compared to the same time last year – up from 53% reported in May 2020.”

Sales levels: % response

The survey further finds that “over 71% of the firms in June 2020 report that sales are ‘much less than normal’ as against over 75% in May 2020 and 81% firms reporting in March 2020”, adding, “While there seems to be some improvement of sales from ‘much less than’ category, around 91% of the firms in the sample still report that sales are ‘somewhat or much less than normal’, as against 92% reporting in May 2020.” It adds, “This proportion has remained over 70% since June 2019.”

Profit margins: % response

The survey also says that “over 68% of firms in the sample in June 2020 reported ‘much less than normal’ profit as against 74% in May 2020”, noting, “Over 86% of the firms in the sample in June 2020 expect ‘much less than normal or somewhat less than normal’ profit margins – down from 89% that reported in May 2020… This proportion was hovering around 75% since June 2019 till January 2020, thereafter it went up further.”

It adds, “Responses on profit margins also show some early signs of optimism.”

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