Businesses in India appear to be 'crawling back' to normalcy, says IIM-A survey

By A Representative

An Indian Institute of Management-Ahmedabad (IIM-A) survey has said that while businesses in India appear to be crawling back to normalcy, around 85% of the firms still believe that sales are “somewhat or much less than normal”, while over 83% of the firms expect “much less than normal or somewhat less than normal” profit margins.
The survey, based on the responses of around 1,300 companies in July 2020, shows that in the previous survey, carried out in June soon after the lockdown came to an end, over 86% firms reported “much less than normal or somewhat less than normal” profit margins.

It also finds that roughly one-third of the firms still expect significant (over 6%) cost increase as compared to the same time last year, though “this proportion has been gradually declining after March 2020.” It adds, “Around 53% of the firms now believe that the current cost increase is 3.1% and above as compared to the same time last year – down from 58% reported in June 2020.”

Called Business Inflation Expectations Survey (BIES) and carried out under Prof Abhiman Das since May 2017, the survey claims to provide ways to examine the amount of slack in the economy by polling a panel of business leaders about their inflation expectations in the short and medium term.

The survey seeks to get a probabilistic assessment of inflation expectations and thus get a measure of uncertainty, even as providing an indirect assessment of overall demand condition of the economy. Business inflation expectations in July 2020 declined sharply to 3.70% from 4.12% reported in June 2020. “After running over 4% since March 2020, business inflation expectations fell below 4% in July 2020”, it says.

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